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Posted: 6/12/2017 10:25:50 AM EDT
46 years old, $60,000 in 401K, besides mortgage I have another $34,000 in debt
 and no other savings 
I have read a bunch where people suggest paying off debt rather than saving as you pay more interest on the debt than you earn by saving. So hypothetically I can borrow $15,000.00 from myself at 5% and pay off the same amount of debt that is currently running between 13% to 24%. The payments on the 401K loan would be about $260 a month payroll deduction, whereas the amount I pay each month for these accounts ( all closed ) is about $570. The 401K loan in a 60 month term, compared to various lengths of time on the credit card accounts. This would free up about $300 a month that I could put towards other debt. In my mind this makes sense, but being that I got myself this far in the hole to begin with, I am obviously not a financial genius 
What say the hive on this concept? Good idea?, bad idea? I have finally grown up a bit and come to the realization that I need to unf#ck myself from the world of debt. |
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Posted: 6/12/2017 10:29:26 AM EDT
[#1]
Not a Financial adviser here. I know co-workers that have done this. They are happy they did it. I have talked with a couple of different Bank loan officers in the past, friends of mine, about it. They both agreed that if you're going to pay interest to someone, it might as well be yourself.
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Posted: 6/12/2017 10:31:28 AM EDT
[#2]
13% to 24%
eta- pay it off asap |
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Posted: 6/12/2017 11:39:49 AM EDT
[#3]
What kind of debt is this?
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Posted: 6/12/2017 11:45:13 AM EDT
[#4]
Quote HistoryQuoted:
What kind of debt is this? |
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Posted: 6/12/2017 12:03:15 PM EDT
[#5]
Do you have a pension? Home? Mortgage?
That's a lot of CC debt. Can you sell stuff to pay off a portion of it? Can you sell a nice car and drive a beater for the next 5-10 years? Any opportunities for overtime? Maybe fit in a second job? $60k is already very low for your age, you need a long term plan that not only clears out your CC debt at exorbitant rates but heavily increases the amount available for retirement. |
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Posted: 6/12/2017 12:09:40 PM EDT
[#6]
Best way sounds like Home Equity loan because the interest is tax deductible. But borrowing from 401k is nice because the interest goes back to you after a small fee.
I don't know about yours, but my 401k is way up with the market. So it's like skimming the winnings at the casino while you keep playing. That's what I tell myself anyways. |
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Posted: 6/12/2017 12:14:49 PM EDT
[#7]
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Reads as $34k in CC debt. |
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Posted: 6/12/2017 12:19:13 PM EDT
[#8]
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Yeah, but being Arfcom, some people think it's a good idea to keep a truck with $20k value than sell it to pay off debt. Quote HistoryQuoted:
Quoted:
Reads as $34k in CC debt. |
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Posted: 6/12/2017 1:20:33 PM EDT
[#9]
Quote HistoryQuoted:
What kind of debt is this? |
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Posted: 6/12/2017 1:20:50 PM EDT
[#10]
It isnt a bad idea at all. Getting out of debt can have profound psychological benefits. 2 questions:
How secure is your job? How well did you learn your lesson? (Staying out of debt slavery) If both are Affirmative, do it, and work every day toward Freedom. |
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Posted: 6/12/2017 1:25:31 PM EDT
[#11]
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Do you have a pension? NO Home? Mortgage? We bought our house last year - currently owe $230,000 and it is worth $300,000 according to a recent conversation with a realtor ( not an actual appraisal, just going off current market values ) That's a lot of CC debt. Can you sell stuff to pay off a portion of it? Have sold a few things, and considering a few other things. Hedging bets on future availability vs future costs on a few things. Kind of wish I had sold a gun or two after Sandy Hook knowing what I know now. Can you sell a nice car and drive a beater for the next 5-10 years? Currently driving a 2002 F-150, worth $3000 if that? Any opportunities for overtime? Maybe fit in a second job? Already doing a second job, have made a good dent in the total in the last few months, I just want to speed things along and still have a little time for family life. $60k is already very low for your age, you need a long term plan that not only clears out your CC debt at exorbitant rates but heavily increases the amount available for retirement. I know . But I also know that at 46 years old, I am a long way away from retirement. I figure the sooner I can get rid of the debt, the sooner I can start really putting money away. |
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Posted: 6/12/2017 1:28:01 PM EDT
[#12]
Quote HistoryQuoted:
It isnt a bad idea at all. Getting out of debt can have profound psychological benefits. 2 questions: How secure is your job? On a scale of 1-10, I would say 9.5 How well did you learn your lesson? (Staying out of debt slavery) Very well, sadly it took as long as it did to get here. If both are Affirmative, do it, and work every day toward Freedom. |
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Posted: 6/12/2017 1:35:27 PM EDT
[#13]
