After losing both her husband and father within two years, Ana turned to spending as a way to cope with overwhelming grief. Travel, shopping, and dining out became temporary comforts — but they also led to $41,000 in credit card debt.
Now 37, Ana has made major financial strides. She stopped unnecessary spending, purchased her first home, and is on track to pay off a 30-year mortgage in just 15. She earns $160,000 a year and has built up $419,000 in a Roth 401(k). She also holds an inherited IRA worth $82,000 — and she’s wondering if it's wise to tap that account to wipe out her lingering debt.
Ana recently posed her question to Suze Orman on an episode of the "Women & Money" podcast, looking for an outside perspective not just on the numbers, but on the emotional weight behind her financial choices.
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The Financial Reality of Tapping the IRA
Orman's first reaction was clear: from a purely financial standpoint, using the inherited IRA to erase the debt doesn't make sense. Because Ana lives in California and has a relatively high income, a large portion of the IRA withdrawal would go toward taxes. Orman estimated Ana would need to withdraw $70,000 to $75,000 to net $41,000 after taxes.
"It’s going to cost you an additional $30,000 in taxes approximately to do so," Orman explained. "Makes absolutely no sense at all."
Inherited IRAs also come with a 10-year withdrawal rule, meaning Ana has until 2031 to deplete the account. Orman encouraged her to consider spreading withdrawals over several years to minimize the tax burden and preserve more of the inherited funds.
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What About the Emotional Weight?
But Orman didn't ignore the emotional side. She acknowledged that the debt represents more than purchases — it symbolizes grief, loss, and perhaps guilt. Orman posed a powerful question: Would eliminating the debt help Ana reclaim a sense of herself and bring closure to the pain she experienced?
Only Ana can truly answer that. Still, Orman noted that even in Ana's own words, she seemed to recognize that using the IRA in this way might mirror the emotional spending that caused the debt in the first place.
Smarter Alternatives for Paying Off Debt
Orman offered a few practical alternatives. If Ana has a good credit score, she could consider a 0% balance transfer credit card to reduce or eliminate interest charges. Then, with her high income, she could commit to paying off the debt aggressively — without sacrificing retirement funds.
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Another option would be to withdraw small amounts from the IRA over time. For example, taking out $17,000 annually over the next few years — depending on market performance and tax impact — could help reduce the debt gradually, while preserving most of the account's value.
Final Takeaway
In the end, Orman left the final decision up to Ana. From a financial lens, the answer is no: paying off credit card debt using a lump-sum IRA withdrawal is inefficient and costly. But emotionally, it's more complicated. Orman urged Ana to see the debt not as a burden, but as a reminder of how far she's come — and a gift she gave herself to survive unimaginable loss.
With a strong income, solid retirement savings, and a clear commitment to change, Ana has the tools to move forward without draining the inheritance her father left behind.
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