How to Withdraw From Your Retirement Account to Clear a Debt

While a retirement account should never be used as a go-to fund for everyday spending, it can, in very special circumstances, be used for emergency funding--for example, when purchasing a new home, paying off medical bills and clearing credit card debt. Before withdrawing any money from your retirement account, weigh your options. Begin the withdrawal process by first understanding whether your withdrawal is subject fees, taxes and penalties.

Instructions

1

Contact your creditors for a bottom-line figure. Before paying off your debt, inquire about the total amount of debt owed. Decide if you want to clear the debt on one credit card account or pay a fraction of the total amount of debt due over several accounts.

2

Research the terms and conditions of your retirement account. For example, ask if you qualify for a loan through your 401k account. Explain that you want to use the loan to clear a credit debt as not all employers administer loans for this reason. Typically, you can only borrow 50 percent of your account balance, up to a specified maximum amount.

3

Withdraw contributions from a Roth IRA or traditional IRA. While you can you withdraw contributions, you cannot withdraw the interest you've earned over the life of your account. You must pay any regular federal income or state income tax due on the withdrawal as well as a 10 percent tax penalty, according to Money-zine's website.

4

Complete the necessary paperwork to withdraw the money you need. Contact the human resource department at your employer if the account is associated with your job. The human resources department can administer and walk you through the loan and withdrawal processes for a 401K account.

5

Decide on a repayment plan and then authorize your employer to take weekly or monthly deductions from your paycheck, if necessary.

6

Contact your broker to obtain funds from an IRA withdrawal.