Dip Into My 401(k) to Pay Off My $25,000 Credit Card Debt?
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- เผยแพร่เมื่อ 10 ก.พ. 2025
- Dip Into My 401(k) to Pay Off My $25,000 Credit Card Debt?
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I did this and it's scary but it's shocking how fast your 401k rebuilds once you have no debt
So you withdrew some money from your 401K to pay off credit card debt ? Did you pay any penatlies and fees ? How much did you withdrawl ?
Thank you for the testimony and encouragement, it's like a radical action, but doing the math taking it to account compounding interest once you're debt-free - NO BRAINER
I did a hardship withdraw from my 401k for about 30k to pay off my debt that was about 30k and to be honest it was 1 of the best moves I ever made I sleep better at night my stress is all gone I'll pay the taxes on that 30k with a 😁 for all that weight off my shoulder I been debt free ever since my bank account looks better than it ever had 30k set me back a little on my 401k but I believe with all that stress gone I'm going to live alot longer.
THANK YOU. Everyone acts like the future is the only important thing to think about. It's important, sure - but so is the present. I'm in the same boat right now - but $40k - and I can physically feel the effect that drowning in debt is having on my health. What's the point of scrimping and saving ($20k a year? Really??) just to have more $ when I'm 65 if the stress is going to end up killing me at 45??
I'm in a similar situation now. I can drain my 401k and be debt free. I figure I'll just contribute way more to it once i'm debt free to make up for it.
@@dbaum23 feeling the same
I know that's right..but u should of took a loan out....
@@rustinstardust2094 The stress of having no money to retire on will kill you when you are 64. Everyone should be acting like the future is the only important thing. Too bad you cant understand.
I'm 54 and my wife and I are VERY worried about our future, gas and food prices rising daily. We have had our savings dwindle with the cost of living into the stratosphere, and we are finding it impossible to replace them. We can get by, but can't seem to get ahead. My condolences to anyone retiring in this crisis, 30 years nonstop just for a crooked system to take all you worked for.
I feel your pain mate, as a fellow retiree, I’d suggest you look into passive index fund investing and learn some more. For me, I had my share of ups and downs when I first started looking for a consistent passive income so I hired an expert advisor for aid, and following her advice, I poured $30k in value stocks and digital assets, Up to 200k so far and pretty sure I'm ready for whatever comes.
@@temmyolarewaju9371 That's actually quite impressive, I could use some Info on your FA, I am looking to make a change on my finances this year as well
@@IfranReinfeld My advisor is *MARGARET MOLLI ALVEY*
You can look her up online
@@temmyolarewaju9371 The crazy part is that those advisors are probably outperforming the market and raising good returns but some are charging fees over fees that drain your portfolio. Is this the case with yours too?
I had 20k in debit credit cards I took a loan out for 20k via 401k paid that debit off 1 shot. Setup the 401k payback from my work check. Best thing I did.
$25,000 in credit card debt is painful to even think about
He could transfer it to a new CC with a low promo rate.
Especially when the household income is only around 80-90k.
Caller: Take out money from 401k to pay debt
Dave: Nope
That could have been Dave's shortest call ever xD
🤣🤣🤣
I’ve done it several times.
For anyone that needs to read this, no matter what you’re going through there is a way out. Wishing nothing but the absolute best for you guys!
Thanks!!!!!
❤️❤️
Really appreciate it, love the positivity
❤️❤️❤️
❤️
Stopping your 401K payments is scary. It should freak you out, but when you pay everything off and you're contributing 5x towards your 401k than your were before, you'll forget all about it.
I'm speaking from experience btw.
I needed to hear this. I was crunching numbers all day wondering if I should stop contributions until I’m debt free.
@@twiWright25 but only for a season and then you can crank it up! 🔥🔥🔥
Agreed. Doesn't make much sense to me to worry about taking money out which won't be there IF the market goes crazy high but stop contributions (which also will miss out on IF the market goes crazy up) but yet pay crazy high interest on 25k of cc debt when you can pay that interest to your 401k. In the end you'll prob be up money by not paying 35k to a CC company instead of paying yourself the extra 5k to your 401k.
Stopping your own contributions could stop your employer match (in my case they match 6% of my income). I would rather keep the 6% extra income they match and do a 401k loan and pay myself 9% interest back.
