I am writing you because my wife told me to do it. But this is my story, I'm active duty in the Army and to put it modestly we make enough to get by. But lately I've had barely enough to get by. Let me elaborate. As of last month I calculated all of our debts and we have $32,432.44. This may not look like muuch to some people but its been so bad lately weve had to use credit cards to buy daily living expesis. Because of the either late fees or over the limit fees on credit cards, even when we do pay the credit cards we still arnt making any progress. I've been living like this for a some time now but with a new addition to family (baby Grant) and some other unexpected expensis (moving and car problems) this really set us back. My question is I recently past 15 years in the Army and we can retire at 20 years and recieve 50%. One potion they give us is that we can take 30,000. at 15 years but after taxes it's like 23-24,000. and it reduces the % amount from 50% to 40%. All my friends advise against it but my with out any extra money coming in I feel its my only option. I tried for debt consolidation but my credit is to bad. My question is should I take the REDUX (reduced retirement) and pay off this debt or what do you recommend I do please let me know soon. Very resepectfully Sergeant-in-trouble.
First, congratulations to you and your wife on the birth of your son! I can think of several possible solutions to your problems, depending on how old the debts are, your overall financial situation, and how much money you can afford to pay toward your debts on a monthly basis. Very quickly, if you would like a free debt consultation with one of Bill's debt help partners, you should visit http://www.bills.com/debthelp/debt. A professional debt consultant should be able to review your finances with you and help you determine which of the options discussed below, if any, is the best choice for you and your family.
One popular option for individuals struggling with debt is enrolling with a Consumer Credit Counseling Service, or CCCS. CCCS companies offer numerous services, such as financial counseling and budget planning, as well as Debt Management Plans (DMPs). In a DMP, the CCCS would arrange a new payment amount with each of your creditors, usually based on a reduced interest rate. You would then make a single monthly payment to the CCCS which would distribute the funds to your creditors, based on the new payment amounts. There are several drawbacks to CCCS, though. First, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. Second, it may have a negative impact on your ability to obtain a loan, so you may not wish to enter into a DMP if you anticipate any large purchases, such as home or an auto, in the near future. Third, the average DMP takes five years or more to pay off your debts, so you must be willing and able to commit to a long-term repayment plan, which may be difficult with a growing family and upcoming retirement from military service.
Another possible solution you may want to consider are the services offered by debt settlement firms. Rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. These programs usually take 2-3 years to complete, depending on your ability to fund settlements, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. In many cases negotiations programs can also reduce your monthly payments toward your debt. There is one major drawback to debt settlement programs, though–they will significantly damage your credit while in the program and for at least a year or two afterwards. However, if you are currently unable to afford to pay your creditors, the hit to your credit may be worth the benefit of ridding yourself of credit card debt.
Finally, I understand that, like many people, you may be opposed to filing bankruptcy. However, if you find that the possible solutions I mention above are not able to help you resolve your debt crisis, bankruptcy may be the only viable option left open to you. I encourage you to speak with a bankruptcy attorney before writing bankruptcy off altogether. You should be able to find an attorney in your area willing to provide you with a free consultation. Speaking with an attorney will allow you to fully understand the bankruptcy process, providing you with the information needed to make an informed decision in regard to bankruptcy and the other debt relief options available to you. To read more about bankruptcy, I invite you to visit the Bills.com Bankruptcy Resources page at http://www.bills.com/bankruptcy/.
I would encourage you to consider the options discussed above before you borrow any money against your retirement benefits. Even filing for bankruptcy protection, while unpalatable, may be preferable to taking money from your retirement account. $30,000 may seem like a lot of money right now given the hardships you are facing, and a 20% reduction in your retirement benefits may not seem very large, but the math can be surprising. For example, if you earn $50,000 per year, the reduction in your retirement from a 50% to a 40% benefit means that you will receive $5,000 less each year. At this pay rate, the $30,000 early payment benefit would be outweighed by the reduction within six years. Assuming that you are relatively young (since you recently had a son), you can see that you would likely be giving up much more that $30,000 by sacrificing 20% of your retirement benefit for the remainder of your life; the financial benefit of this lump sum simply does not justify the potential lifetime income you would forfeit. If you are not convinced that this early payment is a bad idea, I encourage you to speak with a professional financial planner who can review these figures with you in more detail and explain the long-term impact of taking an early lump-sum disbursement from your retirement.
Since the withdrawing money from your retirement account is probably not a viable option, I hope that one of the several options I have described will be able to help you. I encourage you to explore the Bills.com website, http://www.bills.com/debthelp/, to read more about these and other options available to consumers struggling with debt. I wish you the best of luck, and hope that the information I have provided helps you Find. Learn. Save.