Empty IRAs to pay off credit card debt before recession / depression?

[zestforlife]

So I know this would typically be a horrible idea, but we have only been saving for retirement for a few years (our ages are 29 and 31) and have not lost *too* much at this point (have less than 20k in accounts now). We racked up some credit card debt due to medical expenses last/this year but planned on paying it off by the start of next year. It is on 0% interest cards (2) and nothing is due until March 2021.

Our fear is that if the market continues to drop, everything goes to hell and we both lose our jobs, my spouse and I would have a (very) negative net worth. It's worth noting that we do not own, we rent. We also have one child.

We know we have the same amount of shares, they are just worth less. But it does seem like we are in uncharted territory here. We just want to position ourselves to be in the best possible position for the coming economic times.

For what it's worth, my spouse works at a manufacturing startup and I work remotely in the art industry. We bring in just shy of 78k.

What do y'all think??

[charis]

Throw all extra income at the cards now and get it paid off as soon as possible.  Don't raid the IRA until you absolutely need to.  Would you both be eligible for unemployment benefits if you were laid off?  If so, you are probably better off than you think.

[erutio]

Horrible idea.  Continue making the minimum payments, setting aside cash for your credit card payoff next march.  If you lose your jobs, rather than raid your retirement accounts, wouldn't it make sense to declare bankruptcy instead?

[moneypitfeeder]

With zero percent for over a year, you have time on your side, relax (a little). If you are remote, then this current situation likely won't affect you, correct? Your husband's job may be more of an if. The way I've always treated the zero interest offers is that I subtract 1 month from the total allowable and divide the balance by that amount of months (equals my monthly payment), that way I'm guaranteed to have paid it off 1 month before all the back interest hits. Are you able to pay that amount every month?

[zestforlife]

Horrible idea.  Continue making the minimum payments, setting aside cash for your credit card payoff next march.  If you lose your jobs, rather than raid your retirement accounts, wouldn't it make sense to declare bankruptcy instead?

I didn't realize bankruptcy didn't touch retirement accounts. Feel silly now!

Throw all extra income at the cards now and get it paid off as soon as possible.  Don't raid the IRA until you absolutely need to.  Would you both be eligible for unemployment benefits if you were laid off?  If so, you are probably better off than you think.

No extra income to throw at it, at this point. The soonest we could pay it off is early 2021 and picking up side gigs while socially distancing/staying home with the kid (school is cancelled) might not be as lucrative as it would be normally.

But you are right about unemployment. Maybe we just need to work on our optimism and self efficacy.

[zestforlife]

With zero percent for over a year, you have time on your side, relax (a little). If you are remote, then this current situation likely won't affect you, correct? Your husband's job may be more of an if. The way I've always treated the zero interest offers is that I subtract 1 month from the total allowable and divide the balance by that amount of months (equals my monthly payment), that way I'm guaranteed to have paid it off 1 month before all the back interest hits. Are you able to pay that amount every month?

Thank you for this. Unfortunately, I make only around 23% of our income - not even enough to pay our full rent each month after estimated taxes (high cost of living city). And yes, we can make that payment each month if we both keep our jobs.

But yes, we probably need to relax just a little. Hard to!

[Morning Glory]

Do you have some expenses you can cut? I have trouble believing you spend all of a 78k salary. Maybe you could post a case study.

Otherwise leave the IRAs alone for now, and pay what you can on the cards. It is most likely that the IRAs will be worth a lot more in one year.

[zestforlife]

Do you have some expenses you can cut? I have trouble believing you spend all of a 78k salary. Maybe you could post a case study.

Otherwise leave the IRAs alone for now, and pay what you can on the cards. It is most likely that the IRAs will be worth a lot more in one year.

Yes! Will definitely be trimming alllll the fat. We live in a high cost of living city for rent/utilities and are paying monthly medical bills that are not on the credit cards as well (these amount to a little over $400/mo). So there's that.

Good news is we can completely erase our "out to eat" budget line!

[Jack0Life]

I feel for you guys but at the moment this would be the worst time to pull money from your IRA.
If you were going to do it, you should have done it before the market dropped so much already. The market already lost 30%.
Isn't there also a penalty for early withdrawal ?