My wife and I have accumulated considerable credit card debt ($70K)while she was out of work for 5 plus years while raising 4 children. I have approx. $120K in a SEP IRA. I am 47 years old and my wife and I combined make approx. $150K per year. I owe $190K on my mortgage, house is worth approx. $275K, but my attempts to refinance have been denied due to the credit card debt. I own a rental property (no mortgage) with a partner … my portion of the equity is approx. $60K. I am hesitant to sell the rental property because I doubt my partner wants to sell and I planned on using the rental income as retirement income … as I currently do not have a pension at work. The credit card companies recently raised the interest rates from 6 to 12% to over 24.99% and our monthly payments have more than doubled … we are at the point now where we are barely getting by making all debt payments and living expenses.
I was considering withdrawing $20K from my SEP and pay $12K of my tax refund for some breathing room and plan to move forward with the snowball payment method to eliminate the debt. Does that sound like the best approach, or should I withdrawal more of the SEP money and get out of debt, then build the SEP back up with the money I’ve been paying in credit cards? Thank you in advance for your help.
First off, $12,000 tax refund!!!
It sounds to me like you are way overwithholding on your taxes and this is resulting in a big refund. Couldn’t you really use $1,000 in your pocket each month and wouldn’t that make a material difference in your being able to get by?
The goal of taxes is not to used it as a forced savings plan to get a big check. The goal is to come close to not owing money in taxes and using that money each month when you need it most.
How much credit card debt do you have?
If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.Should I Use My IRA and Tax Money to Pay Down Debt? - Tim by Steve Rhode