Harris-Courage & Grady, PLLC
Paying Off Debt vs. Saving for Retirement
It can be hard to decide what to do with your limited financial resources—should you pay off your debts, or save for your retirement?
The one thing you should NOT do is use your retirement savings to pay off your debts.
Retirement savings are completely protected during a bankruptcy, and if you take money from your retirement savings, you will receive a tax penalty. Our office sees many clients who have made this tragic mistake—please don’t do it!
When deciding whether to focus on your debts or your retirement savings, follow these steps:
- Examine your debt. Write down each of the debts you owe, and the total amount of your debt. Write down the interest rates and the minimum payments. It’s important to have the complete picture of what you owe when making any financial decisions.
- Examine your retirement savings. How much have you already saved? How much do you think you will need? If you aren’t sure, there are many online calculators to help you estimate your retirement needs. Consider whether you are taking full advantage of any retirement plan offered by your work. If you’re not receiving your full employer match, it’s wise to increase your retirement contribution.
- Meet with an expert. Meet with an expert to discuss your different options and choose your best course of action. If your debt feels overwhelming, or if you have had a judgment filed against you, meet with a bankruptcy attorney to create a plan to get out of debt. Filing bankruptcy is the quickest and least expensive way to eliminate debts. Bankruptcy can help you reach your other financial goals, including retirement savings, more quickly.
- Create a budget. Saving for retirement and getting out of debt are both important goals. Create a budget to determine how much of your income should go to each. A budget will also help keep you from getting into more debt in the future.
It can be difficult to decide which financial goal to focus on. Our office can help. We’ve helped over 10,000 Upstate New Yorkers through difficult financial decisions, and we’d love to help you too.