Thinking of cashing out an IRA early, tell me if I am stupid or not...

[Plutonius]

So here it is in a nutshell,

My wife has an Rollover Ira from a past jobs 401k. It's currently around $108,000 In the past 6 years it has only gained around 8k with the markets being what they are(was up around 16k at one point though).

If we were to cash it out, we would be able to pay off all of our debt, except for our mortgages. If we were debt free, we could then start stashing around 30k a year into savings.

I work for the state and am building a pension, and she is working at another job already maxing out into another 401k, so this isn't our only retirement fund. We still have 17-18 more years till retirement.

My thinking is a loss now would end up making up for itself over time. In 18 years if we were stash the money and not touch it at all, we would have $540, 000 just form deposits, not counting any interest. With the market the way it is, and the history of this IRA, I don't ever seeing it equal that amount of money.

So tell me, is this just a completly idiotic idea and should I quit thinking about it?

Interest rates are very low right now so I would refinance or do whatever you can to pay off your high interest loans without cashing out your IRA. If you do cash it out, you are basically throwing money away with the extra taxes and penalties.

 

[12vElectronics]

Before you go cashing out an IRA, spend some dollars on a financial advisor. I had a moment where I questioned whether I should do something that resulted in huge penalties, like withdrawing from my IRA, and realized it was a bad idea. The first step I took is what others described here and that was to list my debt in order from largest to smallest then the other list was highest interest rate to lowest. Basically, paying off my debt using discretionary income was a much better idea that withdrawing or cashing out something that would result in penalties and lost cash. There is some good advice here, but the best advice comes from someone who you can entrust with a lot of information about you and your wife for the best picture of your financial health.

There is also another thought to keep in mind. If you are debt free, are you certain you can remain debt free? It is like the issue people may have when they make more money. If you once made $50k a year and now you make $100k, you may have thought to yourself that you could pay off all of your debt and live debt free. Instead, you took on more burden because you could afford to, putting yourself further into debt. It's a real issue for some.

You're smart