I am 68 years old, on social security and have 53,000 in ira. I am taking $350 in withdrawals from my ira. My credit card debt is about $8,000. I cannot pay all my bills on my income. Should I withdraw $8,000 from my ira and pay off my credit cards?
Welcome to the forum, @doddjanet3. That’s a tough situation to be in, but we have some information that may help you.
In general, it’s not a good idea to use retirement money to pay down debt. You’d have to pay taxes on the withdrawal and it would shrink the small cushion you have. This is especially true if you’re having trouble paying your bills as it is.
If Social Security is your only income and you don’t have any assets a creditor could take – such as a savings account or investments outside the IRA, or real estate – you may be “judgment proof.” That means if you stopped paying the cards and a creditor sued you, the creditor wouldn’t be able to collect on the judgment.
The rules for being judgment proof vary by state, so it’s important to talk to a bankruptcy attorney. Bankruptcy attorneys understand the credit laws of your state and how they will apply to you.
Another option is a debt management plan from a credit counselor, which would allow you to pay your balances off over three to five years, possibly at a lower interest rate. It’s a good idea to talk to a bankruptcy attorney in addition to a credit counselor, though, since the credit counselor won’t be able to advise you about your other options.
We have a guide to various debt relief options and are happy to answer any other questions you might have about the process: