Here’s what you need to know when making your decision
Should you pay off your student loan debt before saving for retirement?
Experts are firmly camped on both sides of the debate, with others falling somewhere in between. One thing on which they all agree: There’s no one-size-fits-all solution. Ultimately it depends on your individual circumstances, with factors such as income, minimum debt payments, interest rates, and risk tolerance coming into play.
Here’s what each side has to say:
Pay off debt first. Financial guru Dave Ramsey says you should pay off your debt first (technically second, after creating a small emergency fund) as fast as you can.
“Millions of people try to multitask and work toward these goals all at once. They pay on their debt, try to save a little for emergencies, and contribute a bit to their 401(k)s all from the same paycheck,” writes Ramsey on his blog. “Not only does that slow their progress, it also leaves them unprepared when unexpected expenses arise.”
Save for retirement. Kyle Ramsay, investing manager at NerdWallet, is quoted as saying: “The two most important things Millennials can do is save more and save early. Compound interest is a powerful force that can build a comfortable nest egg. For example, if a 23-year-old invests $10,000 at a 6% return today, it could be worth twice that amount by the time he is 35 years old and 20 times that by the time he is 75.” NerdWallet released a study showing student debt can end up costing college graduates $684,474 in lost retirement savings over a 50-year period.
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