Is it a bad idea pay off credit card debt with my 401k?

[William Mitchell]

Hello All,

This is only my second post so I hope this is the correct  forum. 

We have over $20k in high interest credit card debt and the payments are keeping us cash strapped every month. We are just starting to look at real estate investing and feel that it will critical to pay that off as soon as possible. I have $30k in my 401k and was curious if there was a way to withdraw that to pay down the debt penalty free or with as little fees as possible.  I do not plan on investing any more into the 401k as we are going to be focusing on real estate investing.

We also have $250k in equity in our home but thought we would it might be better to use that for our first investment property.

Obviously we are just starting out in this and not even sure what questions to be asking yet. I appreciate any and all feedback. 

[Cory Lucas]

I don't think I'd use my 401k for that, but you know your situation better than I

Personally I love my 401k and utilizing it for investment purposes, there's a lot of reasons to do so. Some of those highlights are 1. It's tax deferred money, so I dump as much as I can in there and it doesn't get taxed, win win! 

2. When you take out a loan on it that doesn't show up on your credit report, win again! 

3. Interest is usually pretty low, 4.75%, but the big kicker is when you pay it back you get the interest! Not a bank

So for me I'd keep dumping money into it and as for the credit card debt I can understand that it's likely crushing you as far as payments, but have you heard of the Debt Snowball as illustrated by Dave Ramsey? That's where I'd start on getting that paid down, but keep your built up capital (i.e. 401k and Equity in your house) for investment purposes

Hope that helps and happy to elaborate further or clear anything up if you need :) Happy investing