Former IRS Agent Shares the ‘Worst Advice’ She’s Heard When It Comes to Paying Off Debt (Exclusive)

September 6, 2026 - 19:50

Natasha Verela, a former IRS agent, knows a thing or two about how money moves through the system. But when she faced $85,000 in student loan debt, she made a choice that she now openly regrets. She pulled money out of her 401(k) to wipe the slate clean. Looking back, she calls that the single worst piece of financial advice she ever followed.

Verela says the pressure to be debt-free felt overwhelming. People around her pushed the idea that any debt was an emergency. So she cashed out her retirement savings early. The result was a massive tax bill, a ten percent penalty, and the loss of years of compound growth. She points out that the money she withdrew was taxed as ordinary income, which pushed her into a higher bracket. Then the penalty hit on top of that. In the end, she paid far more than the original loan balance just to get rid of it.

Her current advice is simple. Do not touch retirement money to pay off student loans or credit cards. The math rarely works in your favor. She also warns against listening to anyone who says you must pay off all debt before you start investing. That mindset keeps people stuck. She suggests a balanced approach. Make minimum payments on low interest loans, then put extra cash into a retirement account if your employer offers a match. That match is free money. Giving it up to chase a zero balance is a mistake.

Verela also stresses that not all debt is bad. A mortgage or a business loan can build wealth. The real goal is not to be debt free at any cost. It is to build net worth over time. She wishes someone had told her that before she made the withdrawal. Now she shares her story to stop others from making the same costly error.