Should I Cash Out My 401(k) to Pay Off Debt?

Should I Cash Out My 401(k) to Pay Off Debt?

I'm a 33-year-old woman who's been unemployed for the past six months. So far I've been doing okay living on unemployment, but the money I put into my 401(k) is just sitting there. I'm not sure how much longer I will be unemployed, and in another few months, my unemployment insurance will be done. 
 
I had the notion of closing my 401(k) completely so I could use that money to pay off two credit cards and save the rest for an emergency. Also, I had thought to open a Roth IRA or other savings/retirement account and contribute $50 a month, so that I can start building again until I get a new job. How do I navigate this process and feel comfortable creating a cushion I can live with? — Evie
  
Although it’s certainly tempting to reach into your 401(k) as your unemployment insurance comes to an end, resist the urge to withdraw. Yes, there’s a level of uncertainty and uneasiness because you’re not sure how much longer you’ll be unemployed, but whatever you do, don’t cash out your retirement savings. You’ll be charged with a 10-percent penalty, plus taxes. Even though it may seem like it’s just sitting there and nothing new is being contributed, consider this to be your nest egg for retirement days ahead. 

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