No. of Recommendations: 0
One time you definitely wouldn't want to contribute to a retirment plan is if you debt is at 10% or above. Think of it this way, if you're paying credit card debt at 25%, 30% the money you invest, over the long haul, is no way gonna earn anything close to that, even with tax advantages. You're in the hole a good 15% or more for every dime you 'invest'.

Would you take a cash advance from a high interest rate credit card and invest the money? No, you wouldn't? Well that's exactly what someone with high rate credit card debt and investments is essentially doing. They're imaginary investments.

Now, in your case, at least for those car payments, you're in a gray zone, so the question is, which do you prefer? A guranteed "post-tax" 8% return on your money by paying off the loan, or a maybe better, maybe worse return by putting it into your retirment account. I'd probably hurry to pay off the car loans at that rate, but that's just me.

As far as the CC, that rate is less than inflation, so I would just make sure you pay that off before the rate expires - and if it does, just pay the minimums, or whatever you feel comfortable doing (but do NOT add to the debt). I figure your student rate may be similarly low.
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement