[‎Angela]

Okay….hear me out…AC went out so to cover the costs l closed one of my 401 K. Decided to payoff Credit cards.

Has a balance of 1600 and did not know this but they advised to wait until lm 31 days and call back and they will accept 50%.

I’ve always paid on time.

[Barbara]

Something about being told to let a credit card become late, etc sounds wrong. I would call back and clarify that.

I wish you had posted before taking your 401k but what’s done is done.

[Cara]

Also, if you accept that deal where you only pay 50%, the half they cancel is considered cancelled debt.

That is possibly taxable to you unless you can claim insolvency.

[Donna]

What? They won’t let you pay off your whole credit card balance. Unless you are over a certain age you are going to have to pay around 30% taxes on that 401k you took out.

Be prepared for that when you do your taxes.

[Ancella]

They say never to pull $ from your 401K. Life happens! Just don’t keep doing it because it’s for your future! The one time I did it my daughter had just started preK and I had to go part- time.

The thing is, I couldn’t afford to be part-time! Not at the height of my student loans and with s car payment and half of the private school tuition, so I withdrew one of my 401Ks (ended up being $7000) after the taxes and and it supplemented my income until COVID hit and I went back to full-time because I didn’t need to do school runs anymore.

[Amanda]

If you’ve paid on time, I dont know why they cc company would settle at 50%. Usually that means it’s in a collection state.

I would research further.

Often that shows up on your credit report as bad debt or a settlement and will negatively impact your score.

[Melissa]

Yikes! If you are under 59 1/2 yo you will have Big penalties to pay. To start you will be taxed 10% and additiinal fees.

If you would have taken a loan from your 401k you could have paid it back in 5 years with quarterly payments with no penalty.

What’s done is done. Work hard to get your retirement investments back on track.

At least you will be cool while doing it.

[Courtney]

Generally, if they accept less to settle the account, they are going to close the account. So that will hit your credit, and you will have to pay taxes on the forgiven amount.

I’m confused why they would say they would settle at 50% if the account was like one day past due.

Are you sure you’re not talking to a collection agency?

[Michelle]

During Covid I borrowed from my 401K at about 6%. I am almost finished with that loan.

I figure if I’m paying someone back it might as well be me.

Not sure it’s for everyone but it helped me. Good luck.

[Damaris]

What was the approximate amount in the 401k?
Less than 5k
Less than 10k
Less than 100k

(If you did it recently, at least the market is at its highest.)

Why would a card rep advise you to wait 31 days to pay their employer 50% less?

[Betty]

Never, never cash out your 401k. It’s meant to be a retirement fund.
Sometimes your employer will let you borrow a certain %, but don’t count on it.

The penalties, interest and income taxes will easily eat up half of what you take out of that 401k.

Be prepared!!!

[Patricia]

I really hope that 401(k) was not your only income source for retirement. Pulling from a 401(k) is bad for a few reasons.

One is that you’re using your retirement money and another is that you’re paying tax as well as a penalty so that cuts pretty deep.

Also, I know it’s the middle of summer but being without AC for a while while you are figuring things out is not the end of the world and AC is not a need it’s a want.

I agree that I also want AC but if it came between taking money out of my 401(k) and getting a window AC unit or fans. I would definitely do it and save up the money.

My husband and I have no debt other than our mortgage and my dryer has to be taped when we use it to keep the door closed because the latch is broken and I’ve been saving up every month to buy a new washer and dryer as we have fixed them many times and decided no more $ is going towards fixing them.

I have enough money in my emergency fund to buy them but I figure this is not an emergency so I am just plugging away to pay it in cash.

I don’t want to be rude and I don’t want to be nagging or anything like that and I’m not specifically talking about you Angela, but in general, I feel like a lot of people are quick to borrow $ instead of looking for a work around.

I hope this won’t set you back too far and that you have more $ in a retirement fund and that you’re not too close to retirement.

[Nancy]

The credit card deal is legit. Go for it. After it is paid – it’ll show “paid as agreed” on credit report. All good.

I’d not have touched my 401.

Just done without AC for a year. 16 years in the Dallas Texas area, and we never had AC, and only one box fan.

We survived … kept our hair wet and carried a wet towel.

[Maureen]

I agree no matter what don’t borrow from your IRA or close your IRA I am now 72 years old and we have had a few medical issues my husband spent much of the past 5 months in the hospital and a rehabilitation center and I spent a few weeks in a rehabilitation center in the bills in those types of places are very high as compared to a hospital to two less reimbursement.

My mother always told me not to touch the IRA and to start early and to take advantage of matching.

I am only breathing easy right now because we have IRA

[Jess]

I thought they only did this if you’re closing the account. Even then, they will give you a tax document (1099 I think) on what they write off.

My husband did this and we received the form to file as income on our taxes.

[Angela]

Update. I’m 66 now and aside from a very small pension l live off social security. As for a knock on my credit report l’m not too concerned.

I had these 401ks for emergencies and made sure taxes were taken out.

I will check with Irs on taxes on this and keep some to the side just in case.

[Debra]

I don’t have any advice for you but just wanted to let you know I definitely sympathize! Ours has been out for the last 6 days during the heat wave here in Colorado and my poor husband has MS.

Hopefully we’re getting our fixed tomorrow and I wish you the very best getting your air back on

[Downing]

Our whole furnace kicked it too so the AC can’t function. We are sitting here with fans and at least saving on electricity.

Getting estimates to see how bad it’s going to be (thus far, it’s going to be a big hit).

We don’t “need” ac (though these heat warnings and advisories are getting a bit much).

We will need to have a furnace though. Never considered taking from our retirement (OMG, the taxes). But a good example of why you need a good sized savings.

Idk about the credit card but I certainly would not count on that.

Plus, your credit could be affected…do you need good credit? Sounds like you might given this post.

[Author]

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