Let me start by saying that I will get 18K next month. Company adds 15% to retirement account regardless of how much I put in 401K.
I was unable to work for 3 months this year and incurred some medical and credit card debt.
My idea was to use post tax bonus to pay debt off.
Someone mentioned that I should put all the money and max out my 401K .
I am trying to get out of debt by paying the least amount of interest.
Would it be a good idea to put all 18K in 401K and borrow 12K from 401K instead of paying the debt of with after tax $
With my current monthly budget it would take me 12-15 months to pay it off
Mon Dec 07, 2015 3:28 am
Cash: $ 380.25
Joined: 09 Feb 2009
IMO, eliminating debt is a very good decision due to the fact unless you have a very high income, your best wealth building tool is your income. So the more payments you have the less money you have to invest and donate.
As for borrowing from a 401k is a real bad decision and is only a last ditch effort to avoid a bankruptcy. The problem with 401k loans is they require you to pay it back in a certain time frame. Plus, if you switch jobs, you owe the entire amount immediately.
Keep it simple and pay off the debt quickly and get back to investing with the extra income you now have.
Risk comes from not knowing what you're doing. (Warren Buffet)