My Retirement Plan Won’t Let Me Borrow Money to Settle My Debt – Quincy

“Dear Steve,

I’m thinking of using some of my reitrement to help settle my debt.

But my retirement says if I refund the money I will lose all benefits to it. I’m with the Arizona State Retirement System. I do not want to take it all out, just enough to cover my debts.

Will I be penalized for this and will i owe taxes come tax time? Will I also lose my benefits from my employer and no longer have a retirement fund?


Dear Quincy,

According to the Arizona State Retirement System documentation “The Arizona Revised Statutes do not allow the ASRS to lend you money from your account.” – Source

It seems as if the fund has you money locked up for retirement. I can’t say that’s a bad thing for you in the long run.

Dollars and StopwatchYou might want to consider talking to a local bankruptcy attorney about your situation. In a consumer bankruptcy your retirement money would be protected and you would not lose it or have to pay tax on any of the forgiven debt.

You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

Unfortunately you did not leave me enough information about your specific debts to comment on that.

Bottom line on the retirement fund, they only appear to be available if you quit before retirement and I can’t imagine any scenario in which that would make good sense.

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


You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

Damon Day - Pro Debt Coach

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