Should you stop funding retirement to focus on debt?

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?

More about...Retirement, Debt

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Mike Piper
Mike Piper
10 years ago

Even if the investment options are terrible, opting out of a 401(k) match makes no sense if you’re fully vested. There’s almost always a “safe” option like a money market fund, such that your return would be an immediate 100% (not counting the rate earned on the money market). I’ve never heard of a credit card charging 100% interest. Even without a 100% match, it can still make sense to invest in an IRA or 401(k) prior to paying off debt if you qualify for the 20% or 50% Retirement Savings Contribution Credit–either of those returns (in addition to the… Read more »

Colin
Colin
10 years ago

Debt is a loan against your future income. I find the question of if you should stop saving for the future to pay off a loan against the future….rather absurd. What’s the point in saving for the future if you’ve already put your future on loan?

Being in debt is a shackle far too many willingly accept on their lives.

Tony
Tony
10 years ago

If the starting point is, as you say, student loans and mortgage only, I really can’t see any reason not to contribute to retirement accounts. I contributed even when “racing” with high interest debt. Because I knew that human behavior would dictate ceasing those contributions would mean that I would waste the difference, rather than increasing my payments towards debt. It’s great if you have the discipline to apply the difference towards debt, but most people do not. As JD wrote in his article, I think you should always pay yourself first. Doing this, you will “trick” yourself into never… Read more »

Snowballer
Snowballer
10 years ago

It was simple for me. The return on my 401k match, up to a certain percentage, was 100%. I kept that much going even while I was paying off debt.

I didn’t invest at all otherwise, because it makes no sense to invest in asset classes which have historical returns of less than the interest rates I was paying. For goodness’ sake my rates were 9, 13, and 7%. If you told me there was an investment which returned 7% guaranteed no matter what, I’d be all over it!

Holly
Holly
10 years ago

I very much agree with Tony (above) and J.D. My husband and I had $200 deposited bi-weekly directly into a credit union savings account; we never saw that money, so we never ‘missed’ it. Then when tax time or a vacation called, we always had the money to cover it, plus some left over for emergencies. However, we wanted to finally pay off our cc’s ($1300 balance), so we quit having the money taken from the paycheck. What happened? We went on a trip to FL!!! Keep the money from landing into that MISC. category and avoid temptation. Have your… Read more »

The Biz of Life
The Biz of Life
10 years ago

The choice is easy for me…. fund the 401K and retirement plans first, get obsessive about cutting expenses to bare bones, freeze all credits in a block of ice, invest as much of the saved expenses in reducing debt as possible, get a second and third job if necessary and use those earnings to reduce debt.

Jamie
Jamie
10 years ago

If we can’t say “free money” with regards to employer matching, then you can’t say “hardship loan” when talking about 401(k)s. There are hardship withdrawal options, and you are able to take a loan from your 401(k), but there is technically no such thing as a “hardship loan”. Yes, I’m being picky, but as a person who works in the financial services industry, the term “hardship loan” drives me nuts.

Tim
Tim
10 years ago

Here’s a question, is there a financial calculator out there that anyone knows of that will compare the two options from a long-term perspective? I know there are a lot of variables in the equation, but there must be someone out there who has worked out a fairly simple calculation by making some assumptions.

If I could find the optimum mix of paying down debt vs saving for retirement, it would likely motivate me to make some changes to my current strategy.

Mike Piper
Mike Piper
10 years ago

Tim: There’s no need for a calculator. Just compare the (after-tax) rates of return offered by paying off debt (where the rate of return = interest rate) vs. investing.

If you don’t have those numbers, then a calculator wouldn’t work either.

Lizard
Lizard
10 years ago

I’m on the debt snowball. One loan left, a student loan, which will be knock out (hopefully) in six more months. It took me a while after starting the snowball to stop my contributions, but once I did, my debt payments really started to make a difference. I’ve paid off five loans (four credit cards and a car) worth about $35k. My 401k is 60% vested (2 more years to full vest) and we have no match right now because of cashflow, so now I’m kind of ambivalent about re-starting my contributions once my debt is payed off. I might… Read more »

