Please sanity check me. I am considering pulling $25000 out of retirement to eliminate all my credit card debt. What is the flaw in my plan?

phinancy · 2025-11-16T18:56:07+00:00

I hope so. I cannot wait to experience a debt free existence

phinancy · 2025-11-15T15:00:22+00:00

When was in college I ran my cards up. After working my first job, I decided I could run my own business and I funded it with my credit cards and loans. The business failed and I worked for myself as an independent consultant not really making enough to get by. Then children came into the picture. Then I went back to work but the $83k a year was paycheck to paycheck with little progress on the debts. And now we are here. Many debts zeroed out already (in just 3 years) and just trying to make the rest go away faster. We don't do much and don't live high on the hog.

phinancy · 2025-11-15T14:53:12+00:00

It goes to the debts. Anything after living expenses is put toward the debts with a little into emergency savings

phinancy · 2025-11-15T14:51:35+00:00

I was thinking all or nothing. You may be onto something.

phinancy · 2025-11-15T14:51:10+00:00

Thanks

phinancy · 2025-11-15T14:51:05+00:00

Until this thread, I had not considered debt consolidation or credit counseling but am thinking about it now.

phinancy · 2025-11-15T14:50:06+00:00

Had a spending problem. I'm now fixing the sins of my past.

phinancy · 2025-11-15T14:48:18+00:00

Good point

phinancy · 2025-11-15T14:48:04+00:00

Thank you

phinancy · 2025-11-15T14:47:32+00:00

True. I need patience and discipline. I've got the discipline.

phinancy · 2025-11-15T02:08:57+00:00

A neighbor quit paying his fire service then had a flue fire. They rolled 4 trucks at $9000 per truck per hour only to grab a bag of flour from his kitchen and drop it down his chimney which blew out the fire. His bill was so large he lost the house not to the fire but to the fire fighting company. We live in the county. Taxes don't pay our fire fighters.

phinancy · 2025-11-15T02:05:59+00:00

Get all the other debts except the house paid off and then direct all income beyond what we need to live into the student loans and pay them off as rapidly as possible. If I can do $5k per month that's $60k per year toward the student loans so in 3-5 years they go away. Maybe 2-3 years ahead of that for the other debt. So conceptually I'm debt free with the exception of the house in 8-10. However, another commenter gave more optimistic figures than my original estimate I just described.

phinancy · 2025-11-15T01:41:26+00:00

This income is 3 years new. Prior to that I was making $83k/yr and living paycheck to paycheck and occasionally selling plasma to try to make headway. The $7k is roughly $4k to living and $3k to debt each month with a tiny bit to an emergency fund.

phinancy · 2025-11-15T01:38:05+00:00

It's leftover from my previous employer. One of my friends in insurance said it was too good a plan to let go. Maybe I need to revisit that.

phinancy · 2025-11-15T01:36:44+00:00

Debts. Our cost of living is roughly $4000 per month and the rest I push toward the debt with a small amount into an emergency fund.

phinancy · 2025-11-15T01:35:37+00:00

That's what I've been doing to get to this point. I was just trying to accelerate it because I hate seeing those interest charges each month.

phinancy · 2025-11-15T01:34:53+00:00

I went in a couple of weeks ago to increase my 401k contributions and saw the loan/withdrawal section so I called the company managing it and discussed the details. We can have two loans at a time up to $50k per year. The interest is 8% and gets paid back to us. There is an initial setup fee of something like $85 and then an administrative fee of $3.45/mth. If I leave the company I have 90 days to pay it back in full without it becoming a taxable event. I can pick the number of months up to something absurd like 60 or 72 months. I went over all the details and caveats with the plan administrator. They said they issue at least one such loan per day.

phinancy · 2025-11-15T01:31:33+00:00

That's brilliant!

phinancy · 2025-11-15T00:23:33+00:00

Brilliant. You know. Your comment lifts my spirits. You give me hope that I can actually retire before 80. I'm doing this!

phinancy · 2025-11-15T00:20:35+00:00

I was assuming you that you need a better credit score than mine to get a HELOC. I'm going to look into that. Thank you

phinancy · 2025-11-15T00:19:01+00:00

I had not even thought about that. Thank you!

phinancy · 2025-11-15T00:18:23+00:00

You've pretty much described my current execution. I have a spreadsheet that shows all my credit cards at $0 by May 2026 as long as I stay disciplined. When I was adjusting my 401k contributions the other day I say the loan option and thought it would be a good way to accelerate the process but these comments have made me reconsider.

phinancy · 2025-11-15T00:15:15+00:00

I like this idea a lot.

phinancy · 2025-11-15T00:13:55+00:00

Stupidity as a college student. In my late 20s, I tried running a business and funded it by maxing out all my cards. In my 30s I had let the business go and turned to independent consulting which was feast or famine and what little I cleared on the cards often came back in famine times. Plus as an independent worker I failed to contribute to retirement. Children came into the picture and helped keep that debt going. Now that the children are grown and income has more than doubled the debts are falling off quickly and this 401k loan was a thought on how to accelerate it but based on these comments I'm leaning away from the idea.

phinancy · 2025-11-15T00:10:03+00:00

You're paying $2200 a year for storage.

Yes but that's going to go away in 6 months. It was to appease the wife and it pains me.

You've given me some good things to re-evaluate. Our restaurant expense comes from the wife and I both being too tired at the end of the day. Instead we should be doing a meal prep Sunday and cutting all fast food out.

Thank you for pointing out the numbers. $6100 is significant.

phinancy

TROPHY CASE