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Teach Me

Try to Avoid Using Retirement Savings for Debt

July 23, 2019

Tip of the Week

Consider other options before using your retirement savings to pay off debt.

1 min read

We know it might be tempting to use your growing retirement nest egg to pay off worrisome student loan or credit card debt. But that money is for the future you, and an early withdrawal* can seriously reduce what you’ve saved.



Let’s say you have $7,000 in a traditional IRA.* You decide to cash out early to pay off a credit card balance.**

Penalties and fees can eat up $3,080, or about 44% of your nest egg.

Jargon Hack

What is a Traditional IRA?

Traditional IRA

It’s a retirement savings account that lets you put money away on a pre-tax basis. IRA stands for Individual Retirement Account.

Find out

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What is a 401(k)?


A workplace-sponsored retirement plan that lets you put money away on a pre-tax basis.

Find out

Jargon Hack

What is a Roth IRA?

Roth IRA

It’s a retirement account that lets you contribute money after you’ve paid taxes on it. IRA stands for Individual Retirement Account.

Find out

*Different rules apply to Roth IRAs. Generally speaking, account holders can take out what they’ve put into a Roth at any time.
**Typically, early withdrawal is before you turn 59 1/2
1Example is a hypothetical illustration of mathematical principles, and is not a prediction or projection of performance of an investment or investment strategy

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