{"id":264515,"date":"2025-11-05T15:03:28","date_gmt":"2025-11-05T15:03:28","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/264515\/"},"modified":"2025-11-05T15:03:28","modified_gmt":"2025-11-05T15:03:28","slug":"pay-down-debt-or-save-for-retirement-what-financial-experts-actually-recommend","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/264515\/","title":{"rendered":"Pay Down Debt or Save for Retirement? What Financial Experts Actually Recommend"},"content":{"rendered":"\n

You\u2019re juggling student loans, car payments, and credit card balances while trying to save for retirement<\/a> \u2014 and you\u2019re not sure which should come first. Should you prioritize getting rid of those balances, or is it more important to keep investing for retirement<\/a>? This is the dilemma GOBankingRates reader Veronica brought to our Top 100 Money Experts series.<\/p>\n<\/p>\n

For You: I Paid Off $40K in 7 Months Doing These 5 Things<\/a><\/p>\n

Learn About: How To Get Guaranteed Growth On Your Money \u2014 Without Risking Your Principal<\/a><\/p>\n

To help her think more clearly about her situation, we turned to Connor Bauserman<\/a>, a financial planner at Preferred Financial Group<\/a> who specializes in helping people navigate this exact question. He gave Veronica some clear points to consider and offered helpful insights to help her strike the right balance.<\/p>\n

With total household debt in the U.S. reaching $18.39 trillion<\/a> in the second quarter of 2025 and few Americans having significant retirement savings<\/a>, this has become one of the most common dilemmas people face.<\/p>\n

Bauserman explains that when someone asks how much to contribute to their retirement fund<\/a> while\u00a0paying down\u00a0debt, the standard answer is around 10%-15% of your income.<\/p>\n

\u201cThat\u2019s typically what\u2019s needed to retire \u2018on time\u2019 \u2014 meaning by age 65 or earlier,\u201d he said. \u201cThat\u2019s assuming you\u2019re entering retirement debt-free<\/a>, mortgage paid off, and you\u2019ve been investing consistently throughout your career to take advantage of compounding.\u201d<\/p>\n

But\u00a0Bauserman is quick to point out that this is a very general answer \u2014 a starting point. \u201cEveryone\u2019s situation is different,\u201d he said. \u201cThere are plenty of scenarios that can shift that number.\u201d<\/p>\n

Read Next: Dave Ramsey Warns: This Common Habit Can Ruin Your Retirement<\/a><\/p>\n

The first step isn\u2019t choosing between paying down debt or saving \u2014 it\u2019s seeing where your money is really going.<\/p>\n

\u201cThe first thing I look at is someone\u2019s budget,\u201d Bauserman said. \u201cIs there extra cash flow to tackle debt? If not, where can we free some up? Once\u00a0we\u2019ve\u00a0got that picture, I divide debt into two buckets:\u00a0bad debt\u00a0and traditional debt.\u201d<\/p>\n

He avoids calling anything \u201cgood debt\u201d because that label can give people the wrong idea. \u201cIt makes it sound harmless, when\u00a0in reality, any debt can hold you back financially if\u00a0it\u2019s\u00a0not managed well,\u201d he said.<\/p>\n

Bauserman further broke down the differences in debts:<\/p>\n

These debts include your mortgage<\/a> or student loans<\/a> and tend to have lower interest rates and longer payback terms. He doesn\u2019t usually recommend prioritizing them over retirement savings.<\/p>\n

Story Continues <\/p>\n

\u201cOnce bad debts are cleared and there\u2019s extra room in the budget, then sure \u2014 put some extra payments toward student loans or your mortgage,\u201d he said.<\/p>\n

These debts are high-interest or depreciating ones, such as credit cards, personal loans<\/a>, car loans, boats, RVs and so on. \u201cThese are tough on your budget because you\u2019re borrowing money for something that either loses value over time or carries double-digit interest,\u201d Bauserman said.<\/p>\n

