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I Am Permanently Disabled. Should I Take Money Out of My 401(k) to Pay My Credit Card? – Jeri


“Dear Steve,

I’m a 51 yr old female on total disability, and will be for the rest of my life. I receive Social Security and Long Term Disability thru the company that I worked for. My question is this. I have a credit card that has a balance of $5900, and the promotion of that card is going to expire before I can pay that off…..with accrued finance charges of almost $2000.

Should I take money from my IRA, (which has only 51K) to pay it off before the promotion expires and that 2K is tacked onto my balance and then 25.99% APR. I do not have to pay any penalties for withdrawing, and because of my situation of income, probably not much in taxes, if any.

Thanks in advance


Dear Jeri,

Let me say this in very clear terms. If you take the money out of your 401(k) to pay this off I will personally come and kick your ass. 🙂

Your 401(k) is not a savings account. In fact taking money out of your retirement account comes with some serious penalties and taxes if you do it before you are legally eligible to do so.

That money right now is protected from your creditors and can’t be touched. So you’d be handing over money you’ve saved and will need to live on to address a bill that you can no longer pay due to circumstances beyond your control.

I truly do care about you and I am a compassionate soul but in this matter I need for you to not make a critical mistake that you will pay for when you are much older.

Leaving that money in your 401k will multiply it and turn it into much more. Let’s say that you leave that money alone and in 25 years it is now worth $15,000 as the stock market rebounds over time.

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So by draining that money now it will actually cost you $15,000 to pay off that card and what will you use to fill the $15,000 hole when you are disabled and 76?

If you don’t have any assets like equity or cash in the bank then one option may be to not pay the bill and do nothing. So let’s look at what happens in that approach.

If you do nothing you will wind up in collections. Debt collectors will call, you may be threatened with a lawsuit and/or sued by the creditor. If you don’t have any assets and you are living on LTD and SS then the creditor can’t garnish that money if they get a judgment against you.

Based on your situation I am not confident that you will not run into another unforeseen financial hurdle in the next five years. If you do, all your financial problems could be addressed with a bankruptcy. And even bankruptcy can’t touch your 401(k) money.

The debt feels emotionally strong and the pressure you are facing wants you to make a decision to address the emotional stress but you also need to consider your responsibility to protect and care for yourself by being a good guardian of the 401(k) money you have. Trust me, it is never enough.


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.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.


  • I’m totally disabled if i remove some money from my 401k do i have to pay a portion to social security I am on ssi

  • I am totally disabled. I don’t contribute to my 401k nor does the the company the I worked for. I want to take a hardship withdrawel. Is it legal for them to hold onto the money for the last 4 years without any activity.

  • I am totally disabled. I don’t contribute to my 401k nor does the the company the I worked for. I want to take a hardship withdrawel. Is it legal for them to hold onto the money for the last 4 years without any activity.

  • Thank you very much Steve….I sure as heck don’t want you coming over to kick my ass, so I will do as you say…..Thanks again!

  • Jeri,

    Listen to what Steve has to say. You need to think longterm and taking money from your 401K is typically not good advice. I might add one thing to keep in mind. If you let this account go to collections, your income “source” should be protected from “wage” garnishment. However, once the income hits your bank account the judgement creditor might be able to garnish (attach) to that account. If this looks like a possibility, consult a few local bankruptcy attorneys to learn how bankruptcy can help.
    You may also want to consult a bankruptcy attorney early to learn more about your situation and how bankruptcy could help, or if it is the right decision at this time. A good attorney should explain your options and let you know if filing is appropriate at this time.
    You also have Steve. He has budgeting tools available on this site. I recommend that you take time and carefully prepare a complete budget. This will help you gain a greater understanding of your financial situation. It will help you make good decisions.

    Best of luck


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