"Do not, and I repeat, do not do a hardship withdrawal. Do not do another loan. Don't do it. Don't do it. Don't do it. It's a mistake. Leave it there. Just leave it there."
"Never forget that money that's in a 401(k) is protected against bankruptcy. Same thing with IRAs."
"When you pull money out of a 401(k) to pay off a credit card, you are converting protected capital into already-spent money at the worst possible exchange rate."
"To net $33,000, she might need to pull closer to $45,000 to $50,000 from the account due to taxes and penalties."
A caller named Andrea has $33,000 in revolving debt and $87,000 in a 401(k) with loans against it. Suze Orman advises against a hardship withdrawal, emphasizing that 401(k) funds are protected from bankruptcy. Withdrawing funds to pay off unsecured debt converts protected capital into spent money, leading to a potential retirement shortfall. A hardship withdrawal incurs taxes and penalties, meaning Andrea would need to withdraw significantly more than the debt amount to clear it.
Read at 24/7 Wall St.
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