I am 34 years old, make $65,000, have $25,000 in retirement and $20,000 in credit card debt. My wife makes $45,000 and has no retirement savings. We are having a baby next month, and the idea of starting off debt-free is super attractive, and it would be helpful to have more wiggle room in the monthly budget (without credit card payments).
I know the fees (10% penalty, and counting as taxable income) are significant for early IRA withdrawals, but at an average of about 18% interest, spread across 4 cards (and not a good enough credit rating to consolidate) I can’t foresee being able to pay it off within the next 5 or so years.
My question is this, assuming no more use of credit cards, at what point do the fees (around 35% one time) become a better idea than the slow pay-off (approximately 18% APR)?