Remember my friend J? I have blogged about her Wanting to be Mrs. Jones, and complaining about debt.
Her husband is an accountant. And he wants to take a withdrawal from his 401k to pay off debt. Not a loan. An actual withdrawal, with penalties and all. The idea is that he wants to be free and clear. He is in his mid 30's, so he figures he has time to make it back. But feels that they aren't making any headway, so this way all the debt is gone. And then they will live on cash.
First off....I know them too well. They won't be able to live on cash. They will run through money like water through a sieve, and when it runs out, they will run to their CC. Guarantee it.
Second...I know they stopped their 401k contributions a while ago to increase cash flow. So not only would he be draining the account, but hasn't been adding to it in a bit.
Third....they think this is a solution to the problem. They have yet to discover that that problem isn't debt...it is poor spending habits, lack of budget, and an overall selfishness that they want it all.
Would you consider doing this? Take your retirement, and pay it all off.....no loan. Free and clear.