Q. I left federal service in 1998 after almost seven years. I left the Thrift Savings Plan intact and have seen it grow quite nicely. It is approximately $95,000. My husband has been in federal service since 1995 and will most likely stay in until retirement age (we are both 49 yrs old). My husband’s TSP has also grown nicely. However, being a stay-at-home mother of five, we are seriously struggling. Our oldest child is two years away from college and our next oldest will be starting at a very expensive parochial high school in September. Our other children are 11, 9 and 3. Our biggest struggle has been credit card debt, which is now approximately $40,000. There is no realistic way that this debt will go down with our future expected expenses. I would like to cash out my TSP and use it to pay off all this debt and the remainder I would put aside for all taxes and penalties that would result. I realize that this would amount to a good chunk, but it should leave me with at least the $40,000 to pay off the credit card debt. Could this be a situation where it would be better to withdraw it now?
A. It could be, but this option should be carefully weighed against the alternatives before you act since the stakes are quite high.