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Dave Says
Dave Ramsey is America's trusted voice on money and business, and CEO of Ramsey Solutions. He has authored seven best-selling books, including The Total Money Makeover. The Dave Ramsey Show is heard by more than 12 million listeners each week on 575 radio stations and multiple digital platforms. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com. |
Dave advises against cashing out a Roth IRA or any other type of retirement account early. Cash out my Roth IRA? Dear Dave, I have around $15,000 in a Roth IRA. I just recently started studying your advice, and I was wondering if it would be a good idea to cash it out and put the money toward debt. Sarah Dear Sarah, I teach people to stop investing temporarily while they attack their debt. So, I wouldn’t add anything to it at this point, but the worst thing you could do is cash it out. If you do, taxes and penalties will steal a huge chunk of that cash. The only time I take money out of a retirement account to pay off debt is to avoid bankruptcy or foreclosure. Start working the Baby Steps from the beginning. Baby Step 1 is saving up $1,000 for a starter emergency fund. Baby Step 2 is paying off all debts from smallest to largest, except for your home, using the debt snowball method. This will free up a ton of money! Then you’re ready for Baby Step 3, which is increasing your beginner emergency fund to a fully-loaded emergency fund of three to six months of expenses. Now you’re ready for Baby Step 4, which is 15 percent of your income going into retirement! - Dave |
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