Paying Off Debt Comes Before Retirement

Gary and his wife want to retire with no debt. He stopped his TSP, but should they stop her annuity contribution since her company matches 11%? Dave says yes.

QUESTION: Gary in Pensacola and his wife have $10,000 in credit card debt, and they also have two car payments. Their mortgage is about $44,000, and they want to retire with no debt. He stopped his TSP, but should they stop her annuity contribution since her company matches 11%? Dave says yes.

ANSWER: I would stop it and get out of debt. When you’re out of debt, have your emergency fund of three to six months of expenses in place, and then after that, I would start investing into retirement again and knock your house out. The sooner you’re done with your debt, the sooner you have control over your cash again because you’re not sending it all to the stupid bank. Then you can resume whatever investing plan you come up with.

I’m not a big fan of annuities. When you resume your retirement savings, I wouldn’t use that. I would put it into TSP or 401(k) or Roth IRAs even. That would be better than an annuity fund. If you go to good growth stock mutual funds, you should get better rates of return.

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