For all the retired folks or ones getting close and anyone else.
Would you cash out 50% or more of your retirement savings to be debt free? Especially if you aren't planning to fully retire for 8 more years or longer.
Would like to know everyones opinions
Thanks

Depends on how much savings you have and how much interest you would be paying. Those are the main numbers to compare. And are you committed to not going back into debt? That's a huge deal.

I assume you wouldn't want to do that for the taxes alone.

1. You may have early withdrawl penalties.

2. The whole idea of saving say $1,000,000 in a 401 is so that when you are retired and only using $10,000 a year to live on, that you are only taxed at that $10,000 income level for that year.

Depends on several things.
Is alot of your debt is in depreciating assets (cars) or appreciating assets (house, real estate).
If they are in the former no way would I pull savings to eliminate the debt. I'd get rid of the source of the debt.

A good friend of mine did this. Reason I was asking.
Said he was tired of dealing with the ups and downs of the market and just wanted peace of mind.
Hes seems ok with his decision and said doesn't mind if he has to keep working into his 60's. Hes 48 now.
I had the same concerns both of you stated - especially the penalty for early withdrawal.
and I discussed with him, but he was dead set on doing it. Hope he comes out alright on taxes.

my view is eliminate any and all short term debt - credit card, vehicle, etc.
Get cheapest rate you can on long term debt - house, farm
And invest the rest - with Roth IRA's you can take tax free withdrawals at 59 1/2. That's a sweet deal.
But that's just my opinion.

The biggest deal in the personal financial health thingy is DEBT! Many folks never learn this. Debt is unavoidable for most folks, at least when it comes to homes. The rest of the stuff.....not so much. My Bride and I were no different than most, we couldn't plop down the full amount for our place, so we had a mortgage. We paid it off ASAP though. All that other stuff like new-to-us vehicles, quads, boats, vacations, and family trips.....cash only. If we couldn't afford it, we went without it. As a result of a lifetime of frugal, we are now debt free and able to get by just fine with what we have to live on. It ain't rocket science at all, it is simple math. Debt free is a goal you should be working on before you even get into debt to begin with. If your pal crunched the numbers and he will actually save money in the long run by cashing in now, then he is likely making the right decision.

Google "the rule of 55". Doing it at 48 was most likely a mistake. He just lost say 7 years of growth if he waited until 55 and things would have been paid down more.

Tired of dealing with ups and downs in the market? That's laughable! If you've had money in the markets over the last 8 years, you've likely done very well on your investment.

People that can't manage their money will justify these bad decisions somehow. I know others that have done it as well...it's not a good decision.

I suspect at this point your investments are generating a rate of return that is higher than the rate/s of interest you are paying. If that is correct, I wouldn't disturb that relationship. Remember too, that some of that interest is tax deductible.

You have 8 years to pay that stuff down or off and then have both taken care of or manageable by then you just need to tighten the belt a bit for the next 8 years maybe. Cashing in your taking a hit (penalty) on that money see if it is worth it, seems like working over 8 years and paying down might be the better route if not your never going to retire if you continue on the same path!

You need to dig out of that hole or not much will change figure what you don't need and sell that stuff off and pay the bills down get some OT if you can better to bust your butt for 8 years rather then the rest of your life!

Our 12 years left on our mortgage is our only debt and it is only 4% interest of which is deductible. Last year, I invested over 16% of my income and had growth of over 20%. We now could become completely debt free and pay off all our land and mortgage - I have chosen to keep the mortgage, pay it off earlier and invest. We live at or below our means. My wife stays home and educates our children (single income family) and above all - WE TITHE! God is great and has blessed us as He promises to those that are faithful to Him.

Great discussion men! love the different view points.
Kre - I agree with you completely and tried to talk him out of it. didn't work. Personally done very well over 8 years -especially the last two
white17 - yes, making more in investments than paying in interest.
Treedablackdog - almost in exact same position. was 100% debt free in 2010. Allowed us to buy the farm in 14 and build our retirement home in 16. Now investing as much as possible and still putting some extra on the mortgage, but its only 3.95%.
Law dog - Debt free except for the mortgage -and working on that too, but thanks for the info - good advice.

I have been semi-retired since I was 30. You can do this if you remain debt free.

Since banks charge such ridiculously low interest rates, they have fee loaded your mortgages to hide your real rate.

I'm 31. This has been my question for years already. Gotta get outa debt but everything is a trap anymore. 3 year old truck with 36k on it is 28thousand dollars, new truck is 33 thousand. Then once that's done it's almost time to start looking for the next one as they dont make real tricks today. 600 bucks for a side mirror. Dumb. House I'll need roof, and windows. It never ends.

I would not pull money out of savings that I worked hard to get there to pay off debt. Debt is a part of life be one young or old. Managed debt to me is smart business if you look at all the money management one can or should do. With only 8 years left to retirement you won't get much growth in that time. The money you pull out will grow at a reasonable rate. The debt you now have will go down at a reasonable rate as you pay it off. I retired from full time work 12 years ago and part time work a little under 5 years ago. We have had some major charitable gifting the last 7 years along with several significant capital expenditures such as new septic system, remodeling an older home to include insulation, siding, windows, doors and a roof. We also needed to buy two vehicles one was planned and the other after my wife's car was hit by a person running a stop sign. We have utilized two 3-year home equity loans to facilitate all these out of the norm expenses.
Getting out of debt does not create a better retirement if it takes the funds out of the savings you plan to use.
Even with the 40% drop in 2008-09 I have had more overall growth in my savings the last 12 years then I did the 12 years prior while I was funding the accounts (including my payments) If you don't trust the economy pay off your debt and hunker down. If you have reasonable faith in the economy make a plan and grow with it.
Bryce

If your retirememt saving is growing, no. If your tetirement savings is in a 401 or IRA or any tax qualified instrument, the taxes will eat you alive. I the debt you are carrying is for your home or business, you get tax deductions.

I expect my money to double every 7 years.....with my investments.

I wouldn’t touch the retirement savings. I would work as much as possible and pay off all debt. I paid cash for everything for the last 35 years. It’s not too late to tighten the belt. Half a dozen new vehicles, and built a new retirement home....paid cash for all of them. We’ve never paid one cent of interest on a credit card bill, or anything else for that matter. I was able to retire at 54 1/2. Everything we have, we worked for....never inherited, got any government handout, sued, or won a lottery either. I was a coal miner, my wife a school teacher.

Bingo on what White said. Look at the interest you are paying on your debt vs what is earned by your retirement investments. With 8 years to go until retirement, if your investments are not earning a higher rate of return than your debt interest rate you have the wrong investments and need to fix that. Then focus on becoming debt free by paying off the higher interest debts as soon as possible.

I retired at 56 in large part because I had very little debt for most of my life. No car loans after age 30, never an outstanding credit card balance, paid off my last mortgage at 52. Some would say I was lucky, I would say I lived within my means.