Re: 401k to IRA

"davdgreat" <[EMAIL PROTECTED]> wrote in message
news:[EMAIL PROTECTED]
> There was a similar thread in this discussion about what Im going to
> ask but not really sure I understood.  I am 23.  I have been working
> at a good company for about 3 years now and have been contributing to
> my 401k and my employer has as well.  Over the years I have racked up
> some debtthat I would like to get rid of.
>     I was told by a friend of mine that I would be able to take about
> 2000 of my 3000 in my 401k and move it to an IRA.  That would give me
> a better tax refund.  And I was plannin on using that refund as the
> final blow to get rid of my debt.
>
> Is this true?

As someone already said, it's not really possible to do what your friend
suggested.  A rollover of money from a 401k to an IRA is not the same as a
contribution that can be deducted from your taxes.

What you can do is reduce the amount that you're contributing the 401k until
the debt is paid off and use that money to pay off the debt. Yes, you'll
forgo the tax savings of having your taxable income reduced, but it will
probably be more than made up by what you'll be saving in finance/interest
charges.  If your company's plan requires that if you withdraw from
contributing that there's a waiting period to re-start, you should reduce it
to, say, 1% or whatever the minimum contribution is.

Leigh