The dependence on credit cards has been on the rise among Americans. The recent rate hike will only put more people in debt and affect your retirement savings. According to CNBC, the average American household has $5,700 in credit card debt. The median is even higher at $8,398. And for those 65 and older, the median debt jumps to $10,235.

Poor decisions can lead to harmful consequences.
When struggling with credit card debt, it can be tempting to take money out of your retirement savings to pay it off. However, there are several valid reasons why you should not do this.

Reason #1

Taking money out of your retirement account will likely trigger heavy taxes and penalties. If you are 59 1/2 years or younger, you will owe a 10% early withdrawal penalty. This deduction can offset any savings achieved by paying off credit card debt.

Reason #2

The money in your retirement account has the potential to grow over time. If you withdraw money from your retirement account to pay off debt, you miss out on that growth.

Reason #3

If you use your credit cards to pay for items after taking money out of your retirement account, you will pay interest on those purchases. This can add up quickly and cost you more in the long run.

Reason #4

When you apply for any loan, the lender or the bank will likely pull your credit report. If they see that you have taken money out of your retirement account to pay off debt, they may view you as a higher risk and be less likely to approve your loan.

Is It Acceptable to Carry Credit Card Debt into Retirement?
It is certainly not ideal for carrying debt into retirement. In some rare cases, people may have a good income, manage their debt, and continue saving for retirement. There is, however, a high level of risk involved in this strategy, and it is not recommended.

How to Handle Debt Without Drawing Money from Retirement Savings?

If you are in a position to pay off debt but do not want to touch your retirement savings, a few options are available.

Solution 1: Balance Transfer

One solution is a balance transfer to a new credit card with a 0% APR introductory rate. The new card will pay off your debt without additional interest. However, you must ensure you pay off the balance before the introductory rate expires.

Solution 2: Choose a Debt Consolidation Loan

A debt consolidation loan combines all the debts into one monthly payment at a lower interest rate. Thus, it lets you save on interest and help you pay off your debt more quickly.

Solution 3: Work with Trust Debt Consolidation Services

If you struggle to pay off your debt, you may consider working with reliable debt consolidation services like Reliant Management Solutions.

Our team can provide safe, proven methods to make you debt-free. Schedule a consultation with one of our consolidation experts, and we will review your exact debt situation. Our primary motive is to help you with financial debt relief and get your life back on track.