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Best way sounds like Home Equity loan because the interest is tax deductible. But borrowing from 401k is nice because the interest goes back to you after a small fee. I don't know about yours, but my 401k is way up with the market. So it's like skimming the winnings at the casino while you keep playing. That's what I tell myself anyways. |
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Posted: 6/12/2017 1:36:54 PM EDT
[#14]
Quote HistoryQuoted:
Quote HistoryQuoted:
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It isnt a bad idea at all. Getting out of debt can have profound psychological benefits. 2 questions: How secure is your job? On a scale of 1-10, I would say 9.5 How well did you learn your lesson? (Staying out of debt slavery) Very well, sadly it took as long as it did to get here. If both are Affirmative, do it, and work every day toward Freedom. Stop buying night vision and other inane things on credit. Stop buying necessary things on credit. Just Fucking Stop. You have to change your mindset, otherwise, borrowing from your 401k is just enabling more degenerate debt addiction. |
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Posted: 6/12/2017 1:46:33 PM EDT
[#15]
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So, governmment job, ok, gtg, just Do it, and then make it your lifes mission to pay off the other debt. Stop buying night vision and other inane things on credit. Stop buying necessary things on credit. Just Fucking Stop. You have to change your mindset, otherwise, borrowing from your 401k is just enabling more degenerate debt addiction. |
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Posted: 6/12/2017 1:59:02 PM EDT
[#16]
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I had thought about the home equity loan, but the 401K route seems like a win / win. Rather than just move the debt from high interest to lower interest, I basically pay it off, then pay myself back over the next 5 years, and free up money to work towards the end goal. |
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Posted: 6/12/2017 2:17:52 PM EDT
[#17]
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But, time value of money? |
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Posted: 6/12/2017 2:24:26 PM EDT
[#18]
Quote HistoryQuoted:
Quote HistoryQuoted:
Quoted:
Do you have a pension? NO Home? Mortgage? We bought our house last year - currently owe $230,000 and it is worth $300,000 according to a recent conversation with a realtor ( not an actual appraisal, just going off current market values ) That's a lot of CC debt. Can you sell stuff to pay off a portion of it? Have sold a few things, and considering a few other things. Hedging bets on future availability vs future costs on a few things. Kind of wish I had sold a gun or two after Sandy Hook knowing what I know now. Can you sell a nice car and drive a beater for the next 5-10 years? Currently driving a 2002 F-150, worth $3000 if that? Any opportunities for overtime? Maybe fit in a second job? Already doing a second job, have made a good dent in the total in the last few months, I just want to speed things along and still have a little time for family life. $60k is already very low for your age, you need a long term plan that not only clears out your CC debt at exorbitant rates but heavily increases the amount available for retirement. I know . But I also know that at 46 years old, I am a long way away from retirement. I figure the sooner I can get rid of the debt, the sooner I can start really putting money away.Retirement is 10-20 years out for you, that's not a lot of time for your investments to grow. It honestly sounds like you need to find a cheaper housing option that is more affordable long term. Maybe your taxes aren't so bad, but where I'm at I would be spending $5-7K/yr on property taxes with a house that valuable. I don't know what your income situation is, but you will need a lot to pay for retirement. I would also look into driving something that gets better gas mileage. If you don't drive very much it may not be an issue, but I would run the numbers. I know my dad drives 2000 era Saturns and gets ~35-40mpg - depending on which model he's driving (and whether it has AC and power steering). I would definitely clear out my gun and ammo collection to pay off the CC debt. In my personal budget, those are all supposed to go before I borrow from my 401k. Unfortunately, this is a bad time to be selling firearms. I would also make use of balance transfers to lower interest rates. I know I'm constantly getting offers to balance transfer to new credit cards for 3% up front and 0% for a year+. If I had a good stream of income where I could legitimately pay it off I would probably pay the 3% and make sure I had it paid off in the allotted time. |
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Posted: 6/12/2017 2:24:40 PM EDT
[#19]
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Not sure I follow you. While I do understand I need to get out of debt as fast as possible, I am still learning about the various financial concepts. Can you give me some more info please? Quote HistoryQuoted:
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But, time value of money? However, he forgot about the very real risk of that money Losing value. This happens every single time the Market has a prolonged upswing. People forget the downside. Its human nature, I guess. Look, you are over thinking this. Either you've changed your ways, or you haven't. Whether or not you "borrow" from your savings, is immaterial. Its your behavior going forward, which counts. |
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Posted: 6/12/2017 2:54:58 PM EDT
[#20]
The wife and I were in the same boat a couple years ago. Not as much $$ but had unwanted CC debt.
