How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Patrick O. Oswald Your Own Question

Patrick O. Oswald
Patrick O. Oswald, Wealth Advisor
Category: Finance
Satisfied Customers: 14
Experience:  20 years experience on wall street with both major and boutique investment banking firms
Type Your Finance Question Here...
Patrick O. Oswald is online now
A new question is answered every 9 seconds

My wife and I have about $50k in unsecured, high-interest debt

Customer Question

My wife and I have about $50k in unsecured, high-interest debt (that is, credit cards). I would really like to get rid of it.

We also have about ~$60k liquid in employer-linked retirement accounts (previous employers, in both cases).

I could wipe the slate clean by withdrawing from the retirement accounts, but the withdrawals are taxable and include a 10% early withdrawal penalty, which will hurt. Unfortunately the retirement accounts do not allow for loans.

Is there a way to turn this debt from high-interest unsecured loans to lower-interest secured loans based on the retirement funds? Maybe by rolling the funds into a different type of retirement account? Or is there some other way I can attack these high-interest debts using these funds, while minimizing my tax burden?
Submitted: 2 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 2 years ago.

Dear Friend,


Even if your retirement accounts do not allow for loans, you may consider few other options as well.


You may consider to transfer tax-free your IRA, 401k from a previous employer, and other qualified retirement account to your Self-Employed 401(k) plan. After this, can borrow up to the lower of $50,000 or 50% of the balance in your Self-Employed 401(k) account. This type of loan is tax-free and penalty-free as long as it is paid back timely. Your principal and interest payments go back into your account. Therefore, a loan from your Self-Employed 401(k) can be smarter than a taxable withdrawal from your IRA (loans from IRAs are not allowed) or other retirement money to consolidate debt.


I hope you will find this option useful.

Warm Regards

Customer: replied 2 years ago.

Can I actually open a self-employed 401(k)? I work for a company...

If I'm understanding this right I could open a self-employed 401(k) with a rollover from my other accounts, then with $60k in that account I could borrow up to $30k? Presumably at a much lower interest rate than my credit cards (I have to follow that up with the 401(k) provider of course)?
Expert:  Eric replied 2 years ago.

I appreciate the opportunity to help!

Unfortunately a SEP IRA does require that you are self-employed and are earning an income from that employment. Even though you have a job, you could still be self-employed in addition. Opening the SEP IRA may be difficult and there are many restrictions about borrowing against it to payoff personal debt. Borrowing against any retirement account to payoff personal debt is a problem. Its' considered very risky and not what the accounts are made for. It is possible to make it work and you could also look at a self-directed IRA, but these are difficult to get set up and there are many guidelines and legalities. You may even have to pay fees to get help with setting all of this up legally (attorney). ANyway...its never completely suggested to raid retirement money to payoff debt, but this is a large amount of debt that you need to find a way to get out of. Debt free is best! Contact the credit card company(s) and workout a cash settlement for hardship and then come down to an exact amount that is needed to settle and payoff. Then only look to withdraw the lowest amount possible and whatever is left, transfer to a new IRA and start rebuilding it with the monies you would have spent on credit card payments.

Expert:  Patrick O. Oswald replied 2 years ago.
18% on 50k is almost 10k/year. As such the 10% penalty doesn't look so steep. In addition depending on the restrictions in these accounts yo may not be able to generate an above market return. If you pay the debt off you will have to plow additional funds into your retirement account to make this up depending on your age... I would say the break-even rate is @ 12%. Anything over that and I would consider paying down the debt with the retirement funds.

You could also go to a bank or credit union and see if you could consolidate the credit card debt and pay 1 payment at a lower rate... unfortunately most people run the cards up again.. I hope you can prevent yourself from doing this...

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA

Meet The Experts:

  • Manal Elkhoshkhany's Avatar

    Manal Elkhoshkhany


    Satisfied Customers:

    More than 5000 online tutoring sessions.
< Last | Next >
  • Manal Elkhoshkhany's Avatar

    Manal Elkhoshkhany


    Satisfied Customers:

    More than 5000 online tutoring sessions.
  • Rakhi Vasavada's Avatar

    Rakhi Vasavada

    Financial and Legal Consultant

    Satisfied Customers:

    Graduated in law with Emphasis on Finance and have have been working in financial sector for over 8
  • Megan C's Avatar

    Megan C


    Satisfied Customers:

    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • JKCPA's Avatar



    Satisfied Customers:

    Bachelors degree and CPA with Accounting experience.
  • Eric's Avatar


    Financial Manager

    Satisfied Customers:

    Loan servicing, counseling and real estate expert. Foreclosure Expert and Financial Planner.
  • R. Klein, EA's Avatar

    R. Klein, EA


    Satisfied Customers:

    Intuit Ask a Tax Expert. QuickBooks Certified Pro Advisor (all editions)
  • Dimitry K., Esq.'s Avatar

    Dimitry K., Esq.


    Satisfied Customers:

    NASD Licensed Rep, 1997-2001, Business Attorney