Should I withdraw from a Simple IRA to pay off credit card debt?

Should I withdraw from a Simple IRA to pay off credit card debt?
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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)?


Better to keep your savings cushion than to be debt free and broke. People who say they won’t run up their debt once this debt is paid off are 95% wrong, they will. Better plan is to be normal and prioritize saving 20% of your gross income regularly. 20% of 110,000 is $22,000. You would have your credit cards paid off in 13 months. 18% rate of return is a better investment choice then what you’d likely get in an IRA so hold off on locating any more savings into the retirement accounts unless there is a company match. After debt paid down then locate savings into a taxable account for emergency fund since you’ll have a baby. Build a plan, not just a quick fix! - The Savings Coach


Before withdrawing from an IRA, I would look into a Debt Management plan. (NOT a Debt Settlement) When you go through a Debt Management Program, the company can usually get a lower monthly payment for you, a lower interest rate, or sometimes both! They also are designed to get you out of debt in less than 5 years.
You can find a credit counseling company in your area by going to Or you can contact me personally at I would love to see if we can help you!


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