Broadcast Thoughts
Broadcast Thoughts
10 years ago

#2 Colin says it well. A mortgage on your home is fine, don’t worry about eliminating it prior to saving for retirement. Even a simple interest car loan may not be a bad thing. Why give the banks 14-30% interest on the credit cards and earn 3% on your savings, or maybe 10% on a risky investment where you can lose your principal.

http://www.broadcastthoughts.net/2009/05/more-bad-financial-advice.html

Adam
Adam
10 years ago

Yeah I’m not sure that turning down the match (as long as you’re vested or reasonably sure you will be) over paying down debt is better than paying down credit card debt, even at higher rates. Given the typical contribute 6% (tax deferred) and 3% match, you’re getting a 50% return instantly AND paying less tax on your income (initally) that you would otherwise had to pay immediately if you weren’t putting it into your 401(k); so the effect is increased further. Even at 29% interest on the credit cards, you’re still ahead. More so if you get 100% match… Read more »

Brandon
Brandon
10 years ago

Overall, a good analysis. I would take great issue, however, with your statement that 99% of high interest debt comes from living beyond your means. Buying groceries, getting medical care, etc. etc. are necessities that many Americans (in Detroit, for example, there is a 29% unemployment rate!) end up having to charge. Also, I think it would be helpful to talk more about specific interest rates. I’m all for paying student loans over 5%. But no matter how many times that Ramsey-Zealot claims I should pay off my 2.625% student loans, I can’t buy it. It’s essentially free money if… Read more »

Michael
Michael
10 years ago

This dilemma has haunted me recently. I am 25 and a half and have about 11,000 in a Roth Ira. I try to contribute 300 a month towards and am happy with where it is right now. However, I also have: School Loan 1: 4900 @ 7.125% School Loan 2: 4300 @ 5.625% Car: 8850 @ 4.9% All scheduled to be paid off by the time I am 30. But it just kills me to know that if I just take a year and put all my retirement allocation towards the highest interest debt I can be paid off by… Read more »

James
James
10 years ago

I’m a 21 year old student getting ready to graduate who is already working full time. I started my Roth IRA about a year ago and currently have a 17k student loan at 5% interest. I have chosen to fund my Roth contributions for this year before the student loan. If you look at it, given a 5% rate of return until I am eligible to retire (39 years) gives me an additional $35,0000 as opposed to taking 1 year less of contributions (38 years) and instead paying down part of my debt. That’s double the value of my loan!… Read more »

Elle
Elle
10 years ago

My husband and I followed a 75/25 approach, where we paid down debt mainly, but invested enough to get a match. Now that we have no car or credit card debt, we have some more wiggle room. While paying my student loans, we invest a bit more,and are saving a down payment for the house.

Little House
Little House
10 years ago

This is a really good analysis. However, I think people can still pay into a retirement account, whether it’s a 401K, 403B, or Roth IRA, and continue paying down their debt. Of course, I’m not talking with experience here. I’m paying off debt and trying to save for a house. Yet, the article yesterday from April, and the whole Retirement Week thing, has got me thinking that I need to start contributing, even if it’s a small amount, towards one of these choices. So, my focus will still be pay down that debt, save for the house, but put a… Read more »

Walter
Walter
10 years ago

@ Michael #12 Cut back on the Roth contributions to perhaps $100 per month and focus that $200 extra on the debt. The Roth will continue to hum along on the smaller contributions and any earnings that your Roth investments provide, while on the other hand your debt will be paid off more quickly. Once the debt is gone, you can return to funding the Roth at the higher rate. It’s just the psyhcology of investment vs debt reduction that has you frustrated. Just compromise and then you can achieve two goals at once. Perhaps not as quickly in either… Read more »

Steven
Steven
10 years ago

@15 James

How are you doing the math?

Given that the debt is at 5% interest, and you’re assuming a 5% rate of return, in the end, you break even. The money you earn at 5% with is negated by the 5% interest you’re charged with.

You have more money in the retirement account, but less money in the bank.

Shane
Shane
10 years ago

Rock on James for starting the Roth at 20. I’m 22 and still saving 3k to open one. Should have it by next year.

