PLANSPONSOR - October/November 2018 - 16

Survey Says
Paying Down Debt
Or Saving for Retirement?
T
here are arguments on both sides as
to whether eliminating-or greatly
reducing-debt should be a priority
over saving for retirement, or vice versa.
We asked NewsDash readers, " Should
people focus on paying down debt before
focusing on saving for retirement? "
As expected, the majority of those
who responded (67.5%) work in a plan
sponsor role; additionally, 18.2% are
third-party administrators (TPAs)/recordkeepers/investment
managers, 11.7% are
advisers/consultants, and 2.6% are attorneys.
Nearly three-fourths (74.4%) of
respondents said people should focus on
paying down debt and saving for retirement
simultaneously. Two in 10 (20.5%)
said they should focus on paying down
debt first, and 5.1% said they should focus
on saving for retirement.
Respondents' comments regarding
whether to prioritize debt reduction or
retirement saving were a mixed bag.
However, most of them favored addressing
debt and retirement savings simultaneously.
Many advised that everyone should
first take advantage of the employer
match, if there is one, in their retirement
plan. Some said the decision is not so
simple and requires analysis.
As always, all verbatim responses
reflect the opinions of individual readers
and not the stance of PLANSPONSOR or
its affiliates at Strategic Insight.
" The type of debt matters. Pay off credit
cards, car loans, etc., before paying down a
mortgage. If you can't address debt and retirement,
you need help from a financial adviser. "
" Create a budget so you can do both.
As debt is paid off, allocate your additional
funds to paying off more debt and toward
retirement and general savings. "
" First, establish an emergency fund.
Then, pay down non-mortgage debt. Then,
save for retirement. The interest that people
pay on consumer debt is outrageous and will
set them back financially for years. Get rid
of that albatross ASAP [as soon as possible]. "
" If the only debt is a house payment, they
need to do both. But if they are in way over
their head, they need to make lifestyle changes
and reduce their debt load so they can save for
retirement. For those in over their head, I like
the Dave Ramsey program. "
" It doesn't make sense to set aside a
" You should pay toward whatever
has the best return on your money.
Investing at 3% does not beat paying
toward an 8% loan. #math. "
" The debt should always be attacked,
but, depending on the interest variance, the
emphasis may change if earnings are better
than debt servicing. One should always be
analyzing. Without analysis, attack the
debt first. "
" Retirement savings is so important.
I think many individuals will say they are
paying down debt but are really only accumulating
more. Eventually the accumulation
of debt will stop as credit lines runs out. "
" Sadly, most people will always have
some amount of debt during their working
lives. Realistically, if everybody waited
until the debt slate was clean, they'd never
save for retirement. I advise employees who
have school loans to opt down, not out, of
contributing to our DC [defined contribution]
plan-particularly when you lose out
on company matching money. "
" It's a tough question. Obviously,
hitting retirement with debt is not the best
idea, but if you save little to nothing for
retirement, you're giving up the benefit of
long-term compounding. "
16 PLANSPONSOR.com October-November 2018
Art by Claudi Kessels
percentage of your pay in a 401(k) when
you're paying double-digit interest on your
credit card debt. "
" No point in being debt-free in retirement
without enough income. At worst,
bankruptcy will clear debts and qualified
plans are protected. "
" It's better to sacrifice some retirement
savings-even if matching funds are left on
the table in the short term-to pay off and
then avoid debt. Do that and you'll have
plenty of time to catch up on your retirement
savings, and you'll have the cash flow
to do it. "
" Student loans will come back to haunt
Millennials in retirement. You just can't get
the time back; kids need to save from birth. "
And the Editor's Choice goes to the
reader who said: " You should pay toward
whatever has the best return on your money.
Investing at 3% does not beat paying toward
an 8% loan. #math. " -Rebecca Moore
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PLANSPONSOR - October/November 2018

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