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Retirement Planning

Pay Off Debt or Save For Retirement?


Welcome to another edition of “Erin uses her blog for life advice”! Y’all thought you were reading a personal finance blog, didn’t you? When in actuality, RDS is basically a place where I can talk about myself and ask questions about things relevant to my life. Aren’t I sneaky?

Anyways, last week I had a wonderful Twitter chat with @vanessapage, @debtblag, & @Liquid_Independ (I would tell you to follow them, but you probably already are. If not, FOLLOW THEM – they are all awesome and you don’t deserve their friendship!).

I asked the Internet via Twitter about retirement accounts because I was curious to know when people were opening 401(k)s or IRAs (or RRSPs or TFSAs or any other combination of letters and/or numbers that mean “retirement savings”). I personally opened my account in January 2012 (age 22) when I got my first “real” job. I have a company match (albeit small) and free money is my homeboy. I’m not overly concerned with opening a Roth IRA for myself until I am out of debt.

However, my husband does not have a retirement account. He has not yet had a position that offered him a 401(k) match and we haven’t opened an IRA for him. This makes me nervous as he will be 27 in September. I know, I know. Normal people generally don’t care about opening retirement accounts in their twenties. But I do!

Why? Come here, I have a secret. Come closer. Closer. Back away a little, I’m married. Okay. I don’t know if you know this, but time does crazy things to money. It like multiplies it by a zillion. For real, it’s some David Copperfield shit. Visit a blog with actual substance to see how it works – LIKE THIS ONE that just happens to be written by one of my favorite people on the Interweb.

Anyways, the dilemma is: do we open a Roth IRA for him now while still in a mountain of debt in order to allow time to do its thing? Or do we wait until the debt is gone even though we have a few years to go? Or, per my debt repayment plan, should we open one once we’ve gotten rid of just the highest interest debt (still a lot of time to go)?

THE STATS:

Steve’s age: will be 27 at the end of September (*tears up* They just grow up so damn fast!)

Highest interest rate on debt: 6.55% on the majority of the student loans (If it were 3-4%, we would totally go for the Roth)

Years till debt is gone: 3 to 4 years aggressively, forever and a half at the minimum payments

Erin’s feelings and emotions: Wants Steve to save for retirement and wants to be debt free *pouts like a small child*

TWITTER BUDDIES WEIGH IN:

@vanessapage

– Opened retirement account at 20

– Possibly a few grand in debt when she opened her account

– Suggested I write a post about it (ta-da!)

– Says “6.55%? Pay it off!”

@Liquid_Independ

– Opened retirement account at 21, no employer match

– Had student loan and mortgage debt @ 5.5% and 3.4% interest, respectively

– Says “Personally I would also pay off the debt 1st 😀 6.55% after tax investment return is hard.”

@debtblag

– Opened retirement account at 25

– Has a large amount of debt, put uses the Roth because it can act as an emergency fund

– Says “(1) This is the cheapest you’ll ever get into a Roth assuming you’ll be in a higher bracket later in life. (2) You can’t go back and put Roth in for previous years.”

Aren’t they awesome? Thanks for the input, guys!

ERIN THINKS SHE’S FUNNIER THAN SHE IS HERE:

Steve may just have to suck it up and eat cat food. Thankfully, he’s not a picky eater.

YOUR TURN:

What do you think, dear readers? Roth while in debt – good or bad idea? Also, if you want to tell me what you did that would be great! Personal experience is way more fun than whatever the numbers say. <– And this is why you should never, ever, ever take my advice on anything.

[Images from Buzzfeed/BuzzFeed]

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Erin Thompson

Erin Thompson spent years managing her own blog about budgeting and debt. Because of that, she has great insights not only about managing spending and borrowing but also about running websites profitably. When she's not writing articles for us, she's traveling and looking for new types of wines to try.
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The content on Cashblog.com is for informational and educational purposes only. It is not financial advice and we are not certified financial advisors. Cashblog.com strives to keep its information accurate and up to date, but it may differ from actual numbers. We may have financial relationships with companies listed on our site. We may receive compensation for the placement of sponsored products or services. We work hard to write authentic and accurate articles.