| credit card debt vs IRA payoff |
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walmsley
New Poster
Cash: $ 0.45
Posts: 2
Joined: 01 Mar 2005
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| credit card debt vs IRA payoff |
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Have 9K in credit card debt
15K in IRA
Considering pulling 8K from IRA and 1K from savings to pay off debit
Want fast track saving and with debt not happening
Is this a sound decision in light of 10% IRS early withdrawal tax?
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Tue Mar 01, 2005 5:06 am |
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joseanes
Full Member
Cash: $ 10.20
Posts: 76
Joined: 30 Aug 2005
Location: Marlborough, MA
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| Re: credit card debt vs IRA payoff |
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quote:
Originally posted by walmsley
Have 9K in credit card debt
15K in IRA
Considering pulling 8K from IRA and 1K from savings to pay off debit
Want fast track saving and with debt not happening
Is this a sound decision in light of 10% IRS early withdrawal tax?
Don't do it.
Keep the IRA. Work hard to pay off the debt. 9k is not terrible. Take a second job if necessary. But keep the IRA.
Every year you do not contribute to an IRA is a year you will not get back (you will not be able to contribute THAT ammount again, only this year's ammount).
-- Jose
http://www.MoneyAndInvesting.net
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Tue Aug 30, 2005 4:15 pm |
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Lambert
Contributing Member
Cash: $ 5.65
Posts: 28
Joined: 29 Aug 2005
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| Re: credit card debt vs IRA payoff |
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quote:
Originally posted by joseanes
Don't do it.
Keep the IRA. Work hard to pay off the debt. 9k is not terrible. Take a second job if necessary. But keep the IRA.
Every year you do not contribute to an IRA is a year you will not get back (you will not be able to contribute THAT ammount again, only this year's ammount).
I am inclined to agree.
If you put in $2000 a year from age 20 to age 30 and then stopped, at retirement you would have more money than someone who put in $2000 from age 30 until retirement. Getting that money in there early is key.
Work your tail off and pay off the debt. Have a garage sale, auction on ebay, take stuff to pawn shops, ... do whatever it takes to get that debt gone. The sooner the better. Then you can really start beefing up that retirement fund.
marC
Because the Law of Gravity Doesn't Apply to Credit Card Balances!
www.ExperiencingFreedom.com
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Tue Aug 30, 2005 4:40 pm |
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efflandt
Senior Member
Cash: $ 80.45
Posts: 401
Joined: 25 Apr 2005
Location: Elgin, IL USA
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In order to have $8k from the IRA, you would have to withdraw $10k (to cover 20% manditory withholding). And you will eventually need to pay the rest of the federal tax and penalty and state tax. If you do not increase your withholding at work (W-4 form) and owe more than $1000 at tax time, you may be hit with additional penalty for under withholding. For example if you are in the 25% marginal tax bracket (single with $29,700-71,950 taxable income including IRA withdrawl), besides the $2000 withholding, you would owe $1500 more to IRS plus state tax on the $10k.
Instead of thinking about the $3500+ in tax/penalties you might have to pay now, think of it in terms of sacrificing over $100,000 of lost retirement savings 30 years from now. Is that worth instant gratification?
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Wed Aug 31, 2005 2:41 am |
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$moneyman$
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Cash: $ 0.60
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Joined: 31 Aug 2005
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Excellent advice Jose!
That $9K is nothing that a little belt-tightening and a part-time job can't fix in a few months. Don't sacrifice those worthwhile IRA contributions... think of the Future Value of those funds. You'll be glad you did, trust me! javascript:emoticon(' ')
Cool
Money doesn't stink and YOU are #1
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Wed Aug 31, 2005 6:47 pm |
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