• Question
  • should I take money from my 401k to pay down debt

    Asked by a 72 year old man from Bremerton, WA on 1/28/2013

    I owe about 50k in high interest debt. I have $380k in a 401k. I have $800 monthly coming in from a retirement plan and $2500monthly in socail security. One year left on my morgage on a home worth $500k thier is an 80k 2nd on it.

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  • Categories: Paying Off Debt, Retirement Planning, Budgeting, Mortgage Refinancing, Reverse Mortgages, Housing

Answers

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  • If you were my Father, this is what I'd recommend:

    I'm going to assume you owe 12k on your existing mortgage. Add that amount to the 50k and 80k and we have 142k worth of debt.

    You need to leave the 401k alone - it compounds the most during the last years.

    Get the "standard" Reverse Mortgage program with the monthly check option. The Reverse Mortgage will eliminate the 142k of debt, and leave you with a monthly check of $915.92. That's tax free, and doesn't impact Social Security or Medicare. The current interest rate is 3.204% and mortgage payments are optional. It's a very flexible program.

    That strategy will end your 50k in high interest debt, stop your mortgage payments, enable your 401k to compound, and increase your cash flow.

  • Login to rate this answer:   Answered on 1/29/2013
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.