Yep. Another "should I cash out the 401k?" thread! (can you help anyway?)

[hopefulfaith]

Here's the short story: my dh is employed by the federal government, and maxes out his TSP at 15% of his income. This works out to be a big number for us, since we're trying to make up for the fact that I'm a SAHM now and don't contribute to a plan.

I previously worked FT before kids, and now haven't contributed for 4 years. My old 403b was worth about 33K; it's down to 21K now.

Even with taxes/penalties, which I'm estimating to be around 30%, receiving $14,000 would nearly pay off our (used) car, (used) truck, and one credit card with a balance (8% interest).

Those three things are the only debt we have.

Given that my dh is maxing out the TSP, would you take the withdrawal and be DONE with the debt?

DH will absolutely, positively not consider reducing his contribution in order to pay down debt, btw. I've tried that.

Thank you for any help you can provide!!

[laura-belle]

The short version: NO

The longer version: This is not an emergency and in my opinion an emergency is about the only thing that would justify liquidating a 401(k) or equivalent. Between the liquidating at the bottom of the market and the taxes and fees you'd be losing half your money. It just doesn't sound like a good idea. Besides if your DH won't suspend retirement contributions to pay down debt, what makes you think he will be ok with you liquidating a retirement account to do so?

[TiredX2]

I don't understand why you would withdraw the money from one account (and pay the penalty) while you continue putting it into the other account. If you are going to do that, wouldn't it be more efficient to just stop contributions to the 1st. If you are unwilling to stop contributions, there is no way you should be doing withdrawals (with penalties).

Does the TSP have some type of matching? Do you need to keep it at 15% all the time or could you dip down for a while while you pay the debt off?

[time4another]

Originally Posted by TiredX2

I don't understand why you would withdraw the money from one account (and pay the penalty) while you continue putting it into the other account. If you are going to do that, wouldn't it be more efficient to just stop contributions to the 1st. If you are unwilling to stop contributions, there is no way you should be doing withdrawals (with penalties).

Does the TSP have some type of matching? Do you need to keep it at 15% all the time or could you dip down for a while while you pay the debt off?

yeah...that and the fact that you are a SAHM not contributing (or are you?) to any IRAs etc...but I still think the best thing to do would be for him to stop contributing all or some to his while you all catch up.

[CarrieMF]

I wouldn't.

You're paying $6000 to receive $14000.

How much do you owe on the cc?

How much are the vehicle loans & how many months do you have left?

[annekevdbroek]

I wouldn't. In addition to what is mentioned above, you are not gaining anything in paying off this debt (in terms of saving by getting rid of the interest) because you are losing so much in terms of fees and taxes to take the money out of your 401k.