With a daughter in college and dental work needing done with no insurance I charged it. We sold anything that was sitting around unused , lowered our car and house insurance rates and cut some unneeded services like Swans. We are back to where we were but I hate having a house payment. Told the wife this is the year to get rid of that. |
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Posted: 6/12/2017 2:56:14 PM EDT
[#21]
I didn't forget about risk. But over time, you're going to come out ahead
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Posted: 6/12/2017 3:06:08 PM EDT
[#22]
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I didn't forget about risk. But over time, you're going to come out ahead Truth is, we simply don't know. |
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Posted: 6/12/2017 3:10:09 PM EDT
[#23]
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Whoever told you that, Lied. Truth is, we simply don't know. You're right. |
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Posted: 6/12/2017 4:12:30 PM EDT
[#24]
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13% to 24%
eta- pay it off asap |
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Posted: 6/12/2017 5:17:14 PM EDT
[#25]
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Damn, OP need Dave Ramsey ASAP.
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Posted: 6/12/2017 5:54:25 PM EDT
[#26]
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I needed him about 10 years ago... Quote HistoryQuoted:
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Damn, OP need Dave Ramsey ASAP. |
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Posted: 6/12/2017 6:32:39 PM EDT
[#27]
Not a finance guy but, I thought If you lose your job you have to pay back the loan immediately.
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Posted: 6/12/2017 9:08:55 PM EDT
[#28]
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Not a finance guy but, I thought If you lose your job you have to pay back the loan immediately. |
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Posted: 6/13/2017 6:34:50 PM EDT
[#29]
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Yes, usually within 60 days, but this is Arfcom, and taking loans against your 401k or cashing out retirements to buy cars is the norm apparently. Quote HistoryQuoted:
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Not a finance guy but, I thought If you lose your job you have to pay back the loan immediately. |
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Posted: 6/13/2017 6:45:50 PM EDT
[#30]
Quote HistoryQuoted:
Not a finance guy but, I thought If you lose your job you have to pay back the loan immediately. |
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Posted: 6/13/2017 6:46:01 PM EDT
[#31]
Pay yourself 5% or pay the credit card 24%? No brainer. I mean, even if your 401k would earn 10% I think you'd still come out ahead especially if you're looking to have some discipline forced on you by a fixed payment schedule that eliminates the debt in 36 months or something.
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Posted: 6/15/2017 9:17:31 PM EDT
[#32]
I don't know how much you make but trading debt for debt is a bad idea.
Why a lot people here bash Dave Ramsey I don't know but if you follow and stick to his plan it just plain works I have heard people paying off 100k in 3 years on his show. Cut back on the lifestyle stop eating out no vacations. You need money when you are old unless you want to work till you die |
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Posted: 6/15/2017 9:26:56 PM EDT
[#33]
OP I did this 4 years ago, let my CC get a little out of hand, EX wanted a few minor things so I took a loan out on my 401, it cost me 480 dollars twice a month, loan is over 8/2017. Best thing I could have done, but you have to not fall back into debt, paying it off is one thing, keeping it off is another. I had to teach myself, do I NEED this or WANT this, to answer your question as long as you do not lose your job I would say do it. I have been driving a beater honda and plan to keep it for a while so I can build my savings up when this loan comes off, I have learned to live on what I have been making so when the loan is done its going to be a nice bonus.
