Dollars and Cents: Losing My Job, What’s My Priority?

It’s time for another edition of Dollar and Cents. This is where I answer one of your questions.

If you have a question, either use the contact form on the blog or use my Facebook Fanpage.

Here’s today’s question:

I have recently found out our plant will be closing in about 12 months. I have $18,000 in credit card debt. I already have a 401k and Profit Sharing from my previous job that also closed (over $100,000). I have left it with my previous employer because there are no admin fees.

I have about $30,000 in my 401k at my current job. My question is….should I take just $18,000 out of my 401K when we close and pay off that debt and immediately take the remaining amount and place in an IRA?

Work in our area is slim pickings but I have been looking. I have been employed since I was 16 and now just turned the horrible 40 :) I do not want to be living on unemployment and struggling to pay that debt. Bankruptcy is NOT an option. I created that debt and it is my responsibility to pay for it.

I have also want to bump up my 401k contribution…but with the upcoming event and debt, I am not sure that is a good idea. Your advice on this would be great.  Thank you for your time!



Resources:

With each Dollars and Cents video we want to provide some follow up links where you can get some additional information on the topic. If you are interested in learning more on how to handle unemployment, how withdrawing early from your 401k works, how to take a 401k loan, or how to tackle a large amount of debt, here are some good reads:

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Comments | 5 Responses

  1. says

    Totally agree with your advice Jeff! I don’t think the reader should touch their 401k to pay off their debt…golden rule. Whatever is in there, let it remain there. Maybe to add, she might look for ways to cut back on some expenses and push that money towards paying off her debt. Cash is crucial at this point so I would argue that getting the most out of each buck would be really worth it.
    All in all, its an uncomfortable position to be in but with a plan, a budget and lots of will and discipline she will come out on top. Wish her all the best.

  2. says

    I agree Jeff on both points. Don’t worry about paying debt when you dont know what the future brings with the job search. What if she does look into bankruptcy that would be about 20-25k she wasted if not more. And secondly focus on savings as of now in your bank account. I did read or hear you mention anything about how much cash she has outside of 401k so if that is not enough for 6 months put the money in you savings account and not the 401k.

  3. says

    Good advice! Emergency fund is #1 when you know there’s a job loss coming in the future. I don’t think that you’re crazy for telling her to stop making contributions to a retirement fund.

    And yes, it made me laugh! Loved that song.

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