Cares ACT Withdraw to pay off debt?

[Anonymous]

CARES Act Withdrawal - Due to Corona we are able to make early withdraws if need be, should I withdraw $12,000 out of my TSP account in order to pay off my car (paying $281/month 4.24% interest rate for it now for 4+ more years) ? I feel like it would be a good idea right now but I know nothing. Thanks in advance.

[tcbofade]

We don't know how close you are to retirement. 

It will certainly save you dollars every month right now.

It will cost you dollars every month later in life.  Significantly more.

Tough call.

Are you close to retirement, or are you a younger person?

[CreditInspired]

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@Anonymous wrote:

CARES Act Withdrawal - Due to Corona we are able to make early withdraws if need be, should I withdraw $12,000 out of my TSP account in order to pay off my car (paying $281/month 4.24% interest rate for it now for 4+ more years) ? I feel like it would be a good idea right now but I know nothing. Thanks in advance.

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It depends--and on a lot of things. Here are 2 that comes to mind:

*Are you still working and receiving a salary? If yes, then no. 

*If you're not working, are you getting unemployment? If yes, can you comfortably continue making payments? If yes, do so. 

Of course, only you know your financial situation; but IMHO, pulling money out of your TSP account should be a last resort. 

GL2U

[MissImMe]

I'm no financial advisor, but my sister and I just did this. I had a ton of CC debt from stupidly allowing a family member to do more than they should have. It was costing me about $900+ a month. INTEREST! 

I looked at several options including a loan from my CU because the debt was spread over two card. I made the decision to withdraw because current me can't drown to save 65 year old me. Also, my job which was certain is looking more doubtful. Definitely needed to lower my expenses in case I lost my job or have to find a lower paying one. I did consult a tax professional to go over the options. You can pay the taxes next year or spread it over three years--although I did take the standard 10% out for the feds. Most of my research said don't do it, but I don't regret it. Wishing you the best!

[Brian_Earl_Spilner]

Do what you feel you need to. While money in a retirement account should be left alone, the above poster makes a good point. What good is a retirement savings if you end up homeless now. I know a few people who have done it and they don't regret it because it gave them piece of mind in case they were to lose their jobs. Here, in California, UI is maxed out at $450 a week, which barely covers the average rent.

[CreditInspired]

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@MissImMe wrote:

I'm no financial advisor, but my sister and I just did this. I had a ton of CC debt from stupidly allowing a family member to do more than they should have. It was costing me about $900+ a month. INTEREST! 

I looked at several options including a loan from my CU because the debt was spread over two card. I made the decision to withdraw because current me can't drown to save 65 year old me. Also, my job which was certain is looking more doubtful. Definitely needed to lower my expenses in case I lost my job or have to find a lower paying one. I did consult a tax professional to go over the options. You can pay the taxes next year or spread it over three years--although I did take the standard 10% out for the feds. Most of my research said don't do it, but I don't regret it. Wishing you the best!

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You absolutely have to do what's best for you and your peace of mind.

I have a friend who is 64 and has a ton of CC debt with a 6-figure unsteady job. She has already decided that she will not touch her 457 if she loses her job--that she will file for bankruptcy instead. She said she will not struggle paying CC debt, and she will not cash in her future to pay yesterday's debt. 

I'm just thankful that I dont have a lot of debt and dont have to worry about making these difficult decisions.

And there is no right or wrong answer.