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<p>I'm a SAHM. My DH has a great 401k thing offered at work: 100% contribution matching up to 6% (i think) of his income. His business school classes taught him how very much this can grow over such a long time (we're in our 20's now He's putting 3% in now and I'm happy with that. If he gets a raise he wants to increase the contributions though, while I'd rather increase the amount we pay off of debts, progress has been painfully slow on that. He says even if we kept that debt forever this kind of retirment plan would give us more than the interest we'd pay. But as I've been trying to tell him, it's about moving on to another stage of our lives financially, moving on to saving instead of repaying, making progress instead of catching up. We want to buy land in the country and build a house someday when we can buy the land at least outright. He says wanting to pay off before saving up for retirement is illogical and emotion based, since it'll double immediately and grow so much over time. What argument would get through to him? Or am I wrong and being misled by Ramsey, etc?</p>
 

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<p>my dh was the same way for over a year, he was putting in 8% eventhough we still have credit card and other debt to payoff. The thing that made him change it was me literally showing him the yearly statement and saying "look hun we have 9K in 401 k savings, had we used that money to pay off cc's we would almost be completely cc debt free. That hit him hard and the next day he changed it to 1%, but of course that was after the fact and it was just a couple months ago so, i don't have any advice, but if you look at our situation, putting off retirement or saving at a lower rate, we would have so much less debt right now, and instead we barely paid off any cc debt this past year.</p>
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<p>Good luck, try to convince your dh to keep it low until you get your debts paid down at least!</p>
 

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<p>I agree with your dh: he should be contributing the amount that his employer matches to the 401k. The 401k is likely pre-tax, so you can put more towards retirement savings than you would see in the paycheck after taxes.The match is free money (where else can you instantly earn 100% interest?), and a good start towards the retirement savings that you will eventually need and that is much easier to accumulate if you start early.  Above that, you'll need to figure out how much for debt, how much for other savings, and how much for retirement. Being out of debt is important and something to strive for, but so is giving 'future you' enough money that you can live without excessive stress when you are older.</p>
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<p>If I could go back in time, I would have saved more for retirement in my 20s. Now I'm in my 40s, and the money I put in for retirement has less time to grow, so I need to put more in. That in turn affects how much we can save or spend on other purposes, such as college for ds, buying a home, travel, etc.</p>
 

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<p>I agree with pp-- i"d put the 6%; and then on top of that look at what else you need to cut to pay off that cc. Does it really have to be either or? I see how DR's plan works when both people are on board, but if you stop retirement contributions, and still keep that debt-- or worse continue to rack up debt, you'll be in a far worse position.</p>
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<p>And a lot would depend on financial specifics-- the numbers I had in mind were what was in ilovemybabybird's post. If you had very little cc, or money was extremely tight I may change my answer.</p>
 

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<p>I agree with your DH.  You should be putting the amount of money in your 401K to earn the full company match.  That's free money.  Then all other extra money should go to be used to pay off your debt. </p>
 

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<p>I agree with your husband that he should at least be doing the max that company manages.  It is free money and it helps reduce your overall taxes (assuming he is doing pretax).</p>
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<p>You are in your 20's so I am assuming that you/he have considerably more earning potential? To handle the debt you should use 100% off all additional funding you may get such as raises, bonuses, gift, etc towards debt.  If he gets say a $50 a week raise you should pretend that $50 does not exist and add that to the amount you are paying each month. Year end bonus-same thing. Snowball" it by paying off the highest interest debt first, making min. payments on all the other.  Once the first is paid off, take the amount you were paying, add it to the min payment of the next highest debt, etc etc. </p>
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<p>good luck</p>
 

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<p>I would do as much of the 401 to get that free money and decrease the taxes on income.My dh does the 401 and also we put non-taxed income into a HSA that rolls over.Whatever we have left goes towards debt.And atleast one extra principal only payment a year on the mortgage.</p>
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<p>Check out the clark howard show for input.</p>
<p><a href="http://www.clarkhoward.com/" target="_blank">http://www.clarkhoward.com/</a></p>
 

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<p>LIke others said, I agree with the max contribution to the 401k to get the employers match.   That money you are saving in your 20s has 40 years to grow.</p>
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<p>While I think a lot of Dave Ramsey's advice is good, he does not, based on my limited readings, address the bigger picture of comparing rates of returns on investment XYZ versus the interest cost of certain debts.  In some cases, it is a far better financial decisions to fund a 401k (tax benefits on employee portion + future earnings + 100% earnings on the employer portion) then to pay off a $6,000 car loan, for example.</p>
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<p>The idea of debt bad, savings good is obviously correct in theory but there so much more below the surface that makes the "what is the best thing to do?" different for every household.</p>
 

