I'm back to where I started

Avatar for poorboy2011
iVillage Member
Registered: 10-02-2011
I'm back to where I started
27
Fri, 01-11-2013 - 9:14pm

Well, almost back to where I started. In October 2011, I was $60,517 in debt. I knocked the debt down to $53.254 by July, 2012. Now I'm back up to $59.181. This is my fault. I am not feeling very good right now.

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Avatar for poorboy2011
iVillage Member
Registered: 10-02-2011
Fri, 01-11-2013 - 9:32pm

I'm trying to remind myself that I can still live a full life without money. I can do a lot of what I want. I'm trying to stay positive. I made a mistake, but it's not the end of the world. My fellow debtors, please chime in any time.

I am hoping to get a new job soon. When I change jobs, I'll be able to withdraw from my retirement fund. I have $39,000 right now. There will be a 10% penalty and a 20% federal income tax withholding. So if I get only 70%, or $27,300, I'll be able to reduce my debt by half, paying off most of the credit cards. Sure, this will mean I'll have no retirement funds. At 38, it's not good, but it's not terrible either.

iVillage Member
Registered: 04-10-2003
Fri, 01-11-2013 - 10:29pm
Please stay positive. I know it sucks when you go the wrong way, but you can do this. I think you've learned a lot about yourself and what drives you and that is a pretty significant achievement. It's a new year so take it as the opportunity to refocus your efforts. Obviously the choice is yours whether to withdraw your retirement funds but I would advise against it. You can't borrow retirement! Ultimately you have to decide whats best, but an almost $12k hit is rough. Is there any other way?

Bex -

Avatar for poorboy2011
iVillage Member
Registered: 10-02-2011
Fri, 01-11-2013 - 11:31pm

I know you can't borrow retirement. Most of my mentors in my profession taught until they died. I'm prepared to do the same if I can find a good environment. 

Here's a story. Ian Watt, a famous scholar of English literature, was put in a retirement home. A visitor asked him how he was doing. Watt answered, "I'm ready for my seminar, but my students," pointing to the mentally decaying residents of the home, "don't seem to be."

But, yeah, 30% is a big hit. When the time comes I'll talk to HR to find out what my options are more precisely.

iVillage Member
Registered: 04-10-2003
Sat, 01-12-2013 - 9:11am
First please take what I am going to say in the spirit that's it given. You know I think you're fantastic! My concern with planning on working till you die is that you are limited in choices. When I think retirement I think vibrant 60 year old (okay maybe 65 ;)) with the choice to retire or keep working. Or maybe travel. You are planning no switching cities, I'm assuming to a bigger one with more, um, options. What if you meet Mrs. PB and she wants to retire with you? Is it possible to cash in retirement and still do this . . . absolutely! I just don't want you to be limited in later years because you are a rockstar and deserve the best of the best! You made headway before paying off almost $8k. Can you do it again?

Bex -

iVillage Member
Registered: 07-24-2001
Sat, 01-12-2013 - 12:53pm

PB,

I have to agree with the others that I really think you should consider not touching your retirement.  You really aren't that far into debt.  You can turn this around, but it's really going to take an attitude shift.  And honestly, (take this for what it's worth) cashing in your retirement is just really more of the same attitude that got you into trouble to start with.  What I mean is that there are no real easy solutions.  What seems to really work is rolling up your sleeves, working hard, cutting back, etc . . . My fear is that if you cash in your retirement, you won't truly appreciate the value that comes with the blood, sweat and tears of making the sacrfices that educate you on the true value of money.  

And working until you die is a noble concept, but you really, really can't count on it.  Forget the dreams of traveling to hearts content instead of working . . . i'm not even talking about that . . . The cold, hard truth is many (most?) of us won't be able to work until death.  My father (a college professor and circuit court judge) always thought he'd work forever because he loved what he did (and continues to have the opportunity to work) realized recently that his mental capacity just isn't what it needs to be to continue working.  My own H would like to work forever too (and he also has a career that would allow it), but we are planning for retirement in case he can't.

I don't mean to preach or anything.  I just want you to think about the big picture. Honestly, you are young, educated, have tons of opportunies ahead . . . don't short change yourself now.  Just buckle down and start getting rid of your debt (it's really not that much).  YOU CAN DO THIS!

iVillage Member
Registered: 04-16-2008
Sat, 01-12-2013 - 1:31pm

I agree with what Bex said.

Another possiblity is, without cashing in your retirement, borrow from it which would avoid the penalty and tax hit.  If you were to get a new job, you could roll your current retirement plan into the new plan.  Depends on the rules of the new plan, you could then "borrow" from yourself.  You will still need to pay interest on the money you borrow (and these days it is extremely low, around 3% or so), but that interest is to yourself. 

The drawbacks are:  1.  Not all retirement plan allows this.  Therefore your thought of checking with HR is a good idea.  2.  If you leave your job before paying off your "loan", it must be paid up usually within 60 days or you will be hit with the penalty and taxes just like if you were to cash in the retirement plan.  (Which is the reason why I suggest doing it after you landed your new job).  3.  Most of the time they would only allow you to borrow up to 50% of the money you have in the plan.  (But if you were to cash in, you would only get 70% anyway).  4.  From a budgeting/cashflow standpoint, you are not eliminating the payment for that portion of the debt, but paying at a lower interest rate (and to yourself instead of some bank).

The "loan" from yourself would not show up on your credit report, so in a way you will also improve your debt to equity ratio on paper.  (And potentially credit scores).

iVillage Member
Registered: 04-10-2003
Sat, 01-12-2013 - 2:22pm
I like that idea! Borrowing from yourself is a great idea!

Bex -

Avatar for poorboy2011
iVillage Member
Registered: 10-02-2011
Sat, 01-12-2013 - 6:30pm

demontespan wrote:
<div><div><div><div><p>Another possiblity is, without cashing in your retirement, borrow from it which would avoid the penalty and tax hit.  If you were to get a new job, you could roll your current retirement plan into the new plan.  Depends on the rules of the new plan, you could then "borrow" from yourself.  

I looked into this possibility more than a year ago with my current job, and my plan does not permit it. If I get a new job, I'll have to look into the policy regarding borrowing against my retirement funds. That is a better plan than losing 30% outright. I am not optimistic, since my employer will be a university. But let me get a job offer first.

As for the retirement lifestyle question, I'll have to think about it. I suppose the way I envision my future probably has to do with feeling like I have nothing to live for. This is not exactly debt-related; I'd still feel the same even if I were a millionaire.

iVillage Member
Registered: 10-17-2010
Sun, 01-13-2013 - 7:43am

Hi PB!

I'm kind of quick on time here but I wanted to say, please don't give in and drain your retirement! You managed to knock out 6k before without touching it and you can do it again! Set backs happen but I know you can do it!

~KT

iVillage Member
Registered: 12-25-2008
Sun, 01-13-2013 - 11:48am

Hi Poorboy,

I cashed in my retirement from another job in another state a few months ago.  I used it pay down most of my debt.  I still have some retirement in my new job, but we plan on really working on that.  They took like 20% away but it was still a huge amount.  My husband is interviewing for a new job (more money!) and I will have our debt paid off by summer.  Then we plan on putting a large amount in a retirement account every month.  Hang in there!

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