<prompt> Human: I was at my previous employer for 2 years and just got a letter from the financial company that I have about 7k in their retirement fund. I owe about 10k on my car paying 400mo. Should I withdraw this and pay it off? What type of penalties would I face? Im 25 - Im already saving for retirement in my savings, but I would like to pay off my car ASAP to be debt free.The asset allocation is JPMorgan SmartRetire 2055 Fund R2  <response>: It doesnt matter what the allocation is. What matters is the type of account.Assuming its a traditional 401k account then early withdrawal will result in you paying income tax on anything withdrawn in addition to a 10 penalty for early withdrawal.99 times out of 100 it is a completely terrible idea to withdraw from a 401k to pay other debts, your case isnt the exception. If you cant afford the car you need to downgrade or take a look at the rest of your budget to find out where you can free up some cashflow.Also: the retirement plan from your previous employer is most likely tax advantaged, making it a much better place to save for retirement than your savings account. Theres a reason retirement accounts exist. If you dont like the account you should consider moving it to an IRA. Again, all this assuming your current retirement account is a traditional 401k. 