In today’s video we’re discussing whether you should fund your 401(k) or pay off your debt. Really, it boils down to personal choice, but we explain both options in this video.

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Paying down debt.
In my 24 years in finance, I have witnessed many clients getting to retirement with zero debt, and they feel relieved. No debt, and just steady income coming in. There is no better feeling.
Here’s where it makes sense to pay off debt first:
If your interest rate on the debt is higher than you can reasonably earn in your investments.
If you are laser-focused in paying off this debt.
When you need to feel that level of accomplishment of a goal.
Fund your 401(k).
I can also understand those who want to continue funding their 401(k) while also paying on their debt.
With the average Social Security payment in retirement being around $1657 per month for 2022, many feel that this is not enough to last the rest of their lives. The feeling of having a sizable nest egg when you reach retirement can be exhilarating.
Here’s where it makes sense to fund your 401(k) while still paying down your debt: When you have a company match.
If your company matches a percentage of your contributions into your 401(k) each pay period, you should at least put in the match.
For example, if your employer matches the first 3% you put in, you would be receiving a 100% return on your investment (before any investment returns are added in)
If your employer only matches 50% of the 3% you put in, you would still be getting a 50% return on your money.

There isn’t any debt that I know of that charges 50-100% interest, so at least get the company match, then tackle the debt.

#Fundyour401kORPayOffDebt…(read more)

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