I am married with two kids, 12 and 16 years old.
We have $80,000.00 in credit card debt (7 credit cards), $70,000.00 in line of credit debt, and a mortgage on which we owe $445,000.000.
We have approximately $250,000.00 in our IRAs. We are paying about $1,500.00/month for minimum payments on the credit cards.
As you can see we are paying out $18,0000.00 per year in credit card payments. If we use the IRA to pay off credit cards I believe the penalty and taxes would be about $35,000.000. I think the $80,000.00 would bring us into the 33% tax bracket. Our total income would be about $240,000.00. My thinking is that we would recap this loss in 2 years, plus we would no longer be struggling with our bills. We would still have $170,000.00 in the IRA to build on. In addition, we usually get a $20,000.00 tax refund.
What do you think of this strategy?
Thanks for your time and expertise.