Early retirement account withdrawal

June 11, 2012 1:34 PM

Need to pay off upcoming credit card bill. Can I use any of my retirement accounts to pay them off without incurring any fees?

I'm living abroad and I have a credit card bill that I need to pay off soon. I have both a Roth IRA account (I have yet to buy any funds) and a 401K account (not much in there), for which I am fully vested.

I'm in my late 20's and was wondering if I could withdraw from either of the accounts to pay off my bill without getting hit with any fees.

Am I out of luck?

posted by AngryTypingGuy to work & money (5 answers total)

The point of a Roth IRA is that contributions (although not necessarily earnings) can be withdrawn without penalty.
posted by saeculorum at 1:43 PM on June 11, 2012 [2 favorites]

Check your 401k plan - some allow for low rate loans. Most outright withdrawls will come with a penalty.

Try to take the shortest duration loan feasible and get the money back into the accounts quickly. You are young - take full advantage of the time you have before retirement. With that kind of time horizon every dollar you pull out now will translate into several dollars of retirement income...
posted by NoDef at 1:45 PM on June 11, 2012 [1 favorite]

You can withdraw your Roth contributions without a penalty
posted by IanMorr at 1:45 PM on June 11, 2012 [1 favorite]

I've thought of doing this too, but you should check into tax penalties as well.
posted by Polgara at 2:08 PM on June 11, 2012

With the 401K, you will pay a 10% penalty plus taxes on anything you withdraw. You also pay a much bigger penalty in that you will miss out on 40+ years of compounding interest on every dollar you take out today. If you are pulling say $5K out that could potentially be $160,000 in 45 years (assuming an 8% annual rate of return). You can often borrow 50% of the value of your 401K. If that is possible and sufficient, it might be the better option.
posted by COD at 4:02 PM on June 11, 2012