He is hoping to be ‘stress free’ from debt
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%.
In general, “taking a loan from any retirement account should be treated as a last resort option,” says financial planner Bobbi Rebell, host of the Financial Grownup podcast and co-host of the Money in the Morning podcast. So what you should do right now is to take a deep look at your spending and see where you can make cuts to pay off that debt without having to take a loan from your retirement account. “If after reviewing your cash flow, you find that you can pay off the credit card debt within a year, then you can consider finding a lower or zero interest rate credit card and focus on paying it down aggressively within that year,” says Dabit.
Rebell agrees, adding that: “If you are paying a very high interest rate on a credit card, you can lower it by taking a loan from a retirement plan, if that plan allows it. In almost all cases that is a better choice than a withdrawal, which will incur a penalty and lower your retirement savings and investments,” she says.
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