Hi friends, thanks for downloading the Money Girl Podcast.

I'm Laura Adams.

Leslie. Leslie asks, I have some high interest loans that I really want to pay off.

My credit score isn't good, so refinancing them for a lower rate isn't possible.

Can I withdraw money or take a loan from my 401k or Roth IRA to pay off my expensive debt.

If you are like Leslie and are itching to raid your retirement account, you need to understand

the rules.

Different types of retirement accounts have different regulations for withdrawals that

occur before you're officially retired. I'll tell you what you need to know so you don't make a major

mistake and sacrifice your future. The rules for retirement accounts

were designed to discourage you from dipping into them before retirement, or at least before

you reach the official retirement age of 59.

The government gives you money saving tax breaks to make retirement contributions,

but they also charge you tax and penalties when you break the rules.

That's why you should never put money in a retirement account that you might need early.

Additionally, retirement accounts are not piggy banks that you can just crack open anytime

you want some extra cash.

You generally have to complete paperwork to document how you plan to use a withdrawal and in some cases provide financial

records to prove that you don't have enough money or assets to cover the expense

on your own. Some retirement accounts have strict regulations that make it very difficult to get money out even if you have a devastating financial hardship.

If you take an early withdrawal from a traditional 401k or 403b, the amount is subject to ordinary income tax plus an additional 10% penalty.

There are only a few reasons the IRS an additional 10% penalty.

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