401 (k) Too Expensive to Pay Off Current Debts

If you are 27 years old, married,and an expecting mother; you may have encountered a situation where you have a credit card debt of let’s say $20,000 that has a high interest rate, 9.5%. The amount is killing you and you would like to pay it off with your sitting 401 (k) deposit in the bank, but the question is should you withdraw all or a few amount of your 401 (k) savings to pay off the liability?

Well, the answer is “no”, here are the reasons why you should not touch your money in the 401 (k) to pay off your debts: first, there is an instant cost involved you pay income tax and a penalty of 10% if you withdraw an amount from your 401 (k) savings. So for example you have a $10,000 savings in your account, it could decrease your balance by 25% from $10,000 you might only have $7,500 dollars left, or less.

Another reason is, withdrawing from this account will affect you dearly in the future. If you withdraw the money, there is a chance that you might not be able to get the long-term growth of your 401 (k) amount. Your $10,000 is going to grow 6% every year for 35 years, and by the end of those years, your money would have grown into $76,861. If you withdraw $1,000 from your account, you will be losing $7,686 in the future.

So what should you do to pay off your excruciating debt? The best remedy is to sit it out with your partner. You and your husband must work out a plan and promise each other to handle your family’s finances more wisely and create a budget and think of ways to make your future financial problems manageable. Paying off all your credit card liabilities is just one of the many stages you must go through in this plan.

Share and Enjoy:
  • Print
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google Bookmarks
  • Blogplay

Related posts on loans for people with bad credit:

  1. Debts Beyond The Grave Debts Beyond The Grave Investigations by the United States’ authorities have found out something disturbing, nothing can make you safe from identity thieves, not even death. According to recent data, the new stolen IDs used the personal information and SS numbers…...
  2. A Great Help in Paying Debts For most people, paying debts is a challenge. It is most especially because today we live in a world where everyone seems to be facing financial crisis. It is really difficult to go with the demands of the time and still be able to pay debts. So, people need help...
  3. How to Relief your Debts from Free Credit Card Debt Consolidation How to Relief your Debts from Free Credit Card Debt Consolidation Free credit card debt consolidation is already easily available both online and offline. A number of debt consolidation organizations give these services with a goal to assist individuals suffering from credit…...
  4. Consolidating All Of Your Debts With A Single Mortgage Debt consolidation is a new trend in which all debts that a consumer owns is paid for with a single mortgage loan. In doing so, it is hoped that the consumer will be better able to keep up with bill payments, yet also refinance interest rates to easier rates....
  5. Not All Debt is Bad – Some Debt can Help Improve Your Financial Condition Not All Debt is Bad – Some Debt can Help Improve Your Financial Condition All types of debt can be seen in a mortgage business. Debt payments for car loans, student loans and IRS payments, alimony, child support are made when…...

Filed under: Creditcredit cardsCredit Scoredebtdebt relief

Like this post? Subscribe to my RSS feed and get loads more!