I have an opportunity to cash out my retirement. I have a student loan owing approx $180,000 for medical education. This loan acquires interest daily and I have been unable to get from under this loan. I have been paying on the loan for 14 years and have 7 more years to pay 1744 per month. I am 47 years old. I have 2 retirements and a 401 k. Not a lot of cash but getting rid of a $2000 a month student loan seems awfully appealing.
This is typically not a good idea and to display such I will assume that your income is right around 250K/year.
You probably can't take money out of your 401K, but you could take out 50K in form of the a loan. But lets say that you have enough in the other two retirements. Once you take it out you will be hit with a huge tax bill. This will easily bump you up into the highest rate, and you will also lose some of your itemized deductions. Assume the effective rate will be between 32 and 35%. You will also have to pay a 10% penalty.
How would you like to pay ~45% interest on a 180K loan? In other words it will cost you 260K to pay off 180K worth of loans.
A bigger question is what does the rest of your life look like? Are you leasing two new cars and have an 800K house payment?
I personally know someone, with a similar income to the one mentioned, that paid off 175K in 13 months. They did not eat out, one of their cars were a clunker, the other was nice but still modest, they did not vacation, and they did not contribute to their 401Ks other then up to the match. They also have a pretty modest home for their income.
Is it worth 13-18 months of your life to keep your retirement, avoid a $75K tax bill, and gain back 2K of disposable income per month?
You can do it, you just have to avoid living the doctor lifestyle.
BTW, it is typically not a good idea to take a 401K loan either.