And, again, your money will miss out on market returns. Anyone considering turning to their k to address credit card balances would also be wise to think about the behavioral reasons why they got into the debt in the first place, which should be explored and addressed.
Skip Navigation. Key Points. Those with persistent credit card balances may be tempted to dig into their retirement savings to pay off the debt. There are a number of ways to do so, all of which come with costs. All that, Rossman said, "should combine to far outweigh the average credit card rate. For most others, though, there are more appealing options than a withdrawal, Rossman said. If you have credit card debt, this could be a good option as long as you have a plan to pay off the transferred balance within the card's introductory no-interest period typically ranging six months to two years , otherwise you accrue more interest on top of that debt.
To qualify for these longer interest-free periods, you will most likely need to have good or excellent credit , but there are options available for fair credit as well. After the intro period, there's a relatively low variable APR of 9. Note that depending on your credit, you may not get approved for a credit limit high enough to cover the full balance of your debt.
While paying off your credit card debt is an important step in your overall financial health, know that there is more than one way to help your credit cards survive an economic downturn like this. Relying on your retirement savings too early may not be your smartest solution.
It's best to preserve your retirement funds. And you can still preserve your credit score even while paying your debt off over time. Nitzsche says his secret to getting and maintaining a high credit score even through his financial hardships was always being meticulous about paying his bills on time. Skip Navigation. Follow Select. Our top picks of timely offers from our partners More details.
Still, you may be hesitant to head into retirement with a house payment on your back. It ultimately comes down to a few things: your age, the value of your mortgage, how you feel about debt, and your retirement income plan. For McGrath, it was also a matter of convenience.
Retiring early? You may face some financial penalties if you dip into your individual or employer-sponsored accounts. Beyond penalties, the more retirement funds you spend up front, the less you have to fall back on down the road. Know how much money you may need to sustain your lifestyle in retirement before you make large payoffs.
Sometimes emotional factors are just as important as financial. Depending on your financial goals and your comfort level with debt, making mortgage payments into retirement could free up funds for other expenses or priorities. The value of your mortgage at retirement could make a huge difference in your payoff plan.
If you continue to make monthly mortgage payments, the amount of interest you pay may be tax deductible. But that interest needs to be fairly high to make it count. The Tax Cuts and Job Acts nearly doubled the standard deduction, eliminating itemized deductions, such as mortgage interest, for many Americans.
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