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Settlement-retirement acct?

Date: Thu, 07/29/2010 - 18:14

Submitted by Jill Adams
on Thu, 07/29/2010 - 18:14

Posts: 96 Credits: [Donate]

Total Replies: 3


So I am very familiar with the fact that you should never take money out of your retirement. I was raised to never have debt, always have insurance and never take out of your retirement. I followed all that until I had sick kids and a husband that lost a huge amt of his income with the economy. So here we are chipping away at the debt. We have settled two accounts. And now we have an offer from citi for 30%. I told them I need a couple days to see if we can get funds. We will not ask family. We just aren't going to have the $700/month for 3 months though to do the settlement but I really want this behind us!

So, I don't have much in retirement unfortunately. Probably just enough to pay this settlement. Would it make any sense at all to use it to pay the settlement? Or would it not even be a good deal if I got 30% then had to pay the taxes on the retirement money?

What do you think??


Well that's a really loaded question. but if you work the numbers. The taxes would be your tax rate plus 10% penalty. So if you took $2000 out then your tax refund next year your tax refund would be about $500 smaller (typical 15% income tax + 10% penalty). To figure out your tax bracket, pull out your tax return and take amount of tax owed divided by your income. Only about 2% of Americans pay 30% federal income tax so you are most likely in 15% or less.

So basically you would pay $2600 ($2100 settlement plus $500 tax on retirement) to settle an account that's about $6500. Still not bad by my calculation.


lrhall41

Submitted by Debt Free to Be on Thu, 07/29/2010 - 18:43

( Posts: 412 | Credits: )