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Pay Off Debt or Save for Retirement?

ArticleID 168  
Writer Isaac Thuku
Category Personal Article
It is important to start saving early for retirement. Different individuals retire from their place of work for different reasons. Though the reason everyone is familiar with is the aspect of age, there are more reasons for retiring. Leaving your work station as a retiree makes it more difficult to get back on employment.

Despite the aspect of age as a reason for retirement, medical conditions could also be reason for retirement as you are deemed unfit for work.

Saving early will allow you save more such that you can cope with the rising cost of living when you retire.

You are more likely to lead a healthier life over a longer period of time with medical advances. however, this may come as a means of funding medical covers for a longer period of time too.

Depending on how you look at compound interest, it may be a benefit or a nightmare. It becomes a nightmare when it is compounded in a debt you owe. If it is compounded from your retirement savings, then it is beneficial for you.

Every time you save for retirement through a 401(k) or Roth IRA, your savings grow with time as the money is invested and you get part of the returns. This encourages more individuals to save earlier as you start receiving returns early too.

What of paying debt?

Though getting into debt will solve your current problem, it is rather expensive paying it back. This is because you divert from your goals such as securing a better home as you are held up paying your debt. It is therefore important that you pay debt early as it will allow you grab more financial opportunities and securities.

The key to paying any debt despite the different modes of payment is that you pay more than the minimum payment. This will help you will take a longer time with more interest rate when paying. It is advisable that you send any extra cash in paying off debt so you can clear it early especially if you are living from one paycheck to the next.

The balance between saving for retirement and paying off debt

You can kill two birds with one stone. You can cut on accruing debt. In this, with less or no debt, you can save more for retirement. Secondly, you may opt to use funds that are yours. With a 401(k) employer match, your employer can provide you with double your savings with no extra costs for you. In addition, you can save for your retirement from which you do not have to get cash related to your debt payment plan.

Paying Off Debt or Saving for Retirement
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