Comments on: Ask the M-Network – Should I Raid My Retirement Account to Pay off Debt?

By: Patrick

Patrick — Thu, 19 Feb 2009 03:16:47 +0000

DC Reeves: Hindsight being 20/20, it worked out perfectly well for you, but not many people can predict the ups and downs of the stock market like that. Most of the time, early withdrawals are not worth it.

As for the extra $700 per month to invest, that’s a good way to look at it – but you would still be down a couple grand on your retirement savings. I hope you have time to build it back up.

By: DC Reeves

DC Reeves — Thu, 19 Feb 2009 03:02:53 +0000

I withdrew 10K from my traditional IRA last Feb (2008) to combine with my emergency fund to pay off my mortgage, whose P&I payments were $700.00 per month. I only needed 9K and I paid the 10% penalty upon withdrawal ($1000).
Since I had 100% stocks with this IRA, it lost about 50% of it’s value in the slump we are now in. Had I not withdrew the money, I would have lost it anyway, and still had the P&I portion of my mortgage. Now I have an extra 700 per month to invest. I think that is an excellant use of IRA money.

By: outlaw

outlaw — Tue, 17 Feb 2009 06:22:39 +0000

Using retirement accounts for anything but retirement is usually not a very good idea. Also having only 34K for retirement is going to work very well either so it may make sense.

By: frugalcpa

frugalcpa — Tue, 17 Feb 2009 04:13:35 +0000

I’ve experienced those early withdrawal penalties, and they weren’t happiness.

I only recently learned that for a Roth IRA you can take out contributed principal with no penalties as long as your account is 5 years old. Gotta’ love Roth IRAs.

By: Patrick

Patrick — Mon, 16 Feb 2009 22:43:25 +0000

That could be, Rob, but we don’t know the full picture of their retirement plans. They may own several rental properties or have a huge dividend stock fund or have some other source of income. Outside of their truck, they may not have any other bills. So it depends on their full situation. So, yeah, a look at their entire financial picture is the first thing to consider.

By: Rob

Rob — Mon, 16 Feb 2009 20:50:14 +0000

I can’t help but focus on the idea that this cat is trying to retire on $34,000. Maybe all his debt is gone ( except the car ) and he lives on cat food…. but unless that’s the case… $34k ain’t gonna take you very far. Perhaps we need to re-look at the entire financial picture before we worry about using nearly all our retirement savings to pay off a car.

By: Curious Cat Investing Blog

Curious Cat Investing Blog — Mon, 16 Feb 2009 13:36:49 +0000

I would not withdraw retirement funds for any but the most drastic situations. Just treat that money as unavailable. It is too easy to get in the habit of tapping that money and ruining retirement plans.