Good luck I hope you get things squared away. |
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Posted: 6/15/2017 10:56:11 PM EDT
[#34]
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I don't know how much you make but trading debt for debt is a bad idea. Why a lot people here bash Dave Ramsey I don't know but if you follow and stick to his plan it just plain works I have heard people paying off 100k in 3 years on his show. Cut back on the lifestyle stop eating out no vacations. You need money when you are old unless you want to work till you die If you have self control and are a finance oriented person, then some of his strategies leave money on the table and cap your potential. That's not bad, it's just 2 different strategies. I'm not a bright guy. I could never meet my goals with a Ramsey approach bc i'm not smart enough to out earn inflation. I would have to scale back my goals or magically become smarter to earn more. |
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Posted: 6/15/2017 11:42:46 PM EDT
[#35]
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The reason some don't like Ramsey is because he focuses more on emotion to help people with little self control get on a near certain path to retirement. If you have self control and are a finance oriented person, then some of his strategies leave money on the table and cap your potential. That's not bad, it's just 2 different strategies. His plan is for people with little financial knowledge or those that don't have an adequate amount of self-control to manage their spending. His plan leaves a lot on the table; those that are financially knowledgeable and have self-control can take on the plans that Dave preaches against and come out financially ahead. OTOH, those with little self-control that choose to take that approach will often fail miserably. I understand WHY his plan exists and WHY he pushes it as the ONLY PLAN. But for those that know better and can control it, there are other plans that can serve them better. For starters, I get 5% cash-back on my gas & groceries, 2 of the highest living expenses I have outside of home costs. I do that through judicious use of credit cards; Dave pushes NO credit cards. |
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Posted: 6/16/2017 1:06:02 PM EDT
[#36]
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This ^^^ His plan is for people with little financial knowledge or those that don't have an adequate amount of self-control to manage their spending. His plan leaves a lot on the table; those that are financially knowledgeable and have self-control can take on the plans that Dave preaches against and come out financially ahead. OTOH, those with little self-control that choose to take that approach will often fail miserably. I understand WHY his plan exists and WHY he pushes it as the ONLY PLAN. But for those that know better and can control it, there are other plans that can serve them better. For starters, I get 5% cash-back on my gas & groceries, 2 of the highest living expenses I have outside of home costs. I do that through judicious use of credit cards; Dave pushes NO credit cards. If i followed ramsey, i would probably retire with 3 millionish in assets. If i dont follow ramsey there is a good chance ill retire with 15 million+ in assets. There is also a chance ill go bankrupt again along the way during a downturn and end up with 3 million or even nothing. To me, its a no brainer. Dave ramsey would steal my future. All depends on what you want in life. |
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Posted: 6/16/2017 10:49:45 PM EDT
[#37]
You are going to cut what your investments produce significantly and if you lose you job you will be in a pickle. That said it might be a slick solution if you don't go back in. Controlling the spouse if you do it to stay the course my be the hardest part. I wouldn't see this as the make or break only a helpful part. It's all the other changes that are going to do it. Big poster on the fridge with blocks I could color in as the student loans got paid off was very modivational. If you both aren't mad and he'll and not going to take it any more I wouldn't do it.
I paid off 184k in 2-3/4 years in student loan dept but I was pissed and the wife was on board making 130-190 over that time. You can do it. |
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Posted: 6/19/2017 10:52:56 AM EDT
[#38]
dont borrow from your 401k, your primary savings - you are going to miss out on market growth, compounding, etc..
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Posted: 6/22/2017 3:22:16 PM EDT
[#39]
Quoted: $34,000 in debt and no other savings (1) Have you stopped borrowing? When was the last time you made a charge on a credit card? (2) Set out an itemized list of each debt making up the aggregate $34,000 in debt, smallest to largest balance, with the interest rate and payment for each. (3) What is your household's annual income? |
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Posted: 6/26/2017 3:38:19 PM EDT
[#40]
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dont borrow from your 401k, your primary savings - you are going to miss out on market growth, compounding, etc.. |
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Posted: 6/27/2017 2:29:01 PM EDT
[#41]
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So he's going to miss out on compounding gains, while paying compound interest rates that are significantly higher than the gains, and that's your justification to not do it? Quote HistoryQuoted:
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dont borrow from your 401k, your primary savings - you are going to miss out on market growth, compounding, etc.. #Allcash #Debtisdadebil #Actonemotionnotfacts |
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Posted: 6/28/2017 12:23:56 AM EDT
[#42]
Go read mrmoneymustache website.
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