Paying Off Debt or Saving for Retirement

There are numerous reasons to save for retirement, although they are not all obvious.

Once you retire, it is hard to obtain a full time job and keep yourself financially stable. Medical reasons can be a reason to retire and the cost of living is increasing year on year so it is hard to support yourself. Even the most frugalof retirements can set you back a little bit.

Although medical advances have increased the amount of life you will lead, they also have the implication that you will need to fund yourself during this period.

Compound Interest- Friend or Foe?

In debt, compound interest can work against you although in saving it can be your friend. The more you have in your Roth IRA, the more interest that you accrue, as things can be compounded. It makes sense to start saving earlier for retirement so that you can earn more money.

The argument for Debt Payoff

Debt costs a significant amount of money. Debt can stop you from moving to the next phase of your life and progressing to where you want to be in life. Paying off debt can give you some increased freedom.

Whatever manner you choose to pay your debt off, you need to pay in excessof the minimum payments so that you can keep making progress and pay your debt off at an accelerated rate.

However, if you are living in anticipation of your next paycheck then it can be quite difficult to pay your debt off. Even if you are not in this situation, then it can be quite hard to pay debt off particularly if it is compounding and there is not much you can do about that. You need to have the dedication and discipline to donate any extra money that you have to paying debts off and then everything will be ok.

The Balance

It is possible to strike a balance between paying debt off and saving for retirement. You don’t have to go for one or the other, it is entirely possible to do both. Ceasing accruing debt is the first step to a healthier financial future as is setting achieveable targets.

An alternative method of striking a balance is utilising the retirement resources which are at your disposal already such as a 401 (k) employer match. If your employer matches your contributions this gives you a chance to double your retirement funds and keep things ticking along quite nicely.