Q: I have $10,000 sitting in a 401(K) that is not earning much and I owe $20,000 on a credit card with 9.5% interest. Should I take some out of the 401(k) to pay off this debt? I am under 59.5 years old.

A: Generally, this is not a good idea. Firs,t whatever you withdraw from the 401(k) will be added to your income and taxed. This could put you into a higher tax bracket. Next, you will have to pay an additional 10% early withdrawal penalty due to you age. These two taxes could reduce your withdrawal amount by 25% turning your $10,000 into a spendable amount of only $7,500.
This would leave you with the remaining credit card balance and no retirement fund. If we look at the loss of compounding tax deferred dollars, for every $1000 withdrawn, you will be losing $7,686 in future spending dollars.

Here is what I recommend: reduce the amount that you are contributing to your 401(k) and apply the difference to the credit card debt. Contact the credit card company to see if you can get the interest rate lowered. You do not know if this is possible if you do not ask. Put together a budget and track where your income goes. Look for areas where you can spend less to reduce the debt, and you will have more money for short and long term savings.