Jason B
Jason B
10 years ago

My company matches with 30% of up to 10% of my income. It’s not the best match out there, but it’s something. Let’s assume I make $1000 per paycheck (nice even number!) so 10% is $100. If I don’t contribute to my 401k, I might get $70 after taxes. If I do contribute, it’s not taxed (until retirement) so I get $130. $130 grows for 30+ years and is then taxed as I withdraw it. Or I can take the $70 and pay off some debt, but odds are I won’t be able to save $60 for every $70 I… Read more »

Kevin M
Kevin M
10 years ago

I think this is pretty good analysis and basically parallels what I did 6 years ago. I kept investing in my 401(k) enough to gain the full employer match (at 50% of my contributions), but put the rest towards my auto loan and credit card debt until it was paid off. After that, we started our house down payment fund/larger emergency fund and opened Roth IRAs for both myself and my wife. Now I’m considering halting the Roth IRA for a few years and focusing on our mortgage (30 yr @ 5.375%). I’m not sure the market will return more… Read more »

James
James
10 years ago

@19 Steven Its in the years of compounding the money is made. Given the fact that I intend to retire at 60 and not push retirement to 61 an extra year of contributions and a 5% rate of return nets me an additional $35,000 (632,522.63-597,402.50) assuming I contribute 5k each year, which shouldn’t be a problem. A 17k student loan @ 5% interest that should be paid off in 3 years comes out to only $19679.625. That’s only $2679.625 in interest. I’ll taken an additional $35,000 at age 60 over saving a much smaller amount in interest now. By contributing… Read more »

TheDebtHawk.com
TheDebtHawk.com
10 years ago

In response to Michael (Comment #14) and many others: One of the best ways to be able to contribute to your 401k and to pay off your debt at the same time is to find a second job. Too many people overlook this option. Find someplace that you think would be fun to hang out. Go work at a bar as a bartender. Get a second job at a book store, a coffee shop, or BestBuy. By just working a few extra hours a week you can do both. Plus you won’t have time to spend as much of your… Read more »

Chiot's Run
Chiot's Run
10 years ago

Personally Mr Chiots and I are do both, but we are wrestling with this as well, but not in regards to paying off high interest debt. We want to pay off our mortgage and be completely debt free. We are currently paying a double mortgage payment and still fully funding our IRA’s each year, we are on track to pay off the mortgage in 3 years, we’d love to make it 2, but that would mean lowering retirement amounts. Another thing you have to look as is the tax savings if your retirement accounts are currently tax deductible. Taking that… Read more »

Rex Huston
Rex Huston
10 years ago

I believe in paying your debt down first. Especially credit card debt. That is the only way to GUARANTEE a positive return. In turbulent markets like these, how many investments can offer a guarantee like that?

Also if something were to happen like a job loss, you will not be weighed down by the extra debt if you had been paying it off.

Bill
Bill
10 years ago

This is a great debate, and I built my own calculator to compare the 2 options. There are 2 things I did NOT build into the model: taxes or the risk associated with the investments. I could include the tax impact, but it’s really hard to quantify the risk associated with 401K investment vs. “guaranteed” return of paying down debt. That said, here’s the math: Assume you have $5K in debt with an average rate of 12%. Assume you get a 50% match at work on your 401K and earn an 8% average return. Assume you have $400 a month… Read more »

sjb
sjb
10 years ago

2 years ago I was looking at my wife’s student loan ($6k) @ 3% interest and a high yield savings account @ 4-5% interest. The 1-2% more we was getting in our savings made me feel comfortable paying the minimum to her student loan. Although, with the drop in high yield savings account interest rates over the past 2 years, We’ve increased her student loan monthly payments to where we will have them paid off within the next year ($500/month). The increased student loan payments have not bit into our bi-weekly contributions to our Roth IRAs, investment account, or 401k/pension… Read more »

Chickybeth
Chickybeth
10 years ago

Writing a post arguing against saving for retirement seems counter intuitive to “National Save for Retirement Week”. All I took away from this post is that the author does not really understand how Roths work. You cannot simply compare interest to interest when dealing with retirement savings.

James
James
10 years ago

I agree that in the short term you come out ahead paying down the debt immediately. But for things such as a Roth where you can’t get back time since there is a contribution limit each year, missing 1 year can have drastic effects on the funds total value especially over a long period of time. This effect can easily be far worse than a years worth of accrued interest. 401k’s have a much larger contribution limit which can negate this point.

