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Author: aja91 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 310999  
Subject: Re: 401K Tax Benefit vs Card Payoff Date: 6/18/2001 2:44 PM
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I was considering lessening my contributions to my 401k plan in effort to gain the income back on my paycheck, to help payoff this debt faster...since I can actually see the end of the tunnel now.

This works if you ensure that the "extra" income is added on top of the existing payments. If you don't have the discipline to not "raid" this extra income for other expenses, it can be worthwhile.

You'll probably net something like $80 in extra income per paycheck out of the $105 you're currently putting in the 401(k). So it's $160/month more for the debts. Your message indicated you are currently paying $200/month towards a $1700 debt @ 8%. Right now it's roughly 9 months to payoff that one; with the extra $160/month (or $360/month payment)figure five months.

The interesting question is, should you keep this money out of the 401(k) to pay off the 0% card? My thinking is no. With the other card you are getting a guaranteed 8% return on the money. With the 0% card you are getting... no return. So I'd suggest cutting the 401(k) contributions, paying off the 8% card quickly, then resuming your 401(k) contributions. You could take the $200/month currently going to the 8% card and add that on to your 0% card payment, or consider increasing your 401(k) contribution beyond the 6%. Or fund an IRA with that $200/month.
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