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I have $8,000 worth of credit card debt. (8 yrs old) I have switched to lower rate cards, pay more than the minimum, have budgeted myself, but still it is going nowhere fast. The original debt was close to $10,000. I'm tired of being saddled with this. I have recently changed employment and need to roll-over my 20,000 IRA into a self-directed plan (my new employer does not offer an IRA as of now-perhaps in 6 months) I'd like to take out the 8,000 and pay the penalties and taxes and be done with these credit cards once and for all. I know it isn't the smartest thing to do, but how stupid is it really? My interest rate is 9.99 for $ 5,000 of the debt and 12.9 for the other $3,000 of the debt. I can't consolitade all to the lower rate because the credit limit is not that high. Can you help me? I feel I would have been better borrowing this money from a bookie :-)

I know from where you speak. I am finally getting out of debt from a failed attempt at starting a business. I even cashed in some IRA funds to meet expenses!! This was a big mistake. Paying the penalties and getting the cash isn't the worst part of the deal, though paying taxes on money a second time is never fun. The problem comes from getting money out of the IRA that you can never get back in fast enough to catch up.

I'll give you an example from a sample newsletter I saw. Two people with similar situations. Person 1 decides to start saving $2000 per year in an IRA and puts the money in the stock market. Amazingly enough, Person 1 picks the worst possible time to invest each and every year. After ten years, Person 1 stops contributing. Person 2 waits until Person 1 stops investing and decides it is a good idea. Person 2 saves $2000 per year in an IRA in the stock market. Person 2 has the most incredible run ever and picks the absolute best time to invest each and every year for 20 years.

OK, now it has been 30 years since person 1 had started investing. Who has more money?

PERSON 1!!!!

You can't beat the power of compounding over time, even with brilliant investing.

Don't mess with your IRA. Others may give you better advice on how to deal with you credit cards, but don't mess with your IRA. My advice would be to try and get a bank loan to repay those cards. Even with less than stellar credit you should be able to do better than the 12.9%, and most likely the 9.9% too.
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