Debbie M
Debbie M
10 years ago

I paid all my debt (car loan, student loans) before starting to save for retirement or a house. Two of my four student loans had such low interest rates that I should have moved my snowball into retirement savings instead of into those last two loans. One factor is that my first job had a really good pension (though I now know not to rely on this because the rules can change at any time). Another factor is I was afraid of the market back then. I started by contributing an amount I could afford to lose. Then I got… Read more »

joruva
joruva
10 years ago

At what point would you pay the minimum on the debt? 5%? 3%? 2%?

I have a Student Loan @1.6% which I will keep contributing the minimum. I have another Student Loan @3.5% which is borderline for me.

I’m of the opinion that you should max all tax-sheltered accounts before paying off a loan that’s <5%, especially if you are many years away from retirement. After that, if you can deal with the extra (calculated) risk you can keep the debt and invest in a taxable account.

James
James
10 years ago

@Debbie,

The issue is the contribution limit with a Roth. I agree in regards to a 401k. But for a Roth, you can’t go back in time and contribute for a missed year. A missed year factors heavily into a long-term compounded fund.

Nancy L.
Nancy L.
10 years ago

I have really pondered this question before, b/c people were always so insistent that one should NEVER touch their 401K balance. I realize that, in the majority of cases, the 401K really shouldn’t be messed with, as most people in debt obviously have issues with their budgeting. And if you rack up more bills after cleaning out your retirement fund, than you are in worse trouble then you were before with just the debt. But I wondered about myself–I’m very strong with my budgeting now, and have the discipline to make sure I stay with a program. How would it… Read more »

april
april
10 years ago

Seems like most of the posters have forgotten to account for age in this argument. Ideally everyone would contribute to their 401k to at least get their companies matching amount. However if someone is seriously considering passing up contributing they should keep in mind the effects of compounding interest. Its more costly for someone in their early twenties to pass up contributing to their 401k in order to pay down debt than it is for someone in their late 40s and early 50s.

Steve
Steve
10 years ago

I think if you have tried the common ways to reduce debt like budgeting and taking on a second job but still cannot eliminate debt then stopping retirement investment is a good ideal.

Broadcast Thoughts
Broadcast Thoughts
10 years ago

A large number of you have brought up the argument that funding should be directed towards retirement to take advantage of longer periods of compound interest.

Y’all are forgetting the debt is subject to compound interest as well and the longer you take to pay it off the more you will eventually pay.

The choice all comes down to effective interest rates. If the effective rate(not estimated) on retirement is higher than the rate on debt, save. If the rate you are paying on the debt is greater than what you could get for your savings, pay off the debt.

Brent
Brent
10 years ago

For me this is the stage that I go by the numbers. I’m assuming people have built up the emergency fund, paid off the high interest/variable debt. Both paying off low interest debt and contributing towards retirement are admirable and in the right direction. So when you have a match on a 401K you should probably do that. When its not matched then it gets a little harrier, I don’t have a match, but my only debt is a mortgage @ 5.375% with a PMI that makes an effective second mortgage at around 9%. My priorities are to save up… Read more »

Sam
Sam
10 years ago

We continued to fund our 401ks even when we were paying off $55,000+ in debt using Dave Ramsey’s snowball method and working his baby steps. We figured out that we could do both, pay off our debt and fund our 401k if we lived off of rice and beans for a year, it took us a bit more than a year but we did it. I think it can make sense to suspend or reduce retirement savings while focusing on debt assuming that you are really, really focusing on paying off debt. If you continue to live a regular life,… Read more »

Beth
Beth
10 years ago

@ James — Right on! I started contributing when I was 23, and even though I took a few years off (grad school). That’s what my parents did, so that’s what I was going to do too.

Now that I’m older and more financially-savvy, I’m very glad I started young. My other savings goals and getting rid of my student debt are built around this habit, not the other way around.

