Reply to Is it ever a good idea to use retirement money to pay off debt?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Penny wise, pound foolish would be a person who coupons aggressively (penny wise = smart with small transactions), while buying Louis Vuitton bags for her toddler to play with (pound foolish = not smart with big transactions). The meaning being it doesn't make a difference if you are good with the little things if you blow it on the big things.

This situation is not a penny wise pound foolish situation. This is a situation where a manageable amount of debt can be consolidated or dealt with in a myriad of ways with options available to OP with a little bit of work. How long would it take for the 13k debt to incur another 5k of interest? Because the liquidation of the retirement account will lose 5k in an instant. 13k is not a small sum - it could be 192k at retirement age if[b] the market averages 8%.[/b] How many extra years of working will it take for OP to make that up?

Money management is all about financial sense and delayed gratification, NOT allowing feelings to get in the way. OP just needs a plan and to start acting on it.[/quote]

this is an absolutely ridiculous assumption. the market is not going to average 8%. the market can also crash at the time she tries to cash in, she might die will before retirement, etc, etc. not to mention, 192k 30 years from now is not going to buy that much.

penny wise pound foolish refers to a situation where a person is foolishly focused on small monetary gain while overlooking bigger issues with more significant implications. you could argue that CC debt is not that big of an issue, but you are one of those penny pinchers who thinks financial decion-making should boil down to math. that's nonsense, and you are giving terrible advice because of it.[/quote]

I agree that 8% is aggressive (although the historical average), but whether it is is 5% (72k), 6% (100k), or 7% (139k), the result is still considerably more than ZERO. And no matter the year, 192k or 72k will buy far more than zero will.

I don't know what you want me to tell you about the possibility of death, as it could absolutely happen at any time. I guess that means we may as well not think about kids, retirement, going to work, or personal hygiene, because we may die at any moment. You can function that way if you would like. I will continue to save for retirement and brush my teeth, just in case.

You are advocating for OP to go from a net worth of 5k (13k debt, 13k retirement, 5k cash) to a net worth of ZERO. I (and it would appear a few others) are advocating for the use of information (taxes, penalty, compounding interest, available alternatives) to make the most of the available resources.

You could be right - liquidating and no longer having the debt may make OP feel better. But it would be the same as buying a sweater that you want to wear Friday for 200 on Monday, even though you know you can get it for 100 on wednesday. It might make you feel better, but that doesn't make it a better decision. [/quote]

If it makes her feel better, that might as well make it a better decision. Though your example so ridiculous because nobody would actually feel better payong twice the price. being debt free is an entirey different kind of situation, perhaps similar in your number oriented view but that is a very limited view.[/quote]

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