Retirement raiders: More tap 401(k) early
A second leading reason readers have raided retirement funds is to get out from under crippling credit card debt.
One woman, Carol from Indiana, tells us that splurges after a happy second marriage eventually buried her and her new groom in debt. "Living beyond our means was an understatement," she says. "Before I knew it, we had $70,000 in credit card debt and huge vehicle and house payments."
She refused to entertain bankruptcy, so she raided her 401(k). "I knew that pulling money from my 401(k) was a VERY bad idea, because once you pay penalties, federal and state taxes, and take into account all of the contributions and compounded interest lost, you probably only end up with pennies on the dollar," she says. "But I had no choice."
She doesn't regret it because "at least now I am keeping my head above water after paying some bills off and refinancing some things after paying down loans and lowering payments."