The Motley Fool Discussion Boards
Personal Finances / Credit Cards and Consumer Debt
|Subject: Re: Get me off this crazy machine!!!||Date: 5/29/1998 4:23 PM|
|Author: PSUEngineerFool||Number: 1895 of 308882|
<<Do I fund my retirement? Or do I pay down debt? Perhaps we should move this thread to the retirement board?>>
Please do post in the retirement board. It is always Foolish to seek more advice and you have a different set of experts to answer your questions.
<<(1) Contributions to 401K:
I only contribute to my 401K to the point of matching funds. In my case, 6% of gross pay. In 1997 that was
$3827. I've participated in retirement board for a long time, and the consensus there is always contribute to your 401K to the point of no match first before paying debts. It is very "unfoolish" to walk away from free money.>>
Your contribution means you have a salary of approximately $63,000. You will find many Fools in here paying off their debts while funding their retirement at that salary or lower. There was a whole discussion about people earning $40,000 being able to fund a Roth IRA.
Also, I think you have misunderstood the consensus. The consensus would be to contribute to your 401K to the point of no match first before paying EXTRA to your debt. I don't think Fools would say to ignore your debt to fund your 401K.
<<(8) Future dollars
Keep in mind that 1 million dollars in 2040 will not buy you very much. Yea, you could retire very, very well on a million today. Try it in 2040 and make it last 20 years.>>
If you reread my calculations, you will see that I stated my numbers in today's dollars. I never said 1 million dollars in 2040. In 29 years, your $250,000 should be $6.7 million future ($1.8 million today) at 12% return and $4.0 million future ($1.0 million today) at 10% return. Inflation rate = 4.5%.
I understand your deep fear of coming up short in retirement because of past family experiences. I would say that all Fools have that fear. But you cannot let this fear make your investments one dimensional and forget your other obligations. I suggest more reading of financial guides to help you see the whole picture. If you cannot overcome this fear, I suggest that you seek out a fee-only financial planner to help make unemotional decisions. If you declare bankrupcy and do not overcome this fear, my fear is that you will fall into the same trap in the future.
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