Help a reader with a retirement question
Susan, an extremely fanatical reader of Clever Dude (chuckle), emailed the following question to me. I had to respond that I am not a certified financial anything, so I wouldn’t feel comfortable giving this advice:
I am about to retire at the age of 55. I plan to take money from my retirement fund with TIAA CREF to pay off my debt. I have been told that I can take the money out without penalty, if I put it into an IRA “for the benefit of myself” (not directly in my name). Is this true? Also, will I be able to use the money as I like, i.e., to pay off my debt. Also, will I be taxed on the money that I use and will I have to pay a penalty?
I do plan to add more money from my next job to my retirement fund. Could you please advise me on this, as I plan to retire within the next four months.
I don’t have the answer on the penalties, but I do have an opinion on the whole matter. I don’t know how much debt or savings we’re talking about here, but at age 55, unless you have some other support mechanism set up, you probably shouldn’t mess with your retirement accounts.
If your debts are too much to handle, can you sell or downgrade some of them? For example, if you have high credit card debt, can you sell off some stuff to pay it down? Can you sell an expensive car and buy something cheap and economical?
Again, I don’t know the numbers here, but big problems require big solutions. If you’re worried about paying the mortgage, the last step would probably be to sell the house and rent a room with someone. It’s easier said than done, but if you really can’t pay the bills as well as you would like, either you need to:
1) Make more income
2) Live more frugally
3) Destroy some debt
You’re asking about using retirement funds to solve #3, but can you do #1 and #2 to fix #3 first?
Does anyone else have other advice? Can you answer the penalty questions?