October 22, 2009
Posted: 06:00 AM ET
Well first, everybody's telling you can't do this and I'm telling you not to do it, even if they say you can.
You don't solve a problem by wiping out your retirement funds to deal with the debt.
The real thing that eats you up with that is the tax burden.
A typical person who does a withdrawal from a 401k pays, with taxes and penalties, 40% of that amount of money in taxes.
So if you take out $10,000 you actually only have $6,000 that you can use for debt, you're going to have to have that other $4,000 to pay tax next April.
Instead, attack debt one step at a time.
If you need help negotiating, you need help working out a plan, go to your NFCC affiliate, check them out at nfcc.org, that's the National Foundation for Credit Counseling.
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Clark Howard helps you become a wise consumer. We know you're busy, and that's why Clark's tips are quick and effective. He'll arm you with the information you need to make smart choices. During these tough economic times, Clark wants to help you save more, spend less and avoid getting ripped off!