Debt vs Ira
Terry,
I was hoping that you could provide me with some insight. I recently retired at 62 and have a small amount of money in an IRA that is with my previous employer. I also have a lot of credit card debt to pay off. My husband is still working and I am not sure if I should take the hit on the withdrawal from my IRA or pay off my high interest debt. I would love your input.
Thanks
Terry Says
Any withdrawal will be taxed as ordinary income — although no penalty since you’re over age 59-1/2. And it makes sense to pay down high interest rate credit card debt.
BUT what really strikes me is that you retired too soon! You should not have retired until you paid down your debt. Any way you can go back to work, even part-time and earn enough to pay double the current minimum payment every month (and never charge another penny)? That’s the best, fastest way to pay down credit card debt.
And please don’t tell me you are planning to take your SS now! That gives you a penalty of 8% every year you take it early, cumulatively. That’s the second worst mistake you can make — after retiring early.
Please re-think your strategy. If you go back to work you don’t have to make an early IRA withdrawal.
