Fund Roths or pay off debt?
Question: Steve and his wife have $8,000 in car debt. He wants to fully fund their Roth IRAs, but she wants to get rid of the rest of the debt. They can have both done by December. Dave settles the debate.
Dave Ramsey's answer: I wouldn't invest until the car is paid off, because I wouldn't borrow on my car to fund a Roth IRA. You've GOT to get out of the mindset that debt is all right. If you miss one year of funding Roths, that won't kill you. But staying in the mindset that debt is all right will kill you financially. Winning with money is more about behavior than math. Compounding interest over time is AMAZING, but what you need to really address is behavior, because the rest of it is theory if behavior doesn't kick in. Get out of debt before you do long-term investing.
funding, I can pay off my house. That's not
in the Baby Steps order. Is that okay?
so much into your Roth Ira per year. Therefore, every year that you put off your retirement, you reduce
the amount of money that can grow in your Roth IRA over the years. I think Dave is right, start funding your
retirement.