Although, I know it's generally a bad idea to do this, but hear me out. I have to 'roll over' about $28,000 from an old 401(k) into my current plan. There are disadvantages to making a bulk purchase like this (it's not dollar-averaged), but my intent was just to roll the whole thing over.
However, I do have a good amount of debt to deal with, left over from college/postbacc school. Total is about $15,000, but the particularly odious debt is two cards, totalling about $8,000 at 26.75% interest.
I was thinking it might be a good idea to take some of that rollover amount to pay off this part of my debt. I have the option of having the 20% withheld automatically, which I would do. This would mean that I need to take out $10,000 from the 28. I would pay off that $8,000 in debt.
The question is, is this a good idea? I can't pay off the debt very fast as things are. I'm just making a couple of hundred dollars of headway against the principal each month. In the meantime, I have plans to go to graduate school next year, and could use some additional flexibility for that. I understand that there will be additional taxes to pay on this money next year, and I'm losing a significant chunk out of the anticipated amount of the 401(k) when I retire (I'm 32 now, with taxable income in the low-to-mid 40s). Still, doesn't this balance out the fact that I'm paying out all this money in interest over the next 10, 20 years?

Mahatma000:

Recommend you roll the 401K into an rollover IRA. You have your choice of brokerage firms that will accept the rollover. Initially, put it into a money market fund. That gives you time to research into which mutual fund/stocks you would want to invest, and then set up a dollar-cost-average methodology.

Do not pay off the credit cards with your 401K money. You would pay at least 35% in taxes, and perhaps as high at 50% (depends on which state you live in).

If your credit card debt is a significant worry, contact the National Foundation of Concumer Credit (also called the Consumer Credit Counselling Service). You can loacte a local office at their website at www.nfcc.org. They will help you with budgeting or maybe even set up a payment plan. Do not use the services that advertise on TV! Most are ripoffs; the rest has a service record that is uneven at best.