Unlike other types of retirement plans, such as IRAs, you can't take a distribution from a 457(b) plan whenever you would like, even if you're willing to pay a penalty. I have a 457 and the rules may be different in your plan, but in mine, the most I can borrow against is 50% of the value up to 50k. Your credit card company only requires that you pay 2 percent of the outstanding balance each month. My question is should I take out a loan from my 457B to pay off my CC debt? The monthly savings on the CC's can accelerate pay-down of the 0% and school debt. Another solution would be to split the difference: Take a little longer to pay off your mortgage and still contribute to the 457(b) plan. Press question mark to learn the rest of the keyboard shortcuts. AARP is a nonprofit, nonpartisan organization that empowers people to choose how they live as they age. You can also manage your communication preferences by updating your account at anytime. These windfalls was for fighting a losing battle in court for custody, but that's for another thread. Loan Aggregator LendingTree is an online marketplace that offers you – the consumer – the opportunity to compare the larger network of lenders out there side-by-side. The 457 is similar to the more widely known 401(k) plan, where you can choose to contribute to the 457 plan through automatic deductions from your paycheck before the taxes are taken out. The 401(k) money is exempt in a bankruptcy, so the funds cannot be taken in … Still, she adds, you'll need to use caution when paying off one credit card with another. Let’s say you have $20,000 in your retirement account and you want to withdraw it to pay off credit card debt. Paying off debt reduces your monthly payments, which frees up more money. A better way to get out of debt. But if you haven't been able to pay off those nagging credit card bills, you may be wondering if you should dip into retirement money to rid yourself of those debts. Best of all, the loan immediately gives you the economic benefit of quickly reducing that high interest rate credit card debt that's draining you financially. That's because if you're under 59 ½ years of age, you could face a 10 percent tax penalty plus have to pay ordinary income taxes on any amount you withdraw. Why? $ 50,000 in cc debt. again. Extra cash: You can apply for more money than you need to repay your existing debt. You can technically walk away from those and take the (massive) credit hit. Lynnette Khalfani-Cox, The Money Coach®, is a personal finance expert, television and radio personality, and a regular contributor to AARP. That $3,000 translates into you making the bank $250 richer and yourself $250 poorer every single month. Fancycrave. First of all, if you withdraw the money outright, without using a loan, you will have to pay a penalty of 10% of the amount, if you aren’t 59-1/2. Learn about budgeting, saving, getting out of debt, credit, investing, and retirement planning. And you must stop adding to your debt. AARP Money Map is a guide to manage unanticipated expenses. In the next 24 hours, you will receive an email to confirm your subscription to receive emails Debt Consolidation Lenders. Tools To Make Your Freelancing Life Easier. Also, like the 401(k), money grows tax-deferred in a 457 retirement account until the time you withdraw the money. Plus, taking money out of your 401(k) permanently means that you lose out on the chance for those funds to grow over time — which is the whole point of stashing away money into your retirement nest egg. Cookies help us deliver our Services. One thing to understand is that your credit cards are unsecured. I just mention that because once you take out the 15k, you may not have access to as much of the rest as you thought. When you separate from an employer for any reason — including termination or just you getting a different job — any outstanding retirement loans generally come due. My average take home pay is about $5k a month or slightly under. But the key word here is retire. Pensions and ss equal 4600 per month. First, the sooner you repay the funds, the quicker they can begin earning interest again. 1 cause of financial stress in 35 states—here are 5 ways to get free Of course, there are downsides to using retirement account money to pay off your credit card debt. www.aarp.org/volunteer. 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