If I’m not mistaken, Cares Act allows for 0 penalty and 0 tax if you pay whatever you pull within 3 years. Theoretically: Can pull, pay off the debt and whatever payments he was making to his CCs, start putting it back into his 401K.
3 things I have learned Dave hates. 1. Credit cards of all types regardless of the circumstances. 2.Cosigning. 3. Borrowing from your 401k.
Ryan De Witt don’t forget car payments.
Also whole life insurance
And shacking up
He also hates time shares.
And debt collectors.
This dude is weird. In 25k debt with 90k house hold income? And contributes 25% in 401k? There's a spending problem in here.
On the contrary this is "normal".
So many people think it's just normal to walk around with debt your whole life
People will do risky tactics just to avoid admitting they have a problem getting themselves into debt. It takes work, no easy way out
The problem is that they’re putting 25% into the 401k while living on a budget of someone who is putting in 5-6%.
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This is my fifth year after retirement. I’ve been following the 4% rule thing, but this isn’t really how hard I expected things to be. I still hold cash of about $460k outside funds in my IRA, I want to know: Do I keep making additions to my portfolio, or do i just rely on my 401k?
Agreed, It's really challenging to create a strong retirement portfolio, so I always preach about the importance of having an advisor.This helped me stay afloat and improve my portfolio 0f $450k by 40% in 4 years.They have strategies that are specifically suited to your long-term objectives and financial aspirations.
I've shuffled through a few advisors in the past, but settled with 'Monica Selena Park'' her service is exemplary and she's a genius in portfolio diversification. I'd suggest you research her further on your browser, sure you'll find her basic info
To be honest i sold some stocks and paid off about 45k. Its not a 401k but it was part of my retirement, and that 2k a month is gone and it was definitely a relief to not have to worry about it again
I just did a hardship withdrawal to pay off my $20,000 in credit cards, student loans, and hospital bills. This very quickly put me deep into step 2. I had no choice. The stress relief has been noticed by my friends and family.
Did you have to send documentation when you did that?
Not all companies require a full 401K loan payback within 60 days. You can keep the account open and continue to pay off the loan. This does hold you hostage from rolling the account over to your new employers plan or an IRA. This was my personal experience with Fidelity but I’m sure loan company polices vary. Dave is spot on though... paying yourself 5-6% interest prevents you from making 10%+ by simply keeping your money invested in the S&P or better.
if you have $60k+ in your 401k, i'd say go ahead and pay that $25k debt. dave's advice is for people to feel remorse, go through some fights and depression in their marriages to hopefully develop character, live frugal for a few years so they never get back in debt again and develop a habit of living on coupons. but if you're more logical than emotional, none of that is necessary.
Disagree. I did this on a 1 year 401k loan payback and it was a blessing. I no longer am strapped to credit card debt.
So you got outta debt by going into different debt? How did that work out for you?
@@RamenReignss you borrow money from your 401k and pay it back in 48 months. Depending on the loan 10k or 20k you are looking at 200-400 biweekly instead of 1,000+ and paying high interest. Makes sense to me.
Yeah I think taking out a loan make sense. That’s a lot different than an early withdrawal.
You didn't listen to 1:05
@@peteross4879 me too
This is absolutely NOT true with all companies/investment firms. I’m speaking from my own personal experience. You are NOT required to pay the loan back within 60 days or pay a tax penalty with all 401k plans.
I spoke with Fidelity yesterday and they said if u leave the company they can convert the loan from a biweekly payment to monthly and you would pay out of pocket as you would any other bill. Or of course u can default and pay the taxes and move on.
@@jorollenola8320 I thought that was the right answer
Can confirm
I will be forever grateful to you, you changed my entire life and I will continue to preach on your behalf for the whole world to hear you saved me from huge financial debt with just a small investment, thank you Susan Kay Mack
Wow. I'm a bit perplexed seeing her been mentioned here also Didn’t know she has been good to so many people too this is wonderful, I'm in my fifth trade with her and it has been super.
She is my family's personal Broker and also a personal Broker to many families in the United states, she is a licensed broker and a FINRA AGENT in the United States.
Looks like she really knows her stuff. I also found her online page and read through her resume, educational background, qualifications and it was really impressive.
i feel i downplayed the role of FA's in the past.. now actively looking to get one.
