Would it be advisable to use 403b money to pay off credit cards?

[ellacott]

I hope it's ok to ask this question in this forum. I don't understand a lot about the economy and am getting a little nervous.

A lot of the financial people say that credit cards may started increasing interest rates.

[dipsydoodle]

1. They're bad enough

without further increases. I'd say if you're able to do so then pay them off.

[smoogatz]

2. If you're making less on your investments than you're paying in interest

on your debt, then yes. If not, assuming you're younger than sixty, say, I'd advise you to hang in there with your 403b at this point. The time to take money out would have been this past Spring.

[ellacott]

3. Thank you so much for the responses

I am 52yrs. old. I had hoped I could retire early but it looks like I may be working for some years. During a family crisis I paid my card late twice. They increased my interest rate to 27%. Another card also increased my rate because of universal default(I was never late on this card). I've been paying this higher rate for a few years and have more than paid off what I bought with those cards. I have been current on all my bills but the balance on my cards never go down because of the high interest rate.

[Tangerine LaBamba]

4. Pay them off as quickly as you can

With those interest rates, you're losing money every day.

Pay them off, and hold onto the cash.

[ellacott]

5. Thank you very much

[MadinMo]

10. Call and ask them to lower the rate. They just might do so.

My sister is in a similar situation and finally called to get the interest rate reduced. Suprisingly, they did so. Just this summer.

[A HERETIC I AM]

6. If you surrender any portion of your 403(B) before you are 59 1/2 years old, it could be costly.

The rules for early distributions from Tax Qualified Plans, which includes 403(B) and 401(K) plans as well as IRA's are very similar.

IRS Publication 571 describes the 403(B)
http://www.irs.gov/publications/p571/ch08.html#d0e3026

IRS Publication 575 describes the distribution rules; (Page 30)
http://www.irs.gov/pub/irs-pdf/p575.pdf

Much of the decision of whether it makes sense to surrender a tax qualified sum in order to pay off high interest debt has to do with the size of the debt to be paid, the interest rate being charged and the size of the qualified account. You will pay a penalty and you will owe taxes on the money you take from the plan.

www.financialcalculators.com has various calculators that can help you figure it out. It isn't always such a cut and dried - yes or no type answer.

[bain_sidhe]

8. Isn't there such a thing as a "hardship" provision?

Or is that just for IRAs?

(Oh, and :hi: - long time no type at!)

[A HERETIC I AM]

9. Yes, some do. But as you mention on your post below, it is up to the individual plan sponsor...

and whether or not high credit card debt would be considered a "hardship" is the real question.

:hi: Backatya, Lady! I hope you and your family are well.

[bain_sidhe]

11. Oh. I thought the "hardship provision" was an IRS thing...

based on the type of plan. My bad.

And :: on edit: sending the OT bit to your inbox...::

[bain_sidhe]

7. Does your plan have a loan provision?

Some plans allow you to take a loan against your retirement plan. You have to pay it back (or surrender the amount left on the loan when you retire) and you'll still pay interest, but it will be far less than the 27% your credit card company is charging you. Our 403(b) allows for it (TIAA-CREF) but I think it's up to the plan sponsor, not the provider.

Here's the information on it from TIAA-CREF, it might not relate to your plan, but it gives you some good questions to ask your provider and/or sponsor.

http://www.tiaa-cref.org/support/help/transactions/loans.html