Cory Santos

Mon, Jun 16, 2025, 5:31 AM7 min read

Holding on to $89,000 in debt can be overwhelming. And you might feel like you’re dealing with an impossible financial situation.

Your 401(k) might seem like the only lifeline available, but to be crystal clear: tapping into retirement savings should be your absolute last resort.

When you're drowning in debt at any age, you're in a particularly vulnerable position. But at 52 it can seem calamitous.

And with potentially 10-15 years left until retirement, you're in the critical accumulation phase where your retirement savings should be growing substantially.

That combination of high-interest credit card debt and the temptation to raid retirement funds creates a perfect storm of financial issues that requires some immediate action.

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Dipping into your 401(k) might sound great. After all, it’s your money, just sitting there; why not cash in? If you're 5-7 years from retirement with high-interest debt, the math sometimes favors taking a one-time withdrawal to clear that debt, especially if your debt interest rate significantly exceeds your 401(k)'s growth rate.

But you are likely more than a decade from your retirement, so it’s almost impossible to justify tapping into the savings right now. That’s because using your 401(k) to address debt comes with serious consequences that can severely derail your financial security in retirement.

You have two main options for accessing your 401(k) funds before retirement:

1. 401(k) loans: You can typically borrow up to 50% of your vested account balance or $50,000, whichever is less. You'll need to repay this with interest (usually prime rate plus 1-2%) within five years.

2. Hardship withdrawals: If your plan allows, you can withdraw funds for "immediate and heavy financial need." Credit card debt typically doesn't qualify unless you're facing eviction or foreclosure.

It’s easy enough to state it plainly, but why should you avoid dipping into your 401(k)? Here's your worst-case scenario: