“After all the bills for the month, we have $3,500 a month left for living, food etc.” (Photo subjects are models.) – Getty Images/iStockphoto
I am 41 years old and have just retired from the service. I have $1.2 million in four different accounts, three of which are IRAs. I bring in $7,200 a month from my pension and disability benefits. That is the only source of income currently for a family of five. We have $46,000 in credit-card debt and we are struggling to find a way forward.
It’s expensive feeding and housing a family of seven, especially with increases in the cost of living. After all the bills for the month, we have $3,500 a month left for living, food etc. How do you recommend we get rid of the credit-card debt until I can find new employment? Raiding my IRAs? Looking into a SEPP plan? Taking out a personal loan?
Lost and Confused
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In order to pay off your card, you’d have to take almost $67,500 from your retirement account. – MarketWatch illustration
You need to pay this credit-card bill off as fast as possible.
Before we get to the numbers, I want to, first, thank you for your service and, second, acknowledge that you’re not the first person to get snowed under with credit-card debt, and you won’t be the last. Guilt, recrimination and blame won’t help now, and it can be counterproductive. It’s way too easy to shame people for taking on too much debt.
That said, things need to change. With the average U.S. credit-card debt at 22.8%, assuming you’re paying that rate, and the average historic return on the S&P 500 SPX at 7% after inflation, accounting for peaks and valleys along the way, it would cost you a lot of money — arguably, way too much money — to take money from your IRA.
You would be robbing Peter (your pension fund by paying a 10% early withdrawal penalty and 22% income tax) to pay Paul (the roughly 22.8% rate on your credit card). Here’s the first sock in the jaw: In order to pay off your card, you’d have to take almost $67,500 from your retirement account. You would also lose $65,500 in returns over the next 10 years (at a 7% return).
That would be a last resort. In the meantime, look into a debt-management plan where you lower your interest rate, a balance-transfer to a 0% APR, moving the credit-card debt to a personal loan with rates of 10%-15%, not ideal, but far less than what you’re paying now, and slashing expenses to increase your $3,500 float after paying your monthly bills.
Ideally, find a way to carve $1,000 to $1,500 per month to pay towards your credit-card debt. Do everything you can to live frugally for the next couple of years. Every $1,000 you put toward principal is $228 you never have to pay in interest ever again. I recommend you meet all minimum monthly payments, but pay off your highest-interest credit cards first.
A less attractive and, frankly, inappropriate strategy: The Rule of 72(t) allows for early withdrawals as a series of substantially equal periodic payments (SoSEPP) also referred to as a SEPP plan, according to Fidelity. But this must continue for at least 5 years or until you’ve reached age 59½, whichever is longer and, therefore, it’s highly restrictive.
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This is obviously a period of transition for you after leaving the military. A look at the landscape for your job search: The jobs market is tightening, as companies pull back on hiring in the face of an uncertain economic outlook. Some analysts are hoping the Federal Reserve continues to cut interest rates when it meets again in December, but that is not guaranteed.
The labor market is uneven: Technology, leisure/hospitality and healthcare are doing better than, say, retail and support services. The September employment report showed that the U.S. created 119,000 new jobs, which was more positive than some economists had predicted and, as such, may lead the Fed to hold back on a third consecutive interest rate cut.
The American Consumer Credit Counseling and National Foundation for Credit Counseling can help you put together a budget. A credit union, if you’re a member of one, is also there to help people who are in your position. And 12-step support groups, including Debtors Anonymous, provide a safe space to talk about your debt.
Circumstances can conspire against us, but there should be room for improvement. You seem to be taking home about $90,000 a year before taxes, which is well above the poverty level for a household of your size, but even after childcare, food, utilities and your rent/mortgage, you have a lot left over. How did you get into $46,000 of debt? That’s an important question to prevent this from happening again.
The average U.S. household owes nearly $6,500 in credit-card debt, according to the most recent data from the U.S. Census Bureau and the Federal Reserve Bank of New York. There was an estimated $1.21 trillion outstanding on credit-card balances in the second quarter of 2025, up 2.3% from the prior quarter.
Your credit-card debt is 7 times the national average. Work out a monthly budget of your income and expenditures, and stick to it. If saving $200 a month on eating out or cinema tickets etc. helps you pay off one of your debts, plan an extra-special night cooking at home instead — choose a $15 bottle of wine or play a family card game.
Take the plunge. Clear the decks. Live your best life.
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Previous columns by Quentin Fottrell:
‘I fear a significant decline in the S&P 500’: Do I sell my tech stocks before it’s too late?
My father’s estate was awarded $50K in a class-action lawsuit. My brother, as executor, kept the money. What can we do?
‘I’m in the home stretch’: I’m 80. Do I leave my kids a ‘Magnificent Seven’ dynasty trust or a brokerage account?
