Should I cash in my IRAs to pay off debt?
May 3, 2006 7:47 PM Subscribe
Should I cash in my IRAs to pay off debt? Explanation after the jump...
posted by anonymous to Work & Money (28 answers total) 1 user marked this as a favorite
Here's the situation: I'm 34. I have about 15K in debt as the result of medical expenses and an extended period of reduced income. (I'm embarrassed about it, hence the anon posting.) Now I'm employed, and making headway on the debt (to the tune of about $750/mo). My credit rating is terrific, so that's not a concern, but the interest, and feeling that I'm at huge risk if something unplanned comes up, are both driving me crazy.
I have two IRAs, one Roth and one traditional. The traditional has about 9K in it, and the Roth has about 6K in it. Frankly, both have performed pretty poorly over the years. (In fact, I think the Roth still has less in it than when I stopped contributing to it eight years ago. Oof.)
I know that early withdrawal earns you steep tax penalties, but I can't help but wonder if I would be better off pulling this cash out of these underperforming funds, getting my debt situation under control sooner, and starting fresh.
I'm hoping the collective wisdom here will help point me in the right direction (or point me away from the wrong direction, as the case may be).
One more fact in case it makes a difference: In my new job, I participate in a traditional retirement plan, which should end up socking away about $10K a year. Plus, once I'm out of debt (be it sooner or later), I plan to take a big chunk of the funds currently going towards cc payments and start participating in the TIAA-CREF option available through my employer. (I'll probably put the rest towards an eventual downpayment on a house.)
Thanks for your thoughts and advice.