This article is by GRS staff writer Adam Baker. In addition to his work at Get Rich Slowly, Baker blogs over at Man Vs. Debt, where he compiles the most famous and inspiring quotes on debt. This article is a part of National Save for Retirement Week, and a sort of follow-up to yesterday’s post about the choice between retirement or a down payment.

Whether you should halt your retirement contributions in order to focus debt is one of the most heavily debated dilemmas in personal finance.

Unlike “spend less than you earn” or “track every penny you spend“, there’s no cookie-cutter answer to this question. Variables such as age, career, risk tolerance, and even personality type make each individual situation unique.

You’ll never win a race against high-interest debt
Regardless of your personal situation, there are very few circumstances where high-interest debt should not be the top priority. What’s high interest? Well, that’s another fun question to debate. For the purpose of this article, we’ll assume a broad range of anything in excess of 8-12%.

Once you start trying to race against debt with double-digit interest, you’re destined to fail. It’s risky at best and downright irresponsible at worst.

Let’s be honest. If you’re still relying on high-interest debt, 99% of the time it’s a result of not living within your means. There are rare exceptions, but for most of us (myself included), the issue boils down to spending less than we earn.

On Monday, J.D. wrote about the importance of paying yourself first. Like many, I love this advice. However, I’d like to challenge you with this: Only pay yourself first if you deserve it.

You could spend decades socking away 15% for retirement, but if you are living beyond your means, you’ll still lose. You’ll be tapping your 401(k) for a hardship loan. You’ll be upside down in a house with two mortgages and a HELOC. Even with the best intentions, this is a game that you need to get very, very lucky to win.

I don’t want to rely on luck. I don’t want to race high-interest debt.

For me, having positive cash flow with at least a minor emergency fund is a prerequisite to retirement investing. This proves I deserve to pay myself first. Otherwise, it’s my high-interest debt against my retirement contributions. Not a race I’d like to see.

Ready to rumble
So now where are we?

  • Positive cash flow? Check.
  • Short-term savings? Check.
  • Only student loans and a mortgage…what now?

Now we’re ready to debate! At this point we’ve covered the basics. We’ve plugged the leak in the ship, but still have a bunch of nasty water to bail from the hull.

Once our remaining debt has interest rates in the single digits (setting an exact percentage isn’t the point), the situation becomes less cut-and-dried. There are two schools of thought on the issue.

  • The first preaches that this is the perfect time to make retirement a priority. These folks point out that starting the contributions is the hardest step. They show that the earlier we adopt this as a habit, the better our situation is in the long run.

  • The second school emphasizes the power of focusing on a single goal with all your energy and passion. They profess that intensity and commitment increase the probability that we ultimately succeed in tackling our financial goals. After all, once you eliminate your debt payments, you’ll have an enormous amount of your income to allocate to wealth generation.

I have to admit, I can see both sides. Like many debatable issues, most of us are going to end up somewhere in the middle. In the quest to find balance for our own situations, there are several common factors that are beneficial to explore.

The 401(k) match
Dave Ramsey suggests going so far as turning down an employer match on 401(k) contributions for a short amount of time (fewer than 18 months) to really focus on your debt. This is where many people draw the line. Actually, that’s putting it nicely. This drives some people absolutely bonkers.

Many exclaim, “But… but.. it’s free money!” That phrase tends to be thrown around a lot. I’m not a full supporter of either side, but I would like to point out that nothing is free, folks. So please stop saying “free money”! Pretty please?

There’s a real and tangible cost to allocating your money in any specific way. There are indirect opportunity costs. There’s the risk that diluting your intensity means you stay in debt longer and thus pay more interest.

Often the math does work in favor of taking an employee match, but that doesn’t make the money “free”. Some 401(k) plans have limited investment options. Or they have vestment periods that stretch out for years. If you aren’t planning to stay with your current employer this could dwindle the value of “free” even further.

Ultimately, there are several reasons someone may decide to opt out of a matching 401(k) program for a short time. Of course, the factors at play vary drastically from employer to employer. Before making a decision either way, it’s important to know as much as you can about your particular 401(k) options.

Other factors
There are a couple other situations where investing may make sense. Consider the following:

  • First, you only have a specific limit per year that you can contribute to a Roth IRA. (This is currently $5,000 per year — $6,000 per year if you’re 50 or older.) Once you miss the window of availability, you’re out of luck. Your new contributions go toward the current year’s limit. You can’t go back and make up contributions you missed for the past two years once you are out of debt.

  • Second, if you don’t have the discipline to actually apply any new money to accelerate your progress on debt, then don’t halt your retirement. Decreasing your contributions only to spend the difference at the local comic books store (or your vice of choice) may be the single dumbest financial move you can make.

There’s no single answer to this dilemma. In my own life, Courtney and I have chosen to not to invest while still in debt. We live a turbulent life right now, and enjoy the benefits that come with focusing on one financial goal at a time. We’ve also decided to allocate what limited funds we do have into investing in ourselves: training, education, and building a business (our current focus).

Your situation is different. The only thing I will push you to do is consider all your options. Don’t continue making a certain decision just because it’s what you’re doing right now.

Start from a blank slate. Could you benefit from a singular focus? Are you willing to make further lifestyle cuts to increase you current contributions? Examine your options and consider the choices.

How have you attacked this dillemma in your own life?