Retiring Military With Big Debt. Should I Cash Out My IRA to Protect My Security Clearance? – Tim

“Dear Steve,

I am a retiring military officer with about 3200 in post tax income for retirement. This is enought to pay my mortgage and put food on the table. I also have a mass mutual whole life annuity for 250000 and my retirement check will have survivors benefit of half current payment. I am 40k in credit card debt, need to have that reduced substantially for security clearance reasons in the job I would like to do post military retirement. I have an IRA worth 40k and am considering cashing it out. My current taxable income before I retire from the military is 108k before tax. I am 42 and will have a “second career”. Should I cash out my IRA for the great job opportunity.

Should I cash out my IRA for the job opportunity?


Dear Tim,

As a general rule of thumb I cringe when people cash out protected retirement funds. But I doubt you have more than a million dollars in the IRA, the limit of protection from creditors.

I understand the desire to eliminate the debt. But one important fact is not clear from your question. How do we know the security clearance is in jeopardy with your current level of debt? Is that a fact or an assumption?

In a perfect world it would be best to get a definitive answer from the security officer and if your level of debt needs to be reduced a bit, then it will lead you to take less of a hit and tax penalty. There are other ways we could tackle the debt and demonstrate you are dealing with it other than draining the IRA.

Is it possible for you to ask for guidance from them or do we simply have to gamble with your retirement funds on a hope?

Please post your responses and follow-up messages to me on this in the comments section below.


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