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Reply to "Is it ever a good idea to use retirement money to pay off debt?"
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[quote=Anonymous]Unless the debt was to a guy named Vinny with a penchant for cement shoes I would not use retirement money to pay off debt, since the cost of knee replacement or getting un-dead would likely exceed the tax and penalty for early withdrawl. The loan idea from PP is a good option, at least that way you are paying yourself interest. Penalty and taxes on the withdrawal will mean you would only get 7,800 from the 13k (10% penalty, 25% fed tax marginal rate, 6% state marginal rate), which may not even be enough to pay it off completely. Far better to roll it over into your employer plan (if they have a great plan, or you don't otherwise have enough in the plan for the loan), or roll it over to fidelity and vanguard so that it can grow. Also, 13k is not an insignificant sum. If you are 30 - that is 71k in 35 years at 5%, 192k in 35 years at 8%.[/quote]
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