I have the following CC debt $12,000 @4.99%, $4,000 @ 5.9% and $11,200 @9.15%. All of these are fixed rates for the life except for the 9.15% which is x.xx + prime. Total CC debt is 27,200. For reference I am 29 years old.

I have just moved jobs and am getting ready to roll over my 401k and pension. I have $15,500 in 401k and $5000 in pension.

My question is should I cash out my 401k and pension now and get out from under this debt or is that the wrong thought process? I know I will take a 30-40% hit on the funds, however at the current amount the CC's will take years to pay down. Once the CC's are gone I can max the 401k to try and make up for time.

Any advice would be appreciated and yes I know I am an idiot for having 27,200 in CC debt.

Thanks.

NEVER cash out your 401k for credit card debt, you'll never make that back.

That pension may be taxed differently, see about using that. Otherwise just just quit spending, and pay down your debt.

get a second job and put all that money towards your debt. You'll be good to go in 2 years if you're disciplined.

lotusgardener said:NEVER cash out your 401k for credit card debt, you'll never make that back.

Definitely, definitely, definitely. Cashing out a 401(k) is almost never a good idea, unless you want to eat cat food when you're 70.

Your plan relies on the fact that you'd have (a) the discipline the remaining $15k in CC debt after you cash out your 401(k) and pension (assuming a 40% tax penalty), (b) the discipline not to run up your credit cards again after they're paid off, and (c) the discipline to build up your 401(k) again with the maximum contribution when all this is done.

Since you're in a $27k hole already, I'd suggest you work on the discipline part first and then think of creative ways to refinance the debt to reduce your interest payments while you pay it off.

There are much better ways to refinance CC debt than cashing out your 401(k). You may be able to borrow against it at a reasonable rate, for example. But this only works if you get the discipline thing down first.