Should I Wait Until I’m Out of Debt to Save for Retirement?
Being in debt can be tough enough without also worrying how it may affect your retirement years — or even keep you from retiring. With debt, one major issue you face is the interest. With retirement, time is always a consideration. By balancing these two things, you can create a plan that can help you now and in the future.
Find the Balance
How can you find that balance? Start by looking at your debts. Pay attention to what kind of debts they are and how high the interest rates are. The U.S. Securities and Exchange Commission suggests taking a look at your high-interest debt. If you’re buried under heavy interest, or the minimum payments take up too much of your income, it may be best to pay off at least part of the debt before you focus on saving for retirement.
- Employer matching. If your employer matches a certain percentage of your 401(k) contributions, consider contributing enough to get the full match. After all, why pass up free money?
- Time is on your side. The sooner you start saving for retirement, the more your money can grow.
You Can Save While in Debt
If you decide to save for retirement while paying off debts, consider the below tips:
- If you have loans or credit cards with low interest rates, put extra money into savings first, recommends The Balance. This is beneficial while you at least build up an emergency fund.
- Do what you can to free up other small amounts of money, by cutting out unnecessary monthly services or, says The Balance. You could then use the extra money to beef up your savings or pay off debt faster.
Saving for retirement isn’t easy especially if you’re in debt. But, if you consider these simple steps you can help ensure you’re on the right path to enjoy your retirement years.
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