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Should I Use My 401k to Pay Off Debt?

Here’s a tricky question: Should you use your 401(k) or other retirement savings to pay off debt?

This is a question I get pretty often! One couple, in particular, had acquired a lot of debt but had managed to save a decent amount for retirement.

She wanted to keep the savings, he wanted to use it to pay off debt.

I told them to leave that 401k alone and start by attacking debt with their current income. Your 401k, or any other retirement savings, should only be used for retirement. You face many penalties if you withdraw it early  – and it is risky to borrow from it.

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