Author Topic: Pension to Pay off Debt  (Read 1846 times)


  • 5 O'Clock Shadow
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Pension to Pay off Debt
« on: January 01, 2019, 06:55:33 PM »
Hello all! I recently took a vested retirement from law enforcement and have $56K in that account. I also have 45K in credit card debt which has me paying around 950/month in minimum payments. I am 39 years old and my new job has me currently at $75k a year and my wife makes $42K. Would it make any sense to withdraw the pension funds to pay off or a large chunk of the credit card debt? I know that I will be taxed on it. My thoughts are that even with cutting back it will take a good bit of time to pay off the credit cards and I will struggle to make minimum payments.  Once the debt is paid off, I could use that for a large emergency fund and eventually put into my new company's 401k.

I do have a student loan payment, as well as an SBA disaster loan that I could make additional payments.

I appreciate any and all advice!


  • Walrus Stache
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Re: Pension to Pay off Debt
« Reply #1 on: January 01, 2019, 09:03:46 PM »
No.  Just cut back on monthly expenses and find a card / loan with lower interest rate. 

The penalties now and in the future (retirement) are just way too high otherwise.  You could pay up to half of the funds to penalties and taxes by doing this.


  • Pencil Stache
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Re: Pension to Pay off Debt
« Reply #2 on: January 02, 2019, 09:21:37 AM »
There are some things that we would need to determine a mathematical solution to your question:

1) If you were to pull 100% out of the pension right now, what balance would you get?
2) If you were NOT to pull out of the pension at all, what balance would it be?
3) #1 and #2 is to determine how 'efficiently' you could pull out of the pension.  In other words, what fees and early withdraw costs would you incur?
4) Do you want to keep the money in the pension?  Is it secure?  Does it have reasonable returns?
5) What is the current rate on the CC debt?
6) What is the absolute best you could do to kill the CC debt without the pension?
7) Are there any other options for the CC debt like combining into a loan for payoff at a lower rate?

Thanks and good luck with your situation.  Its going to take work to dig out of but your mind seems to be in the right place.


  • Handlebar Stache
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Re: Pension to Pay off Debt
« Reply #3 on: January 02, 2019, 11:39:45 AM »
The FIRST thing you need to do:

You and your spouse need to determine how you got into 45K in CC debt with such a great income and how you will avoid spending more than you make in the future.

The Second thing you need to do is either provide a case study or at least lay out for us your cashflows/expenses so we can see where there's wiggle room, if any.

Happy New year!


  • Walrus Stache
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Re: Pension to Pay off Debt
« Reply #4 on: January 03, 2019, 04:31:46 AM »
And your case study can be put here: