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Personal Finances / Credit Cards and Consumer Debt


Subject:  Re: Converting investment dollars Date:  1/15/2020  10:44 PM
Author:  aj485 Number:  312763 of 312970

Welcome back!

Should a person borrow money on a credit card to invest in stock mutual funds?


If not, I have a question about which of my retirement funds I should withdraw money from.

How does not borrowing on credit cards lead to being okay with withdrawing from retirement accounts to pay off debt? Did you borrow on your credit cards to make the retirement account contributions? I highly doubt that you did. Instead, you decided to finance a lifestyle that was above your means by using credit cards. Even if you did use credit card advances to make retirement account contributions, two wrongs don't make a right. You already made a mistake by running up the debt - don't compound it by taking money out of your retirement accounts to pay it off.

My CC pay down continues. Overall balance is down almost $10k from twelve months ago

Good job! Although, I must say, that if the balance is around the $42,315 that you posted in this post 2 months ago, that balance was already up $10k from this thread from almost 6 years ago. So it seems like things got worse before you really started on your pay down journey.

but yes--"raiding the retirement account" is on the table!

BAD idea!!!!

If you are under 59 1/2, and the account is a Traditional account, you will owe taxes at your marginal rate (probably at least 22% - but it could be higher) plus a 10% penalty. That means that in order to net $42,315 to pay off the credit cards after taxes and penalties, you will have to withdraw at least $62,227 from your retirement account - more if you are in a higher income bracket. And if your state has an income tax, the amount would be higher still.

In just 10 years, at a 6% CAGR, you would instead $111,439 in your retirement account.

What I did with my money in the past is about to get a do-over.

Without getting any more details than what you've already provided, I would say that raiding the retirement account would actually be continuing the past irresponsible behavior. You would be attempting to take the easy way out, and wouldn't actually solve anything. As I suggested in your original thread:

If you can't resolve the problem of putting money away to pay for items that you know you will have to pay in the future, you are likely to be forever stuck in debt.

Here it is, 6 years later, and you have more debt than you had then.

To fix this problem, you need to do several things:

- Stop putting any/all new charges on credit cards - you can't fill the hole in until you stop digging
- Start writing down every single penny that you (and your family) spend
- Examine that spending for leaks that can be stopped, so that you can devote that money to the debt
- Find additional income from side jobs or selling things on Craigslist or FB and put that money toward debt
- Put every extra dollar (tax refunds, bonuses, gifts, etc.) toward debt
- Consider reducing retirement account contributions down to just enough to get any employer match

You can find a lot of support, ideas and different ways of looking at things on this board, if you're willing to share.

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