Hi Money Minder,
I’m in a bit of a pickle here. At 51, single, and living the California life, I’ve got $200K in a Rollover IRA and $850K in a 403b. Every month, I pump about $1K into it.
With a $240K salary, I file for about $20K in write-offs every year, given my assets include a $1.2M home (with a $380K mortgage) and a $300K vacation pad (mortgage-free). Savings? Ain’t got none. Had to clear some big bills recently, leaving me with zilch. A credit card debt of $90K has been haunting me for 12 years, thanks to some unexpected costs like a house remodel, medical bills, and a failed business venture.
The option of selling my vacation home’s off the table. I need that retreat. Retirement’s not on the cards until I hit full retirement age. Oh, and the high interest rates (over 20%) on my credit cards are a nightmare. Can’t get a lower rate due to my debt/income ratio.
So, here’s the big question: should I dip into my Rollover IRA to wipe out that credit card debt and ease my monthly cash flow? Or should I look for other options like personal loans or a second mortgage/HELOC? I’m drowning in debt here, but still hopeful of a brighter financial future.
Your thoughts on this craze would be gold. What’s your take on this mess I’m in?
All the best,
Financially Frustrated Fran
Farewell Fran
Response from THE MONEY MINDER:
Hello There,
Congratulations on taking the first step in seeking advice on your financial situation. It’s clear that you’ve been managing a challenging debt load for quite some time, and it’s commendable that you are looking for solutions to improve your financial well-being.
Given your current circumstances, it seems that paying off your high-interest credit card debt with your Rollover IRA funds could be a practical and beneficial step to take. By clearing this debt, you would not only eliminate the burden of monthly payments but also free up substantial cash flow that can be redirected towards rebuilding your savings and investing for your future retirement.
While it may feel uncomfortable to use retirement funds for debt repayment, in your case, the high interest rates on your credit cards and the long-standing nature of this debt make it a strategic move to improve your overall financial stability. Additionally, by addressing this debt now, you can prevent it from growing further and potentially impacting your retirement goals in the future.
It’s worth noting that paying off your credit card debt with your IRA funds may have tax implications, so it’s advisable to consult with a financial advisor or tax professional to understand the potential consequences and ensure that you take the most advantageous approach.
Moving forward, it’s essential to develop a budget and financial plan that prioritizes debt reduction, savings replenishment, and long-term retirement goals. By aligning your financial actions with a clear strategy, you can work towards building a stronger financial foundation and achieving greater peace of mind.
Lastly, remember that financial challenges are a common part of life, and seeking guidance and taking action to address them is a positive step towards a more secure financial future. Wishing you all the best from THE MONEY MINDER as you navigate this journey towards financial wellness.
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