Saving for retirement can be challenging, but throw a divorce and some debt into the mix, and it gets almost impossibly complicated.

That's the issue facing this week's letter-writer, who wishes to remain anonymous.

She wrote in an e-mail that she is 64 years old, but she doesn't plan on retiring soon "because I'm single, mentally alert and very healthy.

"A recent divorce left me a debt of $24,000," she wrote. "I purchased a home ($980/month), but after utilities, taxes, bank payment, 10 percent tithing and day-to-day expenses, it's pretty tight."

She wrote that she tries to put about $200 a month from her pension plan into savings so she has money to pay taxes at the end of the year.

"I am currently putting 5 percent of my income ($46,000) into my 401(k) ($88 every two weeks), but the interest on my loan is about $180/month. Should I stop putting money into my 401(k) and pay off my loan quicker? I try to pay about $300/month on the loan," she wrote.

"Since the debt interest and 401(k) deposit are about equal, I feel like I'm standing still. Unfortunately, I've had to withdraw from my 401(k), so I only have about $10,000 left in that account. I realize that my taxable income will increase, because the money I've been putting into my 401(k) is not taxed. My take-home is $1,300 every two weeks.

"How can I pay off this loan quickly?"

A couple of days later, she sent me another e-mail with a follow-up question: "Would withdrawing $10,000 from my 401(k) to reduce my debt be a viable option?"

This is a new variation on a theme I've written about before. For help with answers to this reader's questions, I contacted Jeff Salisbury, principal at Independent 401(k) Advisors, a fee-only advisory firm with offices in Cache and Davis counties.

Jeff says this reader's situation is unique, and his advice runs contrary to what he normally recommends.

First, he says he would "absolutely" suggest that our reader stop contributing to her 401(k) and divert that money to loan payments.

"The real guiding principle there is ... $88 at age 64 really is not going to make that big of a difference to her ultimate retirement, but it could make a pretty significant difference in clearing that debt," Jeff says.

Along the same lines, he says she may want to take the $10,000 out of her 401(k) to put an even larger dent in her debt. She could do so without taking a hit from the government, because she already has passed the age, 59 1/2, required to make penalty-free withdrawals.

However, whether she can do so without other restrictions depends on her company's plan. Some let employees make "in-service withdrawals" from their 401(k) accounts if they are over 59 1/2 but still working. Other companies do not, meaning our reader would need to take out a 401(k) loan to get her money.

"But after having to pay a loan origination fee, is she going to be better off taking out one loan to pay off another? That's going to be case-by-case, depending on the details of her plan," Jeff says.

He stressed that this advice is the opposite of what he would recommend to someone still in her 30s. In cases like that, he says, he encourages other methods to eliminate debt, because he would not want her to establish the bad habit of not contributing to, or taking loans from, her 401(k).

"At 30 or 35, someone like that, they've got enough time that the 401(k) could be huge for them," Jeff says. "But this individual, we've got to kind of concede defeat on the 401(k)."

Jeff says he hopes our reader has other sources of income to help her once she retires.

"There's no magic here," he says. "She's got a debt of $24,000. The debt at this point is probably the bigger deal for her. There's no way she can avoid that debt. She's got to pay it back, and she's got to get it paid off as soon as she can."

This should reinforce to everyone the importance of saving for retirement from an early age and avoiding 401(k) loans or withdrawals.

For our reader, I hope Jeff's advice helps, and that you are able to pay off your debt and still have an excellent retirement. Please drop me a line to let me know what you decide to do.

If you have a financial question, send it to [email protected] or to the Deseret News, P.O. Box 1257, Salt Lake City, UT 84110.

E-mail: [email protected]