Withdraw From Your Retirement Fund

In extreme cases, you may consider pulling money from your retirement account to pay off your debt. Beware, if you’re not at least 59½, you’ll face early withdrawal penalties and additional tax liability. The specific penalty you’ll face depends on the retirement account you draw from and how you spend the money, but the standard early withdrawal penalty is a 10% tax.5 Plus, when retirement comes around, your savings will be short—not only from the money you withdrew but also from the interest, dividends, and capital gains you could have earned with that money.

It’s possible to borrow from work-sponsored retirement plans, such as a 401(k). However, this strategy comes with risks, as well. If you leave your job, you’ll have to pay back the loan on an expedited timeframe that could worsen your debt problems.

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