paying off debt … losing retirement

So, I’ve been thinking something crazy tonight… liquidating measly retirement accounts to pay off debt. Yes, it’s one of those crazy thoughts that hit you when you’re feeling extremely overwhelmed by your current financial situation and you just want to make a problem go away.

There are some pluses:
– eliminating this debt will free up income that can then go back into savings and retirement
– the emotional freedom of eliminating this debt is HUGE
– yeah, thats about all the pluses I can think of

the negatives:
– the financial impact of early withdrawal penalties… 10% of amounts taken, and then the cash is taxed like income, if my quick 5 minute review of the conditions is correct
– we lose the retirement account.. it’s losing at the moment anyways, but that’s another post
– it probably won’t eliminate all of our debt, so whats the point?
– while debt increasing behaviors are mostly gone, they’re not 100% gone — in that case, that makes this a very bad idea, it’s a bandaid, a bad bad bandaid that negatively impacts our future

some messed up rationale centers on the fact that we’re soooo far behind on retirement planning, what does it matter — not an approach to take toward your finances. also, freeing up the money currently going to debt will help the monthly cash flow somewhat, but it’s still a losing battle at the moment.

so, yeah, I better go to bed before I give this stupid idea any more thought. feel free to comment on what a bad idea it is if you want, though I don’t really need anyone telling me what I already know.

oh and just cause I like adding details… I’m a numbers and budget wench. There are great suggestions out there for taking serious strides against debt and your budget, I’ve read them all and considered them all. For our situation, I can say that we’ve trimmed our budget down as far as we can/will, let just say that pasta and rice are more than just staples for a while. Getting another job doesn’t work either because I home with a nursling and the partner honestly cannot add that on top of his professional job, with unpaid overtime – yay salary, commute, and helping me continue to run my home business (which does bring in as much income as I can earn with said nursling eating up much of my time).

Though, having said that, I will work up some numbers for our family budget night meeting to go over some other drastic steps that we might consider to improve on this situation. I’m feeling recommitted to getting numbers under control, especially now that I’m not hiding from them as I have for the past 6 months (ouch, that really hurts … we could have been in much better shape if I’d clued in even 2 months earlier). So, I’ll be thinking drastic thought but hopefully nothing as foolish as 401k withdrawals. Oh, and maybe now that I’m facing numbers again, I’ll start posting again on the steps we’ve been taking to make ends meet.

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