Tran Harry
Tran Harry
10 years ago

I don’t profess to know the answer to how to beat debt quickly. But for anyone with bad debt that isn’t productive such as a more expensive car the first thing I would suggest doing is selling that car, even at a loss, and paying as much of that debt back now. If you’re set to lose $3000 now on a $50000 car its going to be much less than the interest you pay on it throughout the loans lifetime. Than go out and buy a more reasonable car, I recommend used. I have seen nice CRVs for $6000 cash… Read more »

Kevin
Kevin
10 years ago

@Brandon: “I would take great issue, however, with your statement that 99% of high interest debt comes from living beyond your means. Buying groceries, getting medical care, etc. etc. are necessities that many Americans end up having to charge.” I don’t follow your point. Just because a person’s “means” are very, very low doesn’t mean that they’re not still living beyond them. Buying groceries and getting medical care you can’t afford is still living beyond your means. Just because you have a very good reason for living beyond your means doesn’t mean the term no longer applies to you. “I’m… Read more »

James
James
10 years ago

@37 Broadcast Thoughts- Yes the interest on the loan compounds as well. However here’s the kicker, the contribution to the Roth will compound over 39 periods in my case (39 years till retirement). The interest on the loan will only compound for 3 years, 5-10 at most if something goes really wrong. In compounding periods that is a HUGE difference. @40 Beth- I’m glad I started now. I’m studying finance at school and the goal is to become a CFP/CFA eventually. Figured it best I follow the advice that I would give to someone else. I just wish I could… Read more »

Money Funk
Money Funk
10 years ago

That is an interesting concept. And one I should consider revisiting. This would give me an additional couple hundred to pay off a (retirement) loan I have out in the tune of $2700. (Yes I have many problems with my finances – 1)took out a retirement loan; 2) am funding a retirement account but paying tons more in debt interest; 3) Don’t fund close to what I should in my retirement account). Judgement has been made: temporarily stopping retirement funds to PIF debt. Do you think someone close to retirement age (1 – 2 years close) should do his task,… Read more »

Monique Rio
Monique Rio
10 years ago

I ran some numbers the other day, and in the long run it depends almost entirely on interest rate. If the interest you pay on your loans is higher than the interest you’ll get on your retirement money, it’s better to focus on your loans.

It seems as though “paying yourself first” has more to do with psychology than it being the best choice financially. If you can honestly trust yourself to save your money, chances are you’ll have more money in the end if you pay off your debt first. That’s a big If, though.

chacha1
chacha1
10 years ago

I’ve had 401(k) and IRA accounts for years. Now my husband and I earn too much to contribute to our Roth (not a bad problem to have) and for the last couple of years, I was not eligible for 401(k) matching or vesting from my short-term employer. We put our “savings” money into debt repayment, since paying off debt = saving money, IMO. With my new employer’s 401(k), I will start contributing as soon as eligible. Regarding other “retirement” savings, we are putting on hold till debt is paid off because the debt is what keeps our cost of living… Read more »

Sarah T
Sarah T
10 years ago

I have always invested modestly in my 403(b) plan — just a bit more than I needed to put in to get the max match. I figured that in my twenties was a time when putting *anything* in would do me a lot of good later. My general rule is that for very low interest debts (less than 3% interest), there’s not enough incentive for me to pay them off quickly; instead of pushing on those, I put money towards my emergency fund. When it’s fully-funded, that money will go towards an IRA. The exception is a family loan, which… Read more »

Foxie || CarsxGirl
Foxie || CarsxGirl
10 years ago

I’m working to get to a point where this isn’t an issue for me. How? A couple things: 1. Starting retirement contributions at 20. I opened my Roth right before my 20th birthday and set my contribution goal at $1,000. Until I graduate college, get my bachelor’s and start work in a “real” job, this is what I’m aiming to do. 2. Keeping debt to a minimum. No credit card debt here, just a car loan for building credit and my necessary-but-evil student loans. I can go after these debts without feeling guilty about my retirement savings because I’m not… Read more »

Walter
Walter
10 years ago

@ Debbie # 31,

From a mathemetical standpoint, you may be correct; however, Michael’s issue is more psychological than mathematical. He obviously feels that to stop contributing to the Roth will cost him investment opportunities. Sometimes setting your mind at ease is more important than the numbers can dictate.

Adam
Adam
10 years ago

“The match from your employer is a one-time deal. After that first “50% return on your investment,” it drops down to whatever the regular return on your investments is, which is most likely far, far lower than the interest rate your credit card likely carries.” This math may be too simple but: Assume you had $10,000 gross income to either pay off a 29% card; OR invest in your 401(k) matched 50% at 7% and had a 25% tax rate, with retirement many years off: 401(k): Year 0 $10,000 matched to $15,000 Year 1 $16,050 Year 2 $17,174 Year 3… Read more »

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