48 year old female, married, 1 child 14 years olds in 9th grade – college bound.
11 years at job with vested pension, Roth and traditional IRA’s,
home owner – 174,000.00 at 6% (fixed VA) monthly payment with taxes and insurance – 1507.00,
800 credit scores, 2 cars financed at 2.5% totaling – $40,000.00,
16 years before retirement,
Net worth 195,000.00.
Monthly income – 5663.00.
1 credit card balance at $4,420.78 / 7.9% (prime 4.65%).
Food bill slashed in 1/2, electric bill at min. Cell phones at 191.00 per month – cancelation fees would be: xxx-xxx-692 – 07/19/2013 – $150; xxx-xxx-9829 08/25/2014; $155 xxx-xxx-0013 09/24/2013 $200.
Family on strict budget with all unnecessary spending stopped as of 01/01/13. Everyone is on board for paying down debt. In the last month we tried to refinance to a lower rate but were denied because of the cars
– Should I use my roth IRA to pay off the balace on my cc and use the cc payments to snowball cars until paid?
– When should we try again to refiance to a 15 or 20 year loan?
Thanks for your help!
Here is the issue with borrowing from retirement plans that people miss, while the rate to repay is low, you lose the power of the invested funds while they are out of the account.
For a detailed example, see Here’s Why a 401(k) Loan to Pay Off Debt Can Cost You a Massive Amount in Retirement
You only have $1,000 in savings and things are clearly tight, but you have good credit and making the minimum payments. You are in the creditor sweet spot, low risk, good returns.
From my point of view, the attraction of stealing money from your retirement to pay down consumer debt is not wise. Really what you are doing is robbing your future higher balance, when you will need the money the most, to deal with consumer debt now.
I’d really like to see you adding to your savings account by several hundred dollars a month.
Is that monthly income your combined family income or just yours?
What is your goal here, to be in a better situation to deal with college debt or to put preparing for that aside and dig out of the current debt?
Please post your responses and follow-up messages to me on this in the comments section below.