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Should I use my 457 to pay off CC
Old 09-13-2012, 01:42 PM   #1
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Should I use my 457 to pay off CC

I'm 35 years old. I want to pay off my credit card which has a balance of about $3,900. Interest rate is a ridiculous 22.9%. I would like to withdraw from my 457 to pay off this debt. Is that a good idea?

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Old 09-13-2012, 02:13 PM   #2
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Originally Posted by gribe View Post
I'm 35 years old. I want to pay off my credit card which has a balance of about $3,900. Interest rate is a ridiculous 22.9%. I would like to withdraw from my 457 to pay off this debt. Is that a good idea?
Well at least you won't have to pay a penalty to take your money out of the 457 plan.

But you'll pay (state and federal) income taxes on what you withdraw

Also, You will forego any growth that the 457 plan might have.

The question I would ask is....

Why would you get in a situation where you have credit card debt ? And 22% interest credit card debt at that !

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Old 09-13-2012, 02:37 PM   #3
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If you have good credit, take advantage of a 0% CC offer and transfer it. Although I only do it occasionally and with a specific game plan, I have had friends float credit card debt for years and pay little to no interest on CC via the transfer game. Paying 22% percent would be unacceptable to me.
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Old 09-13-2012, 06:13 PM   #4
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Or read Dave Ramsey's Total Money Makeover, and start snowballing that $3,900 until it is a big fat ZERO.

I've done what you want to do, and it's the easy way out. That 457 plan should not be a crutch. You don't want to learn to rely on it, or when you get to be my age you won't have much in your retirement fund.

I don't know your situation, but $3,900 is not a huge amount of money. Start throwing an extra $500 a month at it and this time next year it will be gone. Or call and ask the credit card company to freeze it and give you a better rate with a promise from you that you'll pay them XX a month.

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Old 09-14-2012, 08:49 AM   #5
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How long would it take you to pay it off if you don't do that? If it's only a few months I'd just suck it up, tighten the budget for a while and throw as much excess cash flow as I could at it.

If it's longer than that, I'd like to consider a balance transfer to a lower rate while you pay it down (if you have adequate credit to get a single-digit interest rate). Raiding a retirement account is one of the last resorts, and should absolutely *never* be done unless you are 100% confident you won't run up the balance again.
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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