Put it on couple of different industries and etfs. My suggestion:
- Amazon, Microsoft, Netflix, SPY, IRussell, NVIDIA and TSM
25% into your 401K while you are $40,000 in debt?!?? This dude would be debt free in 2 and half years if he made zero life style changes just putting that 25% on the debt lol.
That is about 20k a year. lol. They can pay this off without any lifestyle changes.
In 10 years the 25% investment could be worth 200K, instead of nothing.
@@Mr_Magoo_ Go for it. Wonder what kinda of interest rate credit cards have and how much the average 401k returns are .... hmmm. I guess we will never no. lol
My company does a dollar for dollar match, That's 100%
@@aolvaar8792 Wow that is generous!
If you're not drowning in debt, sure - it's better to leave it in the 401k/keep getting that compound interest. But if that debt is ruining your life, it's ok to "steal" some money from your future self if it will get you out of that crisis. The future is important for sure. But living your entire adulthood in misery so you can be rich at 85 is just stupid.
But living your entire adulthood in misery so you can be rich at 85 is just stupid.
Tell that to a FIRE couple.
@@DrSchor It sounds like you really want me to ask you what a "FIRE couple" is.
Yup! You are not even sure if you live up to retirement age.
I’m 13 and have about $1200 in stocks! Thanks for all the advice! I love finance and you inspired me to make my own channel about finance, stocks, Entrepreneurship, later real estate, and more! Thanks!
I'm 12.9 years old and have $1201 in stocks
shutup brat!
I'd pay the debt now. 401k goes to the grave.
Yo cashout your 401k to payoff your credit cards. Market is not going to up 21% forever. Take profit and pay your credit card and pay the taxes. Get rid of that 21% interest debt.
Simple Finance exactly and specially with this pandemic you don’t have to pay the loan back. Only thing is that you have to pay taxes but it’s not bad for 10 percent.
lol it did the past 3 years
@@clipempolitics it's funny money the tumble is coming
I have a loan with my 401k. I'm switching jobs. They gave 3 options. And one of them. I can continue to make the payment.
Azteca Thanks for the information!
@@michaelmcneffii1912
I think it depends on your employer.
Important to ask and get it in writing.
@Anne Day
Good question.
I'm assuming since I'm still paying off the loan. I "shouldn't" get taxed
I need to ask them that.
Clear something up for me. Why would you keep paying off a debt that on average is a 20-24% interest rate when you can use a 401k loan to pay it off and earn 5-6% interest rate? You said 401K returns is 15%, that’s still making a loss on money doing it your way. Right now in 2020, its on average only 1-3% returns and with the pandemic, it may not even go up much in the next year or so and even if it did, it’s definitely not going to be higher than the interest of the credit card debt. You mentioned penalty/tax fees when you leave the company but you want him to pay it off in 1 to 2 years so obviously he’s not going to leave the job and if he’s fired, then its even better because it would make more sense to pay a one time fee but don’t have to pay anything back vs having a massive debt with some 20% interest rate and now you gotta scramble to find a job to keep paying the debt.
His response is the assumption the person will leave the company or get fired. 🙄 I disagree with his response.
Agreed. Telling people never to touch their 401k is just a rote answer they give to avoid having to do any actual analysis of the situation. Save $20k *a year* when the caller even said he has a baby and they're already making cuts wherever they can? Ridiculous.
Did this with my TSP to increase the size of my down payment and paid it off with the proceeds of my previous home selling a month later.
Easy.
Most people don’t know that a massive loan can become due so quickly. 60 days is no joke. Too easy to get fires these days.
Dave is right. Might as well just stop contributing to a 401k temporarily and cashflow the debt payoffs, rather than borrowing from the 401k. It's too much unnecessary risk.
Not if you’re in a union like I am. Very hard to get fired.
It becomes due if you leave, or get fired but if you don't pay it off they just count it as income at tax time. It's still not a good idea but it's not like you'r scrambling to pay it off.
@@michaelmcneffii1912
You must have high seniority.
@@michaelmcneffii1912 Even union guys can get furloughed during a pandemic. And if that happens and you can't make the loan payments what then?
Didn’t know that about the loan on your 401k... good information.
@Dr. Johnny Sins I did it to cover for closing costs on my home. It was definitely stupid, and I learned my lesson
Dave Blackmen
Many of you keep thinking the 401k is the stock market.
