Do the math. If you pull the money out of your 401K, you will owe a 10% penalty and 20% in taxes - maybe more, depending on your tax situation.
So if you pull that money out, you will have 30% less than what you think you have. So if you have $6000, you will only receive $4000. That's less than half of what you owe.
Best thing you can do is roll it over into an IRA and not touch it. Take your increased salary and throw every dime you have at your debt. Over the next 2 years, as you pay down that $11K, your credit score will increase because you will have a lower debt to income ratio.
I would leave this acct alone because you would lose some of to taxes. Are you and your husband on a budget? If not, get on one when you know how much your take home pay will be from your new job.
If your new job offers matching funds for a 401K, deposit the minimum amount to get your companies matching funds. Your budget will show you how much income you have to pay down debt. But be sure to save money each month for car repair, medical bills and home repairs (like any appliances you own). Not having any money to fix the car will mess up your budget.
And stop using credit cards until you get them paid off. In the future don't pay for anything with a credit card unless you already have the money for it, and have a budget determined for how much you can spend. Pay the full credit card bill when it comes in. If you can't follow these rules for using a credit card, don't use one.
First off. If you were married. Would you pull your penis out of her to be with a prostitute? Your question really is that comical.
First off. Learn to get off credit. Think of a credit score as training your mind to depend on other people's money.
Do you understand how ****** up that is?
So when you 'reward' your mind for using credit by paying it off. What does your mind do? It naturally seeks more credit. You did, after all, use it successfully.
THis is the nature of addiction I might add.
My advice is - keep your 401k. If you can't do something without credit. Then don't do it. Or do it until they don't give you credit anymore. One way or another you gotta break yourself of the nasty habit of depending on other people's money for your success.
Let's put this into perspective:
I'm homeless. At 45. about 3 years ago. I lost my last job. And have been unable to get a new one. I have 150k in credit obligations.
About 8 months ago I applied for a free cell phone which was offered in coordination with the state government.
Free mind you.
I was denied because I didn't have good credit.
Their logic was simple: If I could not be depended on to pay for the 'upsell' of additional services - which is how they would make their moneyn me.
Then I wouldn't make a good prospective customer.
I live in a tent because I can't afford $5 a night for a shelter.
In the three years I have been homeless. I have been to 8 countries. five different states. and I eat a solid meal every day.
Life's difficult. Dont get me wrong:
But the lesson I started learning at 45 is my gift to you:
You can do anything you imagine without credit and without leveraging other people's money.
But once you've walked down that path. It's like steering the Titanic away from the impending iceberg and trying to stay afloat.
My advice is: get VERY rich by avoiding credit. Buy yourself a time machine with your fortunes. Then come back in time and come get this homeless guy off the street and thank him for steering you away from that iceberg called a 'credit report' which may have been your own end..
Credit card companies are like vampires.
Do you like that sucking sound they are making on your artery?
Crazy to do that for 10 grand. Do a monthly budget and you could probably fine hundreds to trim from your spending habits each month.
If you want to be responsible, cut up all of your credit cards, and only spend what you have. Get on a written budget and stick to it. Pay off all of your debts, starting with the smallest one first and working to the next larger one, regardless of interest rate.
PS having a "good" credit score doesn't mean you're successful, it means lenders are more willing to put you into a larger debt!
... and they wonder why I say "Use current money for current expenses." Do not sign up for a retirement account at your new job. That will help you get rid of the high interest debt sooner, and then also save up for the house. After you lock in the house, then consider formal retirement plans.
If house prices and interest rates go up before you get into a house (because you are saving for retirement) your retirement plan may never make up the difference.
Your choice morally about how you feel about debt. Taxes are a constant, but it is possible by not paying cc interest you will more than make up the 10% early withdrawal penalty. [ $6000 cash out - 10% is $600 penalty leaving $5400 to pay debt. $5,400 cc o/s for 1 yr at 18% is $972 - so you GAIN (by saving) at least $372 in this scenario - and that helps with the tax bill, too..]
Really hard to say without knowing how much money you make and how much disposable income you have. Need more information.
I was in your position 3 years ago with $8000 of debt. I paid it off in a year by cutting all unnecessary expenses. I didn't touch my savings. I also had $800 rent payment and $600 truck/insurance plus living expenses. My income is $3500/month after taxes
If you do not roll over the money into a new IRA or 401(k), you will owe income tax and 10% penalty onall of it.
IMO, it is best to roll over the money into a new IRA or 401(k)and work on paying off your credit cards with your income. Leave your cuirrent 401(k) money alone; let it compound & grow so that you will have a much bigger amount of money when you retire.
NO! Never cash out your 401(k) except to retire on. Not only will you pay the income tax and penalty, but you lose all of the future value of that investment. If you have $8,000 in there and it earns a realistic 8% per year, in 40 years, it will be worth $173,800. Put yourself on a budget to pay off those credit cards but do not withdraw your 401(k) funds. Maybe roll it over to an IRA to keep track of it, but do not take the money out.
Absolutely not.
If you pull 6K out of your 401k you'll owe about $1500 in taxes and $600 in penalty. You'll net about $3900. It won't wipe out your debt but it WILL wipe out your retirement seeds.
Wipe the debt by getting a second job or working overtime combined with cutting out unnecessary expenses.
If you can't pay your bills AND fund your retirement AND save for a house, you can't afford the house.
P.S. Having assets such as retirement investments will help you qualify for the mortgage.
you get penalized too much if you take out the 401k money. start by paying off your credit card debt as soon as you can
