If you find yourself in mounting debt that you are not able to take control of, you may be considering liquidating your retirement savings in order to get rid of the debt. While this may seem like a simple solution to get back on your feet, you should take precautions for a number of reasons before you decide to empty out your retirement to cover your current debt.

1. You May Not Be Able to Liquidate Your Retirement AccountPaying Off Debt

When your employer has contributed significantly to your retirement account, you may not be able to access the money until you reach retirement age. If this is the case, then liquidating your retirement to pay off your debt isn’t a viable option. Your first step is to look at any retirement accounts that you own, and see what the penalties are for early withdrawal.

2. Penalties May be Too High

Check to see what the penalties would be if you decide to liquidate your retirement
savings early. You may end up paying a 10% penalty, in addition to having to pay income taxes on your early withdrawal. The penalties you pay may be more than your overall debt, and it’s not worth destroying your retirement to pay off your debt.

3. Consult with a Debt or Bankruptcy Attorney

If you can’t seem to get out from under a mountain of debt and you aren’t sure what your options are, consulting with a bankruptcy attorney is a good idea. At Clark & Washington, 770-824-3108, we can help you come up with a plan to get your credit and your debt back under control.