I’m not sure how many times I can say it, don’t drain your retirement assets to pay debt. It’s a bad idea on so many levels.
In a couple of posts I even talk about the long term consequences of tapping those funds. See Here’s Why a 401(k) Loan to Pay Off Debt Can Cost You a Massive Amount in Retirement and I Want to Borrow From My 401K to Pay Off My Credit Cards. – Carmen
Yesterday NBC News ran a story addressing this very subject. It included some excellent videos on the dangers.
The featured couple in the first story tells the unfortunate story of how they had to face a decision between bankruptcy or draining their IRAs. They made the wrong choice and drained their retirement accounts. Essentially, that one move sacrificed a retirement they may now never experience.
What the story alludes to but does not say, is that bankruptcy would have dealt with their debt and protected their retirement accounts from creditors. The couple could have received a reboot of their financial life without sacrificing years in retirement when they will need to lean on those funds they drained.
For once, Suze Orman and I are in total agreement with the advice she offers in the video above.