Oct
28
401k cash out question - help?
Filed Under Financial Planning
horncusker asked:
Okay, my company merged with another company and we will have the option of cashing out our 401k - I have about 10,000 in it, however, I have about 5000 in credit card debt which is costing me around $250+ per month in bills AND my new company will allow us to contribute into a ROTH 401k. In addition I have a personal ROTH IRA that I can supplement with this extra money. My question is - or opinions that I am trying to gather is this - Does it make sense to become debt free at this time so that I can supplement ROTH investments that will allow me to pay taxes now and as I age and my income grows I will no longer be responsible for paying taxes on my compounding interest. Whereas this 401k - when I cash it at retirement (which I will be at a higher tax bracket) or roll it, I will have to pay taxes on it anyway.
Okay, my company merged with another company and we will have the option of cashing out our 401k - I have about 10,000 in it, however, I have about 5000 in credit card debt which is costing me around $250+ per month in bills AND my new company will allow us to contribute into a ROTH 401k. In addition I have a personal ROTH IRA that I can supplement with this extra money. My question is - or opinions that I am trying to gather is this - Does it make sense to become debt free at this time so that I can supplement ROTH investments that will allow me to pay taxes now and as I age and my income grows I will no longer be responsible for paying taxes on my compounding interest. Whereas this 401k - when I cash it at retirement (which I will be at a higher tax bracket) or roll it, I will have to pay taxes on it anyway.
I am aware of the FIT deduction that will happen if I cut the check.
What do you think yahooers?
Question posted courtesy of: Ella
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