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webhopper
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Registered: ‎09-16-2011
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Re: Cash out 403b to pay credit cards or not?

To reduce the initial payment shock on the student loan repayment she should look at consolidating them into an income based repayment plan and focus additional monies to the cc debt. The inheritance should go towards the debt.

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youngandcreditwrthy
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Re: Cash out 403b to pay credit cards or not?

+1 webhopper
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awdsmama
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Re: Cash out 403b to pay credit cards or not?

Thanks everyone, I've been passing along your replies!

 

She did take a loan of about $4,000 out of her 403b earlier this year for maternity leave.  Unfortunately she didn't start repayments ontime (miscommunication not due to lack of wanting to repay)  and so she cannot take another loan from the 403b. 

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Dustink
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Registered: ‎10-02-2012
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Re: Cash out 403b to pay credit cards or not?

Is there a way to get the students loans deferred for any longer?

 

I would say pay down some debt with the inheritance, then let the new low balances report to the credit bureaus. (Keep some of the inheritance as an emergency fund.) The lower balances will make the scores jump. Then apply for a Chase Slate which has no transfer fee and 0% for 15 months. Pay as much on that as possible. Then after 15 months transfer it to another intro offer card. Repeat until the balance is gone.

 

Leave the investments alone and continue contributing.

 

Sell off whatever is owned that is not needed, find a second job or some side work. Do anything to make a little more money. Keep paying off the debt, but also keep saving.

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cloyd
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Registered: ‎03-01-2012
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Re: Cash out 403b to pay credit cards or not?

She might want to consider applying the estate money to the cards from highest interest rate to lowest, then dropping her 401k  from 6% to 4% in order to make the most of her employers match, but still open up monthly funds to address the remaining cards.

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ImprovingYouth
Posts: 154
Registered: ‎09-21-2012
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Re: Cash out 403b to pay credit cards or not?

She might want to consider applying the estate money to the cards from highest interest rate to lowest, then dropping her 401k  from 6% to 4% in order to make the most of her employers match, but still open up monthly funds to address the remaining cards.


 

 

 

+1 Under no circumstances should you cash out retirement savings, the only way these investment tools work is compound interest+time, this 5k she take out today will barely put a dent in that 50k in debt(especially since the fees+taxes will reduce it to around 3.5k depending on what state you live in), but keeping it invested will dramatically help for after retirement especially given she has another 30+ years to retirement (5k will turn into a good 40-50k given 7-8% return for the next 30 years).

 

I would reduce the contribution to max the employer match, then defer the difference (along with what ever she can afford before the student loans kick in) into a separate savings with bill pay going out to the credit cards with higher interest rates first (Chase cards going first, then homestreet, then orchard, then cap1).

 

OP, How is her credit atm? If she has decent credit consider consolidating the larger interest cards to a lower interest bearing account, ie loan/credit card with no BT fees?

 

IMO I would not spend the entire 10k inheritance on the debt, in my experiecne it i much better to have a solid nest egg that will help down the road, I would keep 5k in a high yeild saving, and throw the last 5k into the cc debt. DO NOT TOUCH THE NEST EGG. It is tempting but this should only be touched if literally you are about to be thrown out of your house, or die. Same thing goes for the 401k/IRA/retirement savings in general.

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ImprovingYouth
Posts: 154
Registered: ‎09-21-2012
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Re: Cash out 403b to pay credit cards or not?

Also, depending on where the student loans originate from, communicating the amount of availible income to the loan holder can help to reduce payments short term in order to completely focus on getting rid of the CC debt. Personally I have all my loans through sallie mae DoE and there are MANY options with them to pay next to nothing if you are having a hard time, but usually this is only a short fix and to pay the student loans off and not have them sucking down your income for the next 30+ years should be the overall goal.

 

With the credit cards pay min balance on everything but the highest interest card and put all other available monies into that one until it is paid off, then cycle to the next highest card, always using all available cash (outside what is necessary to survive) but never missing min payments on any of the cards. Slim down on anything she can, because once she is rid of this debt, the available income will be staggering and she should begin saving long term, maxing out 401k contirbutions, and most importantly DO NOT TAKE ON ANY MORE DEBT!

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