Is it a good idea to use retirement $?
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Is it a good idea to use retirement $?
| Mon, 07-04-2005 - 4:39pm |
DH and I have about 13K in credit card debt (minus 4K we will get when we sell an old vehicle). I just started a government job and will get a pension. I have about 3K in an old mutual fund account that I can cash to pay our debt down a bit. Is this a good idea?
Thanks.
Maggie

Is the mutual fund account earmarked for retirement? If it is, you'll want to check into what kind of penalties you would get hit with for cashing it out. You might end up taking home 50% or less of it once you've paid taxes and penalties.
Otherwise, sure, it might be a good idea.
But, a couple other things to consider. For one thing, just because you will be getting a pension doesn't mean you shouldn't also save for retirement. Pension funds are great, but they rarely pay enough to maintain your lifestyle after retirement, and a privately saved fund is a helpful addition.
Secondly, it's nice to have that instant boost that comes from paying a large chunk of debt all at once, but it's also important to have an opportunity to pay it down the slow, old-fashioned way. Most people who are able to wipe out, or come close to wiping out, their debt with sudden "windfalls" find that in a few months or years, they are right back where they started. The reason for this is that living debt-free requires lifestyle changes and new habits that don't get formed overnight. They take time and perseverance.
Of course, the 3k would offer you a boost but not completely pay off your debt, so it might be okay to do. Make sure first, though, that you have some savings in case of emergencies--the last thing you want to have to do is use your credit cards if your car breaks down or any other minor emergency occurs.
But if you would take a big hit from taxes and penalties, my instinct is to say no, don't do it.
Good luck either way. Blessings,
Heather
Nope not at all! Leave the mutual fund alone. And really once you pay the taxes and penaltys it will be way less then $3000 anyway...
Shannon
Shannon
If it is a retirement account, you will have to pay taxes and penalties. If it is a regular mutual fund account, I would convert it to a freedom account (to pay known, but not regular expenses life insurance, taxes, even gifts and clothes - especially back to school) or emergency account (unexpected expenses like car repairs, medical bills).
This is only my 2cents. Every time I used my savings to pay down a bill, something came up and I didn't have any money to pay for it, so I charged it.
Good luck!
Sandra