Should I Borrow From Savings To Pay Off $17,500 In Credit Card Debt?
Should I Borrow From Savings To Pay Off $17,500 In Credit Card Debt?
May 30, 2020 By Catey Hill
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I’m 40, will get a pension and have $60,000 saved for retirement. Should I borrow from it to pay off $17,500 in credit card debt?
Dear Catey, I am a 40-year-old law-enforcement officer and hope to retire in 13 or 14 years. At that time, I will have 30-plus years on the job with a pension giving me 70% of my current income with a cost-of-living annual percentage increase around 2% or 3%.
Additionally I have a little over $60,000 in a 457(b) plan. But I also have $17,500 in credit card debt with interest ranging from 9% and 16%. Is it a good idea to borrow from your 457(b) plan to pay off credit card debt? I think doing so would mean I was stress free from debt, plus I’d be paying myself back with interest on a five-year plan. What’s the right move? Thank you, Frank
Dear Frank,
You’re not alone in your struggle with credit card debt: More than half (55%) of U.S. adults who have credit cards say they also have debt, a survey from CNBC and Morning Consult revealed in 2019. And those debt levels have been rising -- last year, “credit card balances retouched the 2008 nominal peak,” wrote the New York Federal Reserve.
Having that credit card debt can take an emotional toll, too: Six in 10 people with credit card debt say they find it stressful, one survey revealed. So should you rush to pay it off with your retirement funds? We asked the experts.
In general, “taking a loan from any retirement account should be treated as a last resort option,” says certified financial planner Bobbi Rebell, host of the Financial Grownup podcast and co-host of the Money with Friends podcast.
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