Use My 401(k) To Pay Off My Car?

The Ramsey Show Highlights

Ramsey Network

Business, Education, Investing, Self-improvement

4.5 • 839 Ratings

🗓️ 17 January 2026

⏱️ 8 minutes

🔗️ Recording | iTunes | RSS

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Transcript

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0:00.0	Brought to you by the Every Dollar app. Start budgeting for free today.
0:06.6	I was wondering if it would be unwise to pull out of the 401k to pay off the car before our babies do.
0:17.0	100%. Yes. Absolutely. Terrible idea. Don't do this. this okay have we been clear here's where's why when
0:25.9	you pull it out early you get a 10% penalty plus your tax rate so if you're in 20% tax bracket
0:32.4	the 10% penalty that's 30% that's like saying Dave I want to borrow money at 30% interest to pay off my car.
0:38.8	No.
0:41.6	Yeah. No, you're right. That's silly.
0:45.2	It's a depreciating asset. I'm starting to panic. Yeah, what do you owe on the car?
0:48.7	About 8,000. Okay. And what do you make, sir?
0:54.5	58,500 salary. Okay. And what do you make, sir? 58,500 salary.
0:57.2	Okay.
0:57.5	And you have a baby?
0:58.5	Do you win?
1:00.2	In March.
1:01.2	How old are you?
1:03.1	I'm 29 years old.
1:04.7	Good for you.
1:05.5	So what's the panic?
1:07.9	Well, so my wife, she makes about the same amount of money, and we're planning on for her to, you know, move to a part-time or even less position after we have our child.
1:21.5	And our rent is too high.
1:24.3	How much is your rent?
1:26.5	It's $1,700 a month.
	...

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