QUESTION:I lost my job a while back and have not found a job with enough income to pay all our bills. We have just about run through our rainy day fund. We have a mortagage, a car loan and a loan we used to pay off credity cards. Our credit card debt is essentially zero. Should we dip into the 401k to pay off the car and loan and pull out some money to continue paying the mortgage? EXPERT ANSWER:Not knowing your age, it is hard to come up with a specific recommendation here. I would dip into the 401k only as a last resort because the tax and possible 10% penalty if you’re under 591/2 would really hurt.
You should check with your plan administrator and see if they have loan provisions in your 401k. If they do, that would be much better.
Do you have enough equity in your car to where you could sell it, pay off the loan and get a junker to get you by until you get a better job? Good luck getting a better job. I assume you’re working at whatever you can until that better job comes along.
Max W. Smith
Hillspring Financial, Inc.
www.hillspringfinancial.com