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<br><br><div class="quote-container"><span>Quote:</span>
<div class="quote-block">Originally Posted by <strong>Caneel</strong> <a href="/community/forum/thread/1288898/dh-prioritizing-retirement-over-debt-payoff#post_16156172"><img alt="View Post" class="inlineimg" src="/community/img/forum/go_quote.gif" style="border:0px solid;"></a><br>
While I think a lot of Dave Ramsey's advice is good, he does not, based on my limited readings, address the bigger picture of comparing rates of returns on investment XYZ versus the interest cost of certain debts.  In some cases, it is a far better financial decisions to fund a 401k (tax benefits on employee portion + future earnings + 100% earnings on the employer portion) then to pay off a $6,000 car loan, for example.</div>
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<p>Your reading of DR is correct. Back when we were in debt up to our eyeballs, I became a real DR fan. We attended a live show and did the financial peace classes. We were committed off and on to DR's philosophy, but we have managed to pay off a ton of debt. Eventually, though, we scaled back the repayments to debt and began to put money away and also to save for purchases we needed (mostly upgrades to our house). DR really would have you put everything off and live this spartan life. He's really fond of saying "eat rice and beans, beans and rice," and that's what he preaches. Everything is very much about sacrificing now to pay off debt and then sacrificing to put away everything you can for some mythical day in the future when you can enjoy it. I get why he says what he says, and I understand why it works for lots of people. It's just not the best plan for lots of folks. The comparison you mention is one of many omissions. He often talks about a 12% rate of return on mutual funds in comparison to 18% interest cc rates this year and concludes that obviously the 18% is worse. If you're in the red every month, yes, pay off the cards! If you could be putting away money for later, then the better long-term strategy is to fund retirement.</p>
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<p>OP, I agree with your husband in general as well. One factor that may tip the scales for me would be the amount/rate of your debt versus the amount he's putting into savings. If he could bump back his 401(k) for 4 months, for example, and pay off your credit cards, then I'd do that for the peace of mind and eat the loss of the 4 months of contributions. If it's going to take years, then I'd be less likely to do so. As a pp said, I regret that we didn't save more earlier and focused on debt repayment. While it's nice having fewer bills, I cringe when I think about retirement. DH & I both turned 30 this year, and we have VERY little saved for retirement. </p>
 

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<p>I would also prioritize retirement over debt.  Especially with his companie's generous matching benefit.  You are saving on taxes as well.</p>
 

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<p>I would definitely put enough into retirement to get the full company matched portion, as others said it's free money and even if at some point you need to stop contributing that money will still be there, growing until you retire.  Above that amount you have to consider the kind of debt you have and the interest rates, and compare that with the savings.</p>
 

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Another person who agrees with your DH. I'm not sure you'll want to show him this thread <img alt="winky.gif" class="bbcode_smiley" src="http://files.mothering.com/images/smilies/winky.gif"><br><br>
When you consider the tax duduction together with the great match, you are getting at least a 125% return on your money. If you're not paying that much in interest on your debt, not only are you planning for the future, but you're making money doing it.
 

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<p>I'm going to agree with the OP on this one. I know the feeling of not being where you want to be and always coming short of moving on with life. You are already doing a great job by having funds going towards retirement in your twenties. Even though you may be able to make more/save more in the long run by putting the extra cash in the 401k, there's a lot to be said for having a savings fund, having a down payment for a home and feeling good about what you are accomplishing in the here and now. You are not looking to be wasteful with your money by buying things you don't need, you are looking to pay down debt and save for a home. Both pretty worthy goals, imo. I wouldn't stop contributing to the 401k what you already are but I see no reason to sacrifice your current goals to fund it more. </p>
<p>I don't think it's illogical and I don't think there's anything wrong with making making some decisions based on emotions. It would be pretty sad to wait forty years to be happy, even if you have a huge wad of cash in the end. </p>
 

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Discussion Starter · #14 ·
<p>Well, we don't pay taxes, get a great refund anyway, so that benefit is missing, and he's a full time student so doesn't get the saver's credit on taxes. But yeah the matching is great and the long long time it has to earn on. I guess the couple thousand yearly he wants to increase it by won't go far in wiping out the debt anyway, but the 60k it turns into someday will be good. If I can just get him to stop going to restaurants on lunch breaks and throwing out his microwave lunches we'd stay on track. We should be done with the CC and the auto loan in 9 months, and can pay for his grad school out of pocket just fine when that comes up. After that it's the student loan to deal with, which we'll need to pay before he's been done with school 6 months so no interest.</p>
 

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<p>Wow, it sound like there's nothing to worry about anyway - you'll be debt free in short order even without reducing the retirement.</p>
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<p>I was going to say that there's an argument to be made for both approaches, and I think what really matters is what feels most motivating. The rub of course being that different things are motivating you (the OP) and your DH. But based on what you wrote just now, I wouldn't sweat it.</p>
 
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