Ask Terry Questions 401K — withdrawing to pay cc debt?

401K — withdrawing to pay cc debt?

By Terry Savage on December 13, 2018 | Investments

My husband n I are retired 65 and 67…we have a home equity line of credit of 15,000 n 4,000 in credit card debt.. we have 150,000 in our 401K (my husband) we want to take 20,000 out too pay off our debts and get a clean slate…Do you advise this…we also have substantial stock as well…we use the dividends quarterly. Thank you so much 🙂

Terry Says

As long as you understand that you will pay ordinary income taxes on the withdrawals — AND as long as you never run up your cards again! — I think you’ll be better off without that expensive debt hanging over your head.  But you’ll need the 40l(k) sometime, so figure out where the money should come from.  You mentioned that you have other stocks, as well.  If you sell some winners, and also some losers (you must have some losers!) then you can offset your tax liability and still get the cash.  It’s hard to give specific advice without knowing more about your personal situation, so you might want to talk to your tax adviser.

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