Author Topic: Withdraw from a Roth IRA / selling car to pay off debt  (Read 1804 times)

frugalmusician

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Withdraw from a Roth IRA / selling car to pay off debt
« on: June 28, 2014, 12:38:11 PM »
Hello Mustachians, I have about $5K of debt that I am looking to pay off.  I work in accounting, but live in Hawaii and don't get paid much.  I am planning to move back to the hip midwest town where I was born, attended high school, and have family.  I have a 2010 Civic that I bought new (yes, I know) that would cost $1,500 to ship back.  I've thought of selling it here and buying a good 03-05 Honda with 100K miles if I can find one.  Used cars are a little cheaper here, perhaps because people would rather sell than ship.  Plus I have the time to shop around for a good one and another car to drive if I need to put some work into the used car.  Once the used car is fixed up I would sell the new one and use the difference to pay off debt / add to savings.  I could ship it and still have a similar cost to a used car where I'm moving.  The other option is to wait until before I move to sell the car and buy a used one after I move.  Some of my family in the midwest town have bought cars from a small dealer that buys 7-8 year old Hondas / Toyotas with 100K, does any required maintenance, and sells them with a 6 month guarantee.  The FSBO used car market there is pretty tight and it can take weeks or more to find a good one.  Obviously, I will buy a bike there and try to use it as much as possible.  :)

I'm also have about $1K basis in a Roth IRA that I could withdraw (I think) penalty free.  I'm thinking about withdrawing the money to pay off the debt.  So, what do you think?

Cwadda

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Re: Withdraw from a Roth IRA / selling car to pay off debt
« Reply #1 on: June 28, 2014, 12:53:00 PM »
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I have about $5K of debt that I am looking to pay off.
What is the interest rate on this debt?

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I have a 2010 Civic that I bought new (yes, I know) that would cost $1,500 to ship back.
How much did you pay for it, what is it worth now, and is the debt for that car? Does the shipping price depend on the value of the car?

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I'm also have about $1K basis in a Roth IRA that I could withdraw (I think) penalty free.  I'm thinking about withdrawing the money to pay off the debt.
When did you make the contribution? How old are you?

frugalmusician

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Re: Withdraw from a Roth IRA / selling car to pay off debt
« Reply #2 on: June 29, 2014, 07:20:56 PM »
Interest rate is 8.5%.  This is a line of credit at the bank I used to consolidate my credit card and car debt. 

The Civic is probably worth $13,500 - $14,000.  Shipping price does not depend on of the value of the car.   

Roth was opened for the 2011 tax year, and contributions have been made since then.  From what I can see, the 5 year waiting period does not apply to taking out 'basis', only earnings.  I would be withdrawing basis only.  I also have a SIMPLE plan at work that I have been maxing out, but don't plan on touching that.

I am in my mid 30's and have lived a mostly mustachian lifestyle, although I wish I had read this blog 10 years ago - it would have helped even more.  I went back to school several years ago for graduate accounting classes and have no debt from that.  This was my first new car and I have not owned a TV except for 1-2 years of my adult life.  Pretty much everything I own can fit into my car (except bed and a few pieces of furniture).  I plan to continue this lifestyle and if I ever find myself knocking it out of the park earnings-wise, it won't take forever to retire.  And if not, then hopefully I can enjoy life anyway. 

frugaliknowit

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Re: Withdraw from a Roth IRA / selling car to pay off debt
« Reply #3 on: June 29, 2014, 07:41:56 PM »
When are you planning to move?  Does the car have a loan on it?