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Subject: Re: Poll: 401K Roll it? Take it?  Date: 4/3/2007 9:49 PM  
Author: aj485  Number: 56572 of 82371  
Try it one more time, assuming the original poster diverted the credit card payment into the IRA for those 15 years. Earning the same nominal 8% gains. Or even if he diverts just half of the credit card payment into the IRA... 15 years is a pretty good period of time for compound interest, and you're allowing it to work against him... Sure, if the OP has the discipline to invest the money, EVERY MONTH, he would come out ahead by taking the tax/penalty hit. However, that's a HUGE assumption, given that there is a significant amount of CC debt that has not been paid off, and at the age of 50, there is only $50k in a 401(k) that has been being invested in for 10 years. At an 8% average yearly return, with level contributions each month, that means that he's only been investing an average of about $277 a month ($3324/year) in his 401(k) for the past 10 years. And that's assuming that there wasn't any matching. If there was, say, 50% matching, then his contributions would be about $185 a month, or $2216 a year. So you can see why I am skeptical that he would invest an additional $160  $325 per month ($1920  $3900 per year), when he hasn't even been taking the opportunity to invest more than he has. The ideal solution is probably to borrow from the 401(k) and pay yourself interest. Just because it forces you to replace the money instead of blowing it on luxuries like food. Since the OP's original 401(k) has been discontinued, I doubt he would have the opportunity take a 401(k) loan from his current plan, so this isn't really an option. AJ 

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