I am on disability retirement. My income is about $3,200 monthly. I currently have about $40,000 in credit card debt, excluding a mortgage (which is upside down). I am $1,100 in the hole every month and desperately need help! I have asked my wife to take out a $20,000 loan from her retirement plan at work. She will retire in five years and has $45,000 in the plan. She has her own debt and housing costs,which she pays responsibly.
Should I ask my wife to take out a loan from her 457 plan?
It would be a serious and fatal mistake to borrow from your wife’s to pay off credit card debt.
Let’s look at your situation. You are disabled and there is no reasonable expectation that you will be able to work again and contribute towards your retirement. Your wife is going to retire in only five years so any money in a retirement account is better left in there and protected from creditors so you can use it.
In retirement, $45,000 is nothing and won’t go that far. You have a responsibility to watch over that retirement account with care.
Just imagine if you took a loan against the 457 plan, it would take long time to put $20,000 back in. And that would be money that you can’t afford to repay. I agree that I’m being selfish for you here but it is unfortunate that you have found yourself in a situation where you are $40,000 in credit card debt but you have to put your future first.
That 40K of credit card debt is costing you about $800 a month in minimum payments and yet you say you are $1,100 short. So even if you did drain down the retirement plan with a loan, it would not resolve the underlying problem that the two of you can’t make it on the income you’ve got, even without any credit card debt.
It might just be that with the upside down mortgage that now is the time to leave the retirement money protected and talk to a bankruptcy attorney for a free bankruptcy review so you can shed the upside down mortgage and credit card debt and get yourself back to a safe position to make it in the future.
Think about your situation this way, currently the credit card debt is the symptom, but is not the cause of your troubles. It is just part of the mudslide that is pushing your finances down the hill. We need to repair the foundation to give you a safer and more secure future. Borrowing sandbags just isn’t going to cut it.