[mlambr]

I am 49yrs.old and divorced for 2 yrs. I am having a hard time making ends meet. A doctor is considered a luxery. And there is no hope of buying a new car if mine dies. My question is would it be wise to pay off my mortgage with my 401k. And start contributing $200. Extra amoth to build the 401 back up. I would be saving over $75,000. In interest rates

[ScottGem]

And how much would you be losing? How much more in taxes will you pay without the mortgage interest deduction? What about the 10% penalty? What about the investment return you will lose? What about the affect on your 2007 tax return?

You clearly haven't thought this through with all the consequences. Why is a doctor a luxury? If your company is providing a 401K, then you should have decent health insurance coverage. As for a new car, what about taking a loan against your 401K?

[mlambr]

And how much would you be losing? How much more in taxes will you pay without the mortgage interest deduction? What about the 10% penalty? What about the investment return you will lose? What about the affect on your 2007 tax return?

You clearly haven't thought this through with all the consequences. Why is a doctor a luxury? If your company is providing a 401K, then you should have decent health insurance coverage. As for a new car, what about taking a loan against your 401K?

I could not take out a loan for a car because I could not meet the payments. A doctor is a luxury because insurances do not cover the costs, I could not pay the bill. I have no other debts but my house payment and real estate taxes. And your every day reg bills. I only have $100. A month spending money. And that has to cover bills. My house payment is only $420. A month. Vacations not a chance. Oh yea my car broke down today!

[ScottGem]

I hate to say this, but with your only debt a house payment that is only $420/mth, you would have to earning near poverty wages to have so little money. And I don't understand what you are saying about doctors. Again, a company that has a 401K is likely to have a decent health insurance plan. Doctor visits should only cost you a copay of $20-$40.

Your story just doesn't ring true here. Based on your saying you would save $75K in interest on the mortgage I would estimate your current balance to be in the 60s and that you purchased the home with a mortgage in the $70s when you were divorced 2 years ago.

This would mean that you would have to take out almost $80K from your 401K to net the $60K you need to pay it off. Assuming a 6% return on the investment (a conservative estimate), you would lose almost $75K in in investment gains. Even if you contributed $200 a month you still wouldn't make up the loss in the 15 years until you retire.

I would have to know a lot more about your finances to be able to advise you further, so I suggest you find someone who knows about finances to look over your situation. But I would seriously doubt whether withdrawing from your 401K pays.

[mlambr]

House 420 taxes 250 ins. 50
Heat/elec 250 phone 30 AOL 15
TV 35 clothing 50 spend 100
Groceries 300 gas 100 car ins 75
Total 1675 net pay 1750

The new type of insurance does not have a copay. It only covers a set amount . I've never seen a bill under 125. This is lifes reality for low income people. I appreciate your answer and no I will not touch my 401k. But you now see why people get stressed at times. I thought with me putting 200 dollars a month in ,that my savings would be covered by that amount not being taxable . And with saving about 75000. In interest rates would even it out. Thanks for your help.

[AtlantaTaxExpert]

Agree with Scoot. Do NOT touch the 401K.

Try cotacting Consumer Credit Counselling for budgeting advice.