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Reply to "TSP: financial hardship withdrawal"
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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Why not? Wouldn't the benefit of putting $1200/month towards a tax-deferred account outweigh the costs of servicing 50K in credit card debt? I know the conventional wisdom is to not touch retirement accounts, but doesn't this advice apply more to people with more robust accounts (60K isn't a lot of money)? With maximum contributions we can get back to 60K within 3 years. And I wouldn't expect to lose out too much on compounding interest over the next 3 years---if the next 3 are anything like the past 3. [/quote] Well for one thing, $60K in TSP money isn't going to wipe out $50,000 in debt. You might net $29,000 once you pay taxes and the penalty. Also, excuse me for scoffing at your pledge that you'll have financial discipline now. You ran up $50,000 in cc debt. [b]Why not just take all that money you were going to theoretically invest in your depleted TSP and just pay off the debt?[/b] You didn't get $50,000 in debt overnight, and you can't pay it off overnight, short of a windfall (and this doesn't count). Don't compound your financial irresponsibility with another stupid mistake.[/quote] The $1200 I'm currently paying to service the debt would go towards making the TSP whole again. I don't have an extra 1200/month to pay down the debt. And I wasn't thinking I'd take that big a hit on the withdrawal. That's more than 50%![/quote] The other thing is you mentioned fully funding the TSP again once you liquidated. Fully funding for you and your wife means $34,000 a year in contributions. We presume that if you have an extra $20,000 a year to fully fund (on top of the $1,200 you're paying towards cc every month), that money could be used to accelerate payments on the debt. Or were you exaggerating about your ability to full fund and replenish your TSP? The cap is $17,000 a year per worker. Might be $17,500 now, actually.[/quote]
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