Empty out 401k to pay Credit Cards

[Charles@moneygreenlife.co]

I agree with Disney Steve. 2.5 years to pay off your credit debt is not that bad. You can do a 0% balance transfer to another credit card that has a lower APR. Living paycheck to paycheck is not that bad, for the short time being. If you don't like this idea, you can also take out a "loan" from your own 401k account without paying any penalty. that's much better than paying a hefty 40% tax and additional penalties for early withdrawals.

[disneysteve]

you can also take out a "loan" from your own 401k account without paying any penalty.

Never, never, never borrow from your 401k unless it is a dire emergency, life and death situation. I would argue that there absolutely is a penalty. First, you get double taxed on the money. Second, you lose the earnings that the money would have made had you left it in the account. Third, if you leave the job for any reason, the loan becomes due immediately.

I wish they would eliminate the loan option from 401k plans. It would save people so many headaches.

[Cassius King]

Are there student loans involved here as well, or was school paid for?

[txman14]

I agree with the others on this topic. Your time horizon is too short for comparison and 2008 was a total anaomly. You are comparing 12 year data when we have spent 4 years of that in a recession environment, and one of those years in a near depression. I would not sacrifice future returns for short term gain. I was in the same boat as yourself but investing in retirement for me was ranked much higher than paying short term debts. Use your income and pay towards credit cards/loans and keep making 401k contributions, definitely to your company match. I think in the longer term you will look back and be glad you did.

[snshijuptr]

If you are worried about the CC interest rate jumping up, you could look for a personal loan from your bank or credit union. At 24 it is easy to be impatient (I'm the same age), but don't worry. These things take time. Reduce your party spending. Try to get one drink when you go out on the weekends, use Groupon for meal deals, find a free things to do resource, talk to the department of tourism for discounts, etc. You can have a lot of fun and still save money.

[TheStreetCeo]

What's your rush Asset? At 24 you're doing fine. 12k is nothing and temporary. Emptying your 401k is permanent.
"Don't make a permanent decision for a temporary problem."