Will Cashing Out My 403b Negatively Affect My Credit? – Luke

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May 29, 2009

Luke wrote to me through the GetOutOfDebt.org site and asked the following question. 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.

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“Dear Steve,

I have a great employer pension, a decent 401k, and a small 403b($7000). I am not worried about retirement. I tried several years ago to combine the 403b into the 401k and was told I could not do that. I have no credit card debt but ridiculous student loans and a car payment. This summer I have to undergo major dental work. The estimated $4000 out-of-pocket cost would be approximately what I would net from cashing out my 403b. I do not want to go into further debt for this dental work. I am hoping to buy a place in the next two years.

Will cashing out my 403b negatively affect my credit score?

Luke”

Steve’s Answer:

Dear Luke,

It will not impact your credit report at all. Investments are not listed on a credit report.

While I am almost universally opposed to cashing out 403b or 401k accounts, it sounds like in your situation this makes sense. This is not an ongoing problem, the issue will be resolved with the cash, you understand the loss in taxes and penalties you will face, it doesn’t put you further into debt, and you don’t appear to have any monthly payment problems right now.

My only advice is that you should start saving money into a regular savings account so you don’t have to turn to liquidating investments and losing a lot when a surprise comes up.

Big hug.

@GetOutOfDebtGuy