Ask Terry Questions Place closed IRA money in the market or pay debt when not working/no job

Place closed IRA money in the market or pay debt when not working/no job

By Terry Savage on March 11, 2024 | Financial Planning / Retirement

I received $31,000 from a closed company I worked for and they closed the simple IRA. I’m having difficulty finding a good paying job/any job. I have $20,000 in credit card debt. The $31,000 isn’t currently in the stock market, just sitting in a new Traditional Rollover IRA I opened at Charles Schwab. Should I use that money to pay the credit card bill? (I from time to time take money from my retirement money to get through the month and I hate doing that.) Thank you Terry!! (I know I NEED to find a job!)

Terry Says

I don’t know your age. But assuming you are over age 59-1/2, there would be no 10% penalty for withdrawing this money — although you would have to pay ordinary income taxes on it.
That could amount to as much as 30% of the total amount. And by my math, taking the withdrawal (and having Schwab withhold at least 25% for taxes) would leave you just enough to pay off your credit card debt.

I hate advising that, but if you’re over the penalty age, this might be the one time to do it.
And PROMISE yourself to close that credit card, or put it away. You might not ever get another windfall.
And I heartily agree with your suggestion that you need to find a job NOW!

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