Episode 172: Mailbag: Should I Use My 401(k) to Pay Off my Consumer Debt?
Today’s Prep:
What should you do when you have retirement savings but a lot of consumer debt? David shares his thoughts on debt and how to tackle in before answering three other listener questions.
Equipping Points:
Wondering how to make the best decision on your next financial move? On today’s show, David answers four questions from the mailbag from listeners trying to make wise decisions with their money and investments.
Jack is retiring in three years and has almost a million in his 401(k), however he still has about $60,000 in consumer debt. Should he use the 401(k) to pay it off? David compares consumer debt to rust on a car, because it eats away at your money. Instead of taking money out of the 401(k) now while still working, David says to stop contributing above the company match. With that extra money, put that towards credit card debt. Reduce your spending and do what you can to pay off that credit card debt as fast as you can and make sure it’s gone before you retire.
Janice and her husband have met with a couple of different financial advisors and both of them have mostly only talked to her husband. How can she show that she is an important part of the conversation? David says to keep looking for a better advisor that you like and trust! When meeting advisors, ask the questions you need to know more about should you one day find yourself a widow. You want to work with someone who will include both spouses in the decisions and discussion.
Tony started taking his Social Security a few years ago at age 62. Was that a mistake? It all depends. If you need the money now, then that wasn’t a mistake. If you think you’ll die younger, this could be beneficial, whereas if you live well into your nineties then you would gain more by waiting to start taking it. No one really knows when you’ll die though, so it would be just making a guess.
Finally, A.J. has seven different IRAs from different investment companies. It’s a lot to keep up with but it feels more diversified this way. Is this a good idea? David says this is the illusion of diversification. There’s nothing unique about any of those custodians, but the different mutual funds and ETFs mirrors the money invested in the other custodians.
Do you have a question for David? Reach out!
If you ever want your question spotlighted on the show or to ask David something about your retirement, email him at [email protected]
Listen to the entire episode or skip ahead using the timestamps below to skip to a particular question.
0:50 - David is looking forward to some upcoming travel and celebrations!
2:33 - Mailbag: Should I use my 401(k) to pay off my consumer debt?
6:42 - Mailbag: How do I show a potential advisor they should include me in the discussion?
10:23 - Mailbag: Was it a mistake to start taking Social Security at 62?
14:33 - Mailbag: Is diversifying with multiple IRAs a good idea?
Today’s Takeaway:
“Either be a really good DIY-er or get some help from somebody who does this all the time, and hopefully on a fiduciary basis, putting your interests ahead of theirs."
– David Dickens
KC Financial Advisors Blog


