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Clearing credit card debt using retirement savings a bad idea

In a struggling economic climate, it is easy to be worried about mounting debt and understandable to seek out any means to pay it down. But experts warn that trying to tackle credit card debt by digging into retirement savings might not be the best idea. South Carolina residents considering this option are urged to learn more about other available courses of action before ransacking their golden years nest egg.

Recent reports suggest Americans have accrued a staggering $856 billion in credit card debt, so it makes sense that responsible families are trying to find ways to bring down their personal amount owing. One of the most popular knee-jerk responses to debt management is to succumb to the temptation to pay off large swaths of debt by pulling money from protected accounts like 401(k) and retirement savings accounts. However, experts say this could lead to even more problems down the line. 

Removing money from an account of this type costs money -- both in transaction fees and in income tax, since any amount removed translates into taxable income. In fact, some people may find that up to 35 percent of their total savings could be erased simply by accessing the money early. Experts remind citizens that since retirement savings are exempt from bankruptcy filings, filing for bankruptcy might be the better choice if debt rises to an unmanageable point.

Credit card debt can be a daunting challenge for many South Carolina residents, particularly in a difficult economic climate. However, several options are available to deal with mounting debt. Residents are urged to learn more about these options before making potentially life-altering decisions involving their late-life savings.

Source: CNBC, "Suze Orman: Don't put your retirement on a credit card," Sakina Spruell, Aug. 7, 2013

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Reed Law Firm, P.A.
220 Stoneridge Drive,
Suite 301

Columbia, SC 29210

Phone: 803-726-4888
Fax: 803-726-4887
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Florence, SC 29501

Phone: 843-679-0077
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