Withdrawing from an old 401k to pay debt

[Brian Day]

Current situation - I'm 34 years old. A couple of years ago I rolled 75% of this 401k into my company's ESOP. I left that company in June of last year, but I was there long enough to be 100% vested. Since I rolled over my 401k money into the ESOP, it has grown exponentially. As it stands right now in the ESOP balance I have 3 times my annual salary (~300k). The company was also sold in June of this year, so this number should increase even more once we know the sale price this month.

In the old 401k where I rolled the 75% from, I still have 21k left in that account. I also currently have 11k in my emergency fund. I'm about to move out on my own again after going through a divorce earlier this year (living with my parents now). I want to take the 21k I have in my old 401k and use it towards paying a big chunk on my car (that way I won't have a hefty car payment plus rent for a while, save some more, and pay another chunk later).

Thoughts on this? I know I'll be paying around 8k in taxes if I withdraw the money.

[Charles Carillo]

@Brian Day

I would avoid withdrawing from a 401k. While you don't have a rent payment, you could work towards paying off the car very quickly and/or sell the car, and buy a less expensive one.