Never understood that.
Do you even have one?
Dr. Johnny Sins
I’ve seen from coworkers how much damage has been done after 25 years at our annual retirement seminar/workshop at work.
Was not good at all.
Never knew how addictive it was for some to borrow from 401k.
So now we were offered a nice early out package and most could not afford to take it.
They’ve lost years of compounding.
Yes it sounds good that you pay yourself the interest.
Dave Blackmen of course the stock market is gonna dip. But guess what? It always comes back up. Look at the history. So if you’re young it’s not a big deal. If your older then your 401k automatically goes to a conservative mode. Not a big deal
Like Dave says, it sounds like a good idea. Your credit card is charging you 20%, you’re only making 9% on this money. Just go access it. Of course, it could really blow up in your face too.
I did a withdrawal (not a loan) to pay a $15k debt on a vehicle, but will never EVER go into debt for anything ever again.
Don't touch your 401k now. Market is still climbing.
Actually when the market is climbing it is the best time to touch your 401kif you're dead set on using a 401k loan. If the market were FALLING that would be the time you would make sure not to touch your 401k.
It's buy low sell high and it can't be argued that we're not at a high.
With that said...just don't touch your 401k unless you're desperate. Like I need to pay for a critical operation or I may die desperate.
Don't touch your retirement accounts. That's why it's called says Retirement accounts.
25 percent contribution is way too much when you have accumulated that much debt. He should have reduced it to at least get the company match until he paid it off.
No way, when you are young put it all into 401k and watch it grow. Retire early.
He should contribute to his 401k up to the company match only.
Paying off debt with another debt doesn't solve the problem that got you into debt in the first place.
You're right on.
When I hear that talk, I say, all you're doing is taking your wallet out of your left pocket and moving it into the right pocket.
You still have the debt.
Good counsel
That is correct but if the debt you're using to pay ofg your other debt is charging 4% and your old debt was charging 20% and you need 2-3 years to pay off the debt....You just saved yourself a boatload of money in interest.
@@ariefraiser140 mathematically that's correct but most people end up paying off the bad debt with the 401k and then rack up more debt back on the credit cards they just paid off. If you dont fix the problem, this method would only compounded it. Pay off the debt you actually racked up also does something for you psychologically as well. It makes you eliminate the bad thing you did with the pain of paying it off over time vs a single payment. People tend to justify the 401k loan. His pain point was the 25k on credit card debt. He needs to live in that pain and reward himself with the process of paying it off. He'll be better off for it, even of it costs more in interest.
Darin Pirkey So you’re saying that its a good move as long as the person understands how to manage their budget? Should say that up front. The method is not wrong but whether the person learns their lesson about their money management is another story.
What about taking out a portion of your 401K clear your C-Cards then increase your deductible to your 401K?
I wonder what Dave's answer would be if this were an IRA vs. 401k and the money being withdrawn from the IRA is currently sitting in cash earning nothing waiting to be deployed into the market. Assume the individual is 55 years old and this withdrawal qualifies under CARES act and avoids the 10% penalty so only taxes are due which can be spread over 3 years.
When you’re old and getting ready to die you’re going to wish you just paid off that debt and lived stress free. Whether you use that loan or not in the end it doesn’t matter.
if you invest in a 401k just pretend that money never existed. create another basket for an emergency fund.
have fun eating beans & rice! it's not so bad lol
Well, you should try to manage the funds a little bit and check in on it.
I agree, just hide the 401k part from yourself. Contributing to 401k is not optional. 25% contribution might be a bit much though. Try to get the employer match at least.
I already know the answer. No.
I’m in a similar situation like him, I quit my job 3 years ago and now self employed, can I take the money from my 401k and pay off my credit card debt? Thanks
I totally disagree. I borrowed from my 401k payed for a car loans paid off so is the car. This caller would save money on the interest he's paying to credit cards and still keep his current pay in into his 401k. His credit would improve and he could increase it afterwards.
This the information no one tells you. We all may think. OH! get a little bit of cash to pay off a debt and end up with a nightmare.
With this pandemic you don’t have to pay the money back only down side their is a 10 percent taxes
Exactly..in a normal world Dave's advice is sound!... but taking out the loan in 2020 with no penalty and tax deferment across 3 years its worth it..for me at least
Lyndon Westcott for me too specially since it’s not a Load that you have to pay back.
