Quote:
|
Originally Posted by neatdesign
So, now that you have all the details... Here's my question:
I have about $8000 in my old 401k. I left my previous job in January but did NOT roll it over. (I do have a Roth IRA, BTW.) My mom suggested that I look into cashing it out, paying the 10% penalty fee and applicable taxes, and use the remainder to pay off the Citi card. (She also mentioned that if I wait to cash it out until January 2007, then I won't have to claim it on my tax returns until 2008, so that gives us a bit more time to save up for that.)
~ Jenney
|
First-The reason most people say don't is that you are looking at a lot more than a 10% penalty. At my work they also take out an additional 20% for income taxes on the withdrawl. You say you have $8k in the account so you would probably actually get around $5600 then if you owe more than 20% income tax you would have to come up with the rest at tax time. You would be losing approx. $2400 if you cash it in. Would you lose that much even if the CC was at 13%?
Second-You can't roll it over into a Roth unless you pay the taxes on it. Best bet would be to roll it over into a traditional IRA for now and maybe convert later when your finances are more stable.
I think your best way is the way you are doing it. Keep going with your plan and move as much as you can to lower interest cards. You might look to see if there is anything you could sell or maybe a second job temporarily until you can get out of this hole.