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I need to save for retirement while I’m paying off my debt… uh NOT! That’s the LAST thing you should be doing!

Posted on : 03-06-2009 | By : The Wife | In : Debt Discussion

Tags: , ,


This comes up all the time. Repeatedly I see people asking how much they should be investing in their retirement plans: IRA’s, SEP’s, 401k’s, 403b’s, etc. while they are paying off their debt.

Here it is in black and white: the only time you should be putting any money into retirement before paying off your debt is when your employer is offering you a match on your funds. In other words, if your employer will give you a 25% – 100% on the 2% – 6% you put into your 401k, then you need to put the maximum into that 401k that they will match. That is pretty much a no-brainer.

However, unless you are receiving a match on your contributions, you should never be putting money into retirement until your debts are paid, period.

I know many of you will argue, but be that as it may, your best way to “save for retirement” is to get rid of the debt that is costing you 5% – 30% to have. That is the biggest return on your money you can make. Additionally, with debt paid off, you need less money at retirement to enjoy life fully.

Those of us in debt have no business “investing” our money anywhere else but in our debt first and foremost.

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Copyright 2009, Freedom and Happiness

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