Can I cash advance a credit card to pay off my school loans and then declare bankruptcy? Asking for a friend. Not for me, of course. I'm just curious. .... for my friend
No, the court would rule that credit card debt is now your student loan debt. They already put in laws to prevent people from trying this work around
Most student loan companies don't accept cc's for this potential scam/reason.
60k plus 18k does not equal 90k.
25% into 401k? Drop it to the minimum.
The problem with 401k loans is that they work make not as fun, the same loans ties you to the company . sometimes longer than you should, dave is selling you a little bit of hardship for a long term freedom. its hard to do, that same loan clears your debts and lets accumulate more.
Penalty wouldnt be worth it. Focus all extra income to killing that debt
Has anyone saw the price for $NIO today ???? 😳 20% 🤣🤣🤣🤣
Yup. Have 750 reasons to celebrate. Hedge funds piled in.
You have to change your behavior first.
Did he say put your wife on eBay 😂😂😂
His response is only valid IF the market goes up well above the % of the interest you're paying back (which we all know hasnt been the case since 2020). Also not all plans require an instant payback if you leave your current situation. Id rather not pay 25k of cc debt at 25% when i can pay it off and pay myself in additional 3k into my 401k. Yeah youre missing out on potential gains off that 25k but youll gain off that again in a few years and not paying the cc companies all that money... not to mention he says to stop contributing... so its bad to not get gains off that 25k but its okay to not get the gains from the 25% hes putting in monthly? That makes no sense either
Not true lol once I switched companies my 401k loan asked me to start making automatic payments through my own payment method. You can either roll it over and the loan defaults to you taking it out as a withdrawal or you can set up the automatic payments through your own bank.
He's getting off easy depending on his mortgage payment, I'm doing $20,000 a year for about the same debt making under $80,000.
Mr. Wick the world needs you.
Do what I did. Sign up for Door Dash and make an extra $15,000 a year on top of your day job. Problem solved.
I would not stop contributing to my 401k,, just focus on paying the debt..
If he's getting matched he should contribute up to that amount. I think not contributing up to your employers match is a huge mistake unless your near bankruptcy or foreclosure.
@NutraMorph Knowing that you are missing out on the great return from an employer match helps provide additional motivation to pay off your debt fast. Getting that match can be another goal to look forward to.
@@chrisstaub5880 no, u always get the match, u don’t need to contribute more until your debt is paid off but always contribute to the match
I work two jobs one full-time one part-time and I make $60k a year between the two. I live fairly comfortably but I'm always thinking about more money.
You need to relax. Money without happiness is worthless
This is interesting because Dave always says to stop your contributions to your 401k to payoff debt, so essentially if they did this loan, it's as if they never added to their 401k in the first place and got rid of their debt
You are still paying back the money you borrowed back into where you took it from. So every month money is coming out of your check and going back into your 401k
Bad idea to stop the 401k. Cut expenses or get better/second job.
lol I ain’t leaving this company. Ramsey tripping 😂. It’s your money, trust me not having to see that balance in your credit statement is a blessing. And the money they pull away to pay back the 401k you don’t even look at it. And if you’re a busy person 1 year would go by pretty fast. Next thing you know it’s paid off.
If he watches the show he should have known Dave’s answer. No! 😂😂😂 Don’t matter the circumstances.
Nope!!! Period.
If the debt was low interest he could’ve kept maxing out the his 401k while cutting back in other areas.
He didn't even answer the damn title he just said don't eat for a year.
how do u americans pay your house in like 5 years ?? in my contry that is not posible .... i make 12 000 euros a year and a hous is 120 000 euros and what to do ??? i can borrow money from the bank and i will need like 20 years to pay it back ....
NEVER take cash from your 401k except for bankruptcy or foreclosure. NEVER!!
Why?
@@queenbutterfly4888 because most people turn it into a habit, never contribute or constantly take out what they put in which leaves them destitute in retirement, but frankly sitting in a 25% interest rate bracket is just as stupid. every time i hear ramsay talk i think hes as dumb as his listeners.
That call could have been over at 0:35. "Nope".
