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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: scott27 on May 13, 2016, 10:19:19 AM

Title: Cash out to pay debt?
Post by: scott27 on May 13, 2016, 10:19:19 AM
Hello everyone,

I am newly getting my financial house in order after years of poor planning and getting into debt.  I have a a significant amount of credit card debt that I have been diligently paying off. 

I have a 403(b) through a job that I am now quitting.  I was automatically enrolled in the 403(b) plan, and was at the time too stupid to pay any attention, so the money was allocated all into a money market fund, and has just been sitting there doing nothing.

My question is, now that I am leaving the job, I can cash out the 403(b) without penalty, or I can move it to Vanguard or Betterment or something and invest the money more efficiently.  I'm thinking that the money will be most useful paying off my high-interest debt, but it seems sacrilegious to re-purpose money that has already been set aside for retirement.  Am I right to think that the best use of this money would be to put it all towards my high-interest debt, or should I reinvesst it and leave it alone?  Thanks for your help!!
Title: Re: Cash out to pay debt?
Post by: slugline on May 13, 2016, 10:26:37 AM
The 403(b) is a tax-deferred plan, right? If you cash it out, doesn't it all get counted as taxable income this tax year, possibly leaving you with a fat tax bill? The usual advice is to roll it over into another retirement account where you can pick exactly the investments you want to carry you to your retirement goal.

Out of curiosity, how much is the credit card debt and the interest rate? Any chance of doing a balance transfer to a card with a lower rate?
Title: Re: Cash out to pay debt?
Post by: Jim2001 on May 14, 2016, 11:42:38 AM
+1 for needing more info.

So, consider jumping to http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/ (http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/) for info on building your case study.  You will get much more meaningful answers.