If\u00a0bad debt\u00a0payments are straining your ability to cover essentials or save anything, then paying them off should come first, he said. \u201cSometimes that means making tough calls \u2014 like selling a vehicle or refinancing to lower a payment.\u201d<\/p>\n

For example, if\u00a0you\u2019ve\u00a0got a $50,000 car loan with five years left, you might sell it, buy something more modest for $15,000, and aim to pay that off in a year or two. Then, use the extra cash flow from those lower payments (the \u201cdebt snowball\u201d) to tackle your next goal \u2014 whether that\u2019s other debt, your emergency fund, or retirement savings.<\/p>\n

Even if\u00a0you\u2019re\u00a0focusing on debt payoff, try not to stop saving altogether, Bauserman urged. At the very least, contribute enough to get your employer\u2019s match<\/a>.<\/p>\n

\u201cIf your employer matches up to 3%, and your long-term goal is 15%, that 3% match plus your own 3% contribution gets you to 6% total,\u201d he said. While it may not be perfect, Bauserman points out that it\u2019s\u00a0far better than\u00a0missing out on\u00a0\u201cfree money\u201d your employer is offering. \u201cSkipping that match can cost you\u00a0thousands\u00a0over your career.\u201d<\/p>\n

If paying off your debt<\/a> is going to take more than one to two years, you\u2019re probably better off continuing to contribute to retirement rather than pausing. The longer you wait to start saving, the harder it is to catch up \u2014 because when it comes to investing, time is your biggest ally.<\/p>\n

Bauserman laid out the numbers of consistent retirement saving: \u201cIf you start saving $5,000 a year at age 23 and earn a 10% return until 65,\u00a0you\u2019ll\u00a0end up with about $2.8 million. Wait just three years and start at 26, and\u00a0you\u2019ll\u00a0have\u00a0roughly $2.05 million \u2014 a $749,000 difference,\u201d he said.\u00a0\u201cThat\u2019s\u00a0the power of time and compounding.\u201d<\/p>\n

Age, interest rates and debt type all factor into the decision, but generally, long-term investing shouldn\u2019t take a complete backseat for too long.<\/p>\n

Bauserman says he doesn\u2019t hate debt, but he feels it does make life harder. \u201cDebt slows progress and adds weight to your financial goals.\u201d<\/p>\n

He likens debt to running a race in heavy boots and jeans instead of lightweight running attire.<\/p>\n

\u201cDebt works the same way,\u201d he said. \u201cThe less \u2018baggage\u2019 you carry, the faster you can reach your financial goals. So, if\u00a0you\u2019re\u00a0running that race with some debt weighing you down, just know \u2014 it\u2019s\u00a0still possible to finish strong. You might just need to change your clothes and shoes along the way.\u201d<\/p>\n

This article is part of GOBankingRates\u2019 Top 100 Money Experts series, where we spotlight expert answers to the biggest financial questions Americans are asking. Have a question of your own? Share it on our hub<\/a> \u2014 and you\u2019ll be entered for a chance to win $500.<\/p>\n

More From GoBankingRates<\/p>\n

This article originally appeared on GOBankingRates.com<\/a>: Pay Down Debt or Save for Retirement? What Financial Experts Actually Recommend<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"You\u2019re juggling student loans, car payments, and credit card balances while trying to save for retirement \u2014 and…\n","protected":false},"author":2,"featured_media":264516,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,154838,154840,186,110594,184,185,154839,17822,20153],"class_list":{"0":"post-264515","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-connor-bauserman","12":"tag-credit-card-balances","13":"tag-finance","14":"tag-financial-planner","15":"tag-personal-finance","16":"tag-personalfinance","17":"tag-preferred-financial-group","18":"tag-retirement-savings","19":"tag-student-loans"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/264515","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=264515"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/264515\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/264516"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=264515"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=264515"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=264515"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}