401K Is not a good investment, the returns are barely substantial for an average investor, however I came by an investor who grew a profit of $608,000 in 2months from stocks and I'd really appreciate tips and ideas on how to make this much profit.
I believe most people invest in 401k because they don't understand the stock market.
Without having prior investing knowledge, one can still make a substantial 6figure profit through the guidance of either a professional broker or tutor, I got in touch with a broker in April and through her guidance i generated a profit of $350,000 with no prior investing experience of my own, just basically taking advice from my broker.
@@nuggets9113 That makes sense.
@@nuggets9113 who is your broker and how can i reach her?
@@kingzhao3587 Melanie Bailey Hess is my broker, I found her on a business insider magazine so i decided to check her out online and reach her, you can get in touch with her from her website if you care to get in touch with her, just look her name up online.
... how about just reducing the contribution. At 25%, you wouldn’t have to just stop (which is mathematically ill-advised). Reducing temporarily by 15 is about $813 a month.
I have $147 k after 25 years work. I've done house work to my property and plus now medical, medical been sent collections near $6k
House stuff ac , siding and solar $80k
Should do hardship in need now not 2p years down road
How get it and no tax?
Me and wife together make $130 k but not bring home.
Thoughts? P.s don't mock my writing lol it's weakness no matter how hard try learn it.
He probably shouldn’t take it out if he can pay off the debt soon. He just needs to get into a grind!!!
The caller said he has a baby & is already making cuts/living on beans & rice. Saving $20k/year for this caller is not realistic.
Save that’s not true. Loans aren’t due in 60 days. You just get charged the tax rate.
Time to eat beans 🤣
Rice beans and a 20 cent iced coffee
rice and beans, beans and rice 😂
@@chrysterfung5983 Now you have me hearing that old Schoolhouse Rock song about beans and rice.
I still think Dave needs to come out with his own canned food line for grocery stores called DAVE'S BEANS, DAVE'S RICE and DAVE'S RICE AND BEANS
Why do people still use 401ks? You are literally allowing Wall Street to captivate your dollars & use it to leverage for THEIR advantage! Put in the minimum for a company match & pay the taxes in a brokerage account & learn to get that money working for you!
I wouldn’t stop the contributions in a perfect world it works like that but what if an unexpected expense comes up I would continue contributing but cut back on everything else just my opinion
Terrible decision lol. Just hustle harder. Rice and beans for two years and two side hustles would take care of the debt.
Yes borrow from it
Shut 'cho blasphemin' mouth.
Either that or a second job. Never reduce the contribution.
It's not correct that 401k loan is due in 60 days after leaving employer
He didn't ask how much he has in 401k. If you have 2 million at 40. Take out 200k and live a little.
Nah, waste of money. Put the 200k to work in the stock market.
@@zvaults4168 Why have more money they you will ever need or spend? Why die rich and live poor?
Mr Magoo Because it is a really expensive way to spend the 200k. If he has 2 million in his 401k, you can’t pull out 200k without paying taxes on it + a 10% penalty (at least on 100k right now).
Besides if you keep the 200k in there, because of the power of compounding, it will be a lot more when you retire.
If you want to live a little (and have 2 million in your 401k already). You could just stop your 401k contributions.
Besides if at age 40 he has 2 million in his 401k, he would probably have a very decent wage. If you want to maintain that lifestyle when you retire, you will probably need more than that 2 million. And you also have inflation to consider.
@@zvaults4168 I don't want to be a mega millionaire at 65
If he does a hardship withdrawal, is isn't a loan and can still contribute to his tsp. Before you had to wait 6 months. Now you don't have to wait.
Just move the debt to a new CC with a low promo rate, and pay it off.
I have a loan from my 401k of 1500 dollars / I out right now from from work on medical leave with some injures that
Correct me if I am wrong, you no longer have to pay the 10% penalty for a early withdrawal. Or is that only for a IRA.
I’m pretty sure you still pay the penalty on both unless it was taken out through the Cares Act.
Up to 100k without the 10% penalty. For both traditional IRA and 401k. Always check with your employer and CPA.
I wish my company allowed me to stop the contribution to my retirement account! I have to put mandatory 5% from each paycheck and it’s not even a 401(k)! And I won’t be vested for another 8 years 😳💩
Same here. 6%. But I could just take money from my 457 and pay the taxes. There is no penalty on 457 withdrawal
Be thankful your company matches. Mine doesn’t.
