High cc balances - pay off using some IRA funds?

[Anonymous]

High credit card balances, certain companies won't lower their interest rate, and it's becoming more difficult to keep up regular payments on everything, plus monthly rent!  

AND, presently unemployed in a tight market, with approx. 2-to-6 years before retirement (but want to work as long as possible!).  Conventional wisdom: Don't touch any "retirement" funds."  

?: Would it make any sense, considering the present erratic stock market(s) --with most funds seeing losses-- to withdraw (up to 25%) "no penalty" dollars from a mid-five-figure IRA to pay off even one low-five-figure / high interest rate card? 

(Impossible that I'd find a lower-interest  home equity loan on my small out-of-state condo in this economic climate!)

Ideas welcome!

[Creditaddict]

Do you have someone that is currently handling your retirement fund? if so, I would HIGHLY suggest you talk to them about this

[Anonymous]

The answer to this question depends so much upon so many other factors.

Is this mid-five-figure IRA your only source of retirement funds?  Do you have sufficient other sources of retirement funds to be able to retire in your desired timeframe even without the funds that you want to withdraw?

Keep in mind that retirement funds are protected from creditors, but as soon as you withdraw them, they are subject to seizure.

Even if the withdrawal would be penalty-free, would it be tax-free?  Is this a Roth IRA or a Traditional IRA?

Also remember that once you withdraw funds from an IRA, you can never put them back.  It's not like taking a loan from a 401(k).

You mentioned paying off one card that you can't currently make the payments on.  Are there others?  If there are, is BK an option?  It would be a shame to withdraw protected funds to pay a debt only to end up filing BK anyway due to other debts.

Message Edited by cheddar on 08-06-2008 05:08 PM

[Anonymous]

Is this mid-five-figure IRA your only source of retirement funds? 

Yes, thus far   !

Do you have sufficient other sources of retirement funds to be able to retire in your desired timeframe even without the funds that you want to withdraw?     (only Soc. Sec. ...whenever I decide to give up and claim, and hope to work part-time/earn some extra $$ within the SS limits)

Keep in mind that retirement funds are protected from creditors, but as soon as you withdraw them, they are subject to seizure.

Even if the withdrawal would be penalty-free, would it be tax-free?  No, but my current income is negligible.

Is this a Roth IRA or a Traditional IRA?

Also remember that once you withdraw funds from an IRA, you can never put them back.  It's not like taking a loan from a 401(k).  Yes, but could at least contribute up to annual max.  (It would be helpful, perhaps, if one could take a "loan" from IRA and re-pay to oneself at lower interest rate as w/ a 401-k.)

You mentioned paying off one card that you can't currently make the payments on.  I'm making the payments.

Are there others?  Yes, making those also--trying to pay a bit more toward the higher interest rate cards, but too many different expenses/payments to keep up without an occasional small bite from IRA. 

If there are, is BK an option?  I suppose BK is always an option, but I feel it's an absolute last resort, as my credit rating has always been OK.  Even w/ a Ch.13 [?] and cont'd. partial pmts., a BK hangs around and never looks good! 

It would be a shame to withdraw protected funds to pay a debt only to end up filing BK anyway due to other debts. 

[Anonymous]

I wouldn't withdraw from your IRA, you'll get penalized and taxed especially if you don't pay back the amount in 1 year.  Have you ever thought of seeking a credit counselor who can negotiate with your credit card companies on your behalf... this way you really don't have to get your hands dirty "per say".  In regards to the market, usually when people want to puke and get out is when it has bottomed, make sure you are diversified so you can take advantage of any market swings...

[Anonymous]

oops.... thought you had a 401k, if you have a traditional never take out IRA monies to pay down credit card debt...