Many of my clients have invaded their 401k plans or IRAs to pay on credit card debt. After having done so they are faced with penalties and taxes, or a new debt that is not dischargeable. DON’T MORTGAGE YOUR FUTURE. Your retirement funds are for retirement, not paying off your short term debt. Your retirement funds are exempt from collection, so unless you borrow the money to pay your creditors, or you already took out a loan and put it in your bank account, creditors can not get at those funds under Michigan Law. In addition, you get to keep up to One million dollars in your 401k, 403b or IRA if you file for Bankruptcy. If someone suggests you take money from your 401k, 403b or IRA to pay the bills, don’t. The day will come when you need that money to retire, and then you will be glad you addressed those overwhelming bills with a bankruptcy filing instead of raiding your retirement accounts.