I have $11,000 in credit card debt, but I have $34,000 limit total. Idk what to do fr
Learn and follow Dave's Baby Steps.
Take out 401 K money to pay debt? No, no, no, no, no.
Stop contributing to a 401k is also a no no.
He's probably getting like an 8% return on his 401k contributions while paying like 20% interest on the credit card debt. That's just so stupid. It amazes me how people that make a decent living can be so bad with money.
@Antoine CareyIf your money is in a 401k index fund you should be averaging 8-10% over the long (10+ years) term. If he is closer to retirement and has more conservative investments, he would have less return, yes.
@Antoine Carey for example the fidelity s&p500 index FXAIX has had average annual returns of almost 14% for the past 10 years. Not bad for a index
@Antoine Carey I mean then it depends on the broker right. I have fidelity with my employer and if you want s&p your only choice is the fidelity managed one. I imagine it's not uncommon for them to only have the broker managed one so they can get their fees. Otherwise I'd just invest in stocks rather than an index given the choice
401k compounds each year. He could transfer his debt to a new CC with a promo rate and cut expenses.
Yes $90k not what we bring home
what's wrong with eating rice and beans? I'm eating steak, rice and lentil soup as I'm typing this.
Dave meant without a steak.
These guys are just echoing the conundrum that is current society and the financial slave institution we are raised in. First of all, this isn’t a cut and dry, yes or no answer. There are a lot of factors that come into play here. Depending on your age, what point you are in in your career, and what type of funds you are invested in/how much you’re contributing monthly all come into play in deciding whether or not it’s a good idea to borrow from a 401k. I borrowed 10k for a down payment from my 401k on my first home. It was the best decision I ever made. I got an asset that is worth more today than what I bought it for, and to this day I would still be renting and throwing money away had I not leveraged the money that already belonged to me.
Was wondering about this exact question!!!
What if you had 100k in your 401k and just took out the 25k, paid the penalty and held %35 aside for taxes (NY)? You’d be out of debt, and YES it would sting but you’re out of debt. No more stress. Then you can attack your larger debts, etc, etc. That’s my 2 cents. ✌️
I'd rather not rely solely on my 401(k) when I retire. Better to diversify and be as comfortable as one can possibly be. I have over 35k lying around and I'm more than willing to expand, maybe into stock. But the thing is stock is scary and I really don't have the experience per say. I don't know, I guess I'm looking for any help on how to diversify or someone pointing me in the right direction.
Geez... He dropped "I've got over 35k lying around" casually, just like that.
If you have that kind of cash with you then it would be a huge waste just lying around. Being scared will only delay you. Invest in the stock market, if you are not sure of what to do, hire a financial advisor or learn it if you've got the time. Should be enough to point you in the right directions as a beginner.
@@brucedaniels6516 Have you tried it? How do you know it works?
@@mikekeith7168 Lol. I have over $110,000 form $40,000. Thanks to my advisor. Unlike you, I made a decision to retire by 40 and instead of speculating, I'm doing something about it. Regardless of how people feel about the stock market, it's very profitable. You just have to make sure you start on the right track. Mine was getting an advisor and it worked out really well. Saved me a lot of stress and money.
@@brucedaniels6516 Okay Cool, I get your point. If so, how do I start with this Financial advisor thing. Like how do I begin, or is there anyway you can share yours? Just to spare me the headache of finding someone.
Rice and beans!
Beans and Rice
@Culture Freedom
I doubt it.
Beans, farts, 💩
18 months can be done.
No don’t do it
30 years and retire on 75%
some people stay with the same employer
My employer offers retirement healthcare at 20 years of service
Not at all. Money pays for assets not liabilities.
I’d muscle it out. But I made the mistake of not rolling it over. But I’m still young so I’m not worried. But never again!
If you lose the job you also get access to the 401k
If you gross 90k a year that is not net. Dave's assumption to just pay off 20k a year is probably unrealistic when you include taxes and bare minimums for bills, eating etc.
Switching a 4% loan for a loan that could be 28%+ seems like easy math to me. But, it does depend how reliable the job is & if you could lose it at any point, because he is right - it will be due within 60 days or so.
He's investing 25% in his 401k. He can stop contributing temporarily and use that to pay off the loan and be done with it.