Author Topic: At 64, use 403b to pay CC?  (Read 1917 times)

James!

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At 64, use 403b to pay CC?
« on: April 12, 2015, 09:04:59 AM »
Hi all,

I've recently begun the difficult task of helping family sort their finances. I've had good luck with a brother, now on to my mom.

She is 64 and on long term disability, which is permanent. She recently told me she has 9k on a CC. I'm assuming she can draw from her 403b without penalty, so is this a good option to payoff the CC debt? I don't know the interest rate on the card but it's safe to assume it's higher than the return on her 403b.

We always talk about not taking out of 401k's to pay debt but we're typically talking about pre-retirement.

Long term, I'm working on sorting all her assets and liabilities, there's a pension to make sense of, and she definitely needs a budget, short term I'm just trying to put out the fire.

Cheers,
James

MDM

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Re: At 64, use 403b to pay CC?
« Reply #1 on: April 12, 2015, 10:18:49 AM »
She is 64 and on long term disability, which is permanent. She recently told me she has 9k on a CC. I'm assuming she can draw from her 403b without penalty, so is this a good option to payoff the CC debt? I don't know the interest rate on the card but it's safe to assume it's higher than the return on her 403b.

We always talk about not taking out of 401k's to pay debt but we're typically talking about pre-retirement.

Long term, I'm working on sorting all her assets and liabilities, there's a pension to make sense of, and she definitely needs a budget, short term I'm just trying to put out the fire.
You are correct, now that she is 64 it may indeed make sense to withdraw and use that money - good thinking.

Another month's interest, however, won't make or break things - so you might want to wait until you see more of the bigger picture.  In particular, is her tax bracket apt to change between this year and next year, and would that change anything if so?  The CC debt is probably worth killing now as you said, but just in case....

 

forummm

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Re: At 64, use 403b to pay CC?
« Reply #2 on: April 12, 2015, 10:57:22 AM »
The bigger issue might be the underlying spending. Did she run up the debt because she had a legitimate and unexpected expense and she didn't realize she had access to cash? Or was it just spending because she always maxes out her CC? I know people that will see their CC limit as the amount they get to spend. And if their CC balance was paid off they just fill it up again. So something to think about. If that's the case, then maybe a lower limit or no cards would be the way to go.

seattlecyclone

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Re: At 64, use 403b to pay CC?
« Reply #3 on: April 12, 2015, 11:55:20 AM »
The bigger issue might be the underlying spending. Did she run up the debt because she had a legitimate and unexpected expense and she didn't realize she had access to cash? Or was it just spending because she always maxes out her CC? I know people that will see their CC limit as the amount they get to spend. And if their CC balance was paid off they just fill it up again. So something to think about. If that's the case, then maybe a lower limit or no cards would be the way to go.

This is an important point. From a tactical perspective, the spending that led to this debt is in the past, you can't take it back, so the best you can do is pay for it out of the funds she has available so the interest doesn't keep piling up. Thinking about longer-term strategy, you need to take a look at her spending, make sure the amount is sustainable given her savings and other income, and make sure she knows that it's better to pay for stuff out of her savings than accumulate debt in this manner.