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Is it ever smart to borrow from a 401k or ira for dept settlement so that you have the funds to settle before chargeoff?

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Posted: Fri Jul 25, 2008 10:18 am Subject:

I never ever ever ever ever suggest touching your retirement money to pay off unsecured debt. That money is what you will use to survive off of when you retire and most likely Social Security won`t be around. Plus the IRS will penalize and tax the Dejesus out of you for touching it.

Posted: Fri Jul 25, 2008 10:31 am Subject:

I borrowed $1000 from my 401k and I wish I would have never did that. I regret to this day, I'm trying to hurry up and pay it off. Once I get that paid off I will never do it again.

Posted: Fri Jul 25, 2008 10:34 am Subject:

Well it actually depends ... if the investment has not gained much value, and you can use the money to really improved your credit which will improve your future financial stability in future, then yes, go ahead and take the money. But if the investment has been going gangbusters and has gained a ton of value, then maybe you shouldn't touch it. My advisor gave me his blessing to cash out a Roth IRA with $1500 value that had only gained a few hundred dollars in 5 years, and that money could be used to pay down my debt, therefore making my ability to refinance my home much sooner a reality. You will get other people who agree with mobile not to touch it, but SOMETIMES it makes sense depending on the various factors. Good luck, finances can really be tricky!

Posted: Fri Jul 25, 2008 10:43 am Subject:

In my opinion you should never touch it for a number of reasons. The first reason is if you borrow against it and then lose your job most companies immediately call the loan do in full within 30 days. That means if you borrowed 10k then you have to pay it back in full immediately. If you can't pay it back then this is where the next reason comes into play to not ever borrow from your 401k. The next reason is you will pay a huge penalty at approximately 50% of the borrowed amount to the government if the loan defaults. This means if you borrowed 10k and it defaults then that is like withdrawing 10k and you would have to pay 1/2 of that to the government in taxes and penalties. The final reason I can think of is it deterioates the earning potential of that money until it is paid back.

Posted: Fri Jul 25, 2008 9:52 pm Subject:

no its not smart to touch money you have put in a 401k or ira ever because it always comes back to hurt you in the end so just stay away from that idea.

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Is it ever smart to borrow from a 401k or ira?

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