Please give me your financial opinion on the following situation?

He would like to retire at age 66, which will be 9 years. I would like to retire at age 62, which will be 12 years from now..we both have retirement savings, credit card debt and car loans which should be paid off in less than 3 years. Our mortgage is 19 years, which we would like to pay off in less than 10. I have a small pension from the hospita which I could get $50/month now, $75/month in 5 years, or $150/month at age 65. I don't know which is the best option? Also is it worth paying off some credit card debt with 401k money, so that we can start to pay off the mortgage sooner?

Please give me your financial opinion on the following situation?
Whether or not you will be able to retire comfortably depends on how much you plan on spending vs. how much you have saved in your 401(k)s and other investments. As a general rule, you should have 25 times the amount that you plan to withdraw from your savings when you retire. For instance, if you think you will be spending $40k a year, and you will get $25k in Social Security and pension income, you would need to withdraw $15k from your 401(k)s. You should have a minimum of $375k in your 401(k)s to start with.





Especially if you are not close to the balance needed in your 401(k)s, you should not withdraw any money to pay off credit card debt. Besides having to pay taxes on the withdrawal, you would also be charged a penalty. You could end up with half of what you withdrew after the taxes and penalties are paid.
Reply:Do not consider using 401K money to pay credit cards, or anything else.


Instead, tighten the spending so you can get serious about paying down the cards and the car loans. When the cards are paid off, never use them again for things that you can't pay for immediately that month. Keep working now, maybe even consider a second job temporarily, to pay off debt and save more $$.
Reply:Well I would wait if you can. And no..do not use the 401k to pay off debt..you need that money to live on, if you use it to pay off debt, what will you have to live on if your not working....stay with the plan and just maybe think about getting a loan through the bank to consolidate and pay off sooner. You have equity in the house, I hope and may use that to pay off debt and then just have the mortgage and the loan. stop using the cards and see if you can downgrade the car.Don't mess with the savings this close in the game....retirement is about rest and no work...be smart, sit with an investment rep to help your money work for you. Go to your bank and get your options, its free and the manager and there investment rep can give you great advise.


Good Luck!
Reply:Here are my opinions based on my experience and studies into some of the same issues.





Debt:





1. Pay off your credit car debt and any loans you have before paying off your morgage early. The reason being is that the interest on your morgage is deductable (and usually much lower then credit/auto/whatever loans). Paying off a debt at 5% makes no sense when your paying 12%+ on a credit card.





Of any debt, morgage debt is usually the best to have. All others, get rid of as quickly as possible.





2. Taking out 401k money is usually a terrible idea, not only do you have to pay a 10% penality (which is as harsh as the debt your going to pay off) but you also have to pay taxes on the full amount that you take out. The government gets a huge chunk of money even before your creditors do.





3)The pension I'm kinda of up in the air about. My recommendation is this, if you have the financial discipline to take the 50 a month and apply it to your debt, then the interest savings will be huge over the next 10+ years. In that case, go ahead and take the pension.











2.
Reply:From personal experience I say look at each of your debts and pick the one with the highest interest rate because that one is costing you the most in interest per payment. Pay it off as quickly as you can. Then keep repeating the same over and over. As you pay them off you will be able to double up on your payments to pay others off even quicker. I chose to retire at 62 and take the lesser SS monthly payment rather than wait until 65. I'm not sure you can still retire at 62 with SS. There are advantages and disadvantages to each. One advantage to earlier retirement is that you have more time to enjoy life and life is a perishable commodity. $150 is no biggee when you have other investments and no payments going out. Also, get rid of credit cards and start adjusting to a cash basis for your transactions. When you are successful with getting out of debt you will find you have a lot more $$ to spend. Leave the 401K alone so you don't encrue penalties. Good idea to think ahead.
Reply:STOP!!!!!! paying extra on the house and put that money on your other debts, you should never pay extra on your house IF you have other debts. They need to be paid off first, a few reasons why: 1-they don't go up in value. 2-they aren't tax deductible. 3-they are usually a higher interest rate.





Don't ever borrow from a retirement account to buy something or pay off debt. Also sounds like you could use an emergency fund. While you are paying off the debt put a little into savings to start your fund. When the debt is paid in full use that money to fund your emergency fund until you have 3-6 months of income saved. This money is not to be used to buy things (new couches are not an emergency) it is there for emergency's only. When you are at that point start paying as much as possible into your retirement accounts. And then make 1 extra payment a year on your house. Your house isn't the issue of being paid off, it is how much savings will you have? If you have enough savings your interest alone can pay for your retirement and your house payment.
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Reply:Choose the very best option based on your situation and health.