Should I save for retirement or pay off debt?

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I am 26 years old, currently contributing 6% to retirement funds and paying 10% on a auto loan with 20k left.

Michelle Tirpak, Member

@michelle_tirpak_1 • 03/05/15 This answer was first published on 03/05/15. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

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You should definitely contribute more money to your retirement account if you can rather then to your loan payment. Six percent is a good amount to contribute to begin with, however studies show that when you are in your 20's, it is best to be contributing at least ten percent of your salary into your retirement funds. In the end though, there is not a set formula to this. More is always better and you really can not save too much for retirement. The amount that you contribute to your retirement can also grow in your age with people that are in their thirties and forties reporting that they put anywhere from up to twenty percent of their salary towards retirement. It is also possible to find alternative sources to save towards retirement rather then just contributing funds into a retirement account. One route to consider is potentially investing in a mutual fund. Mutual funds can invest in everything from stocks to treasury bonds and each investor gets a slice of the fund as time progresses and the fund reaches maturity. Mutual funds are a bit more risky then your standard retirement account, however if you wanted to allocate a portion of your funds to such an investment strategy, they do seem to be very profitable overall.
Looking into various investment strategies and options would be a very good route for you to consider, and would make it possible for you to ease the financial burden that comes along with retirement. Look into saving as much money as possible without putting yourself into a financial hole. Look into a variety of options such as mutual funds, IRA's, savings accounts, and more. Try and map out a plan with the amount that you feel that you will need for retirement and how much you would need to save for a certain amount of years to get there. In the end, these are the best ways to go about maintaining and planning for a successful and happy retirement. Paying off your loan is important of course but retirement should always be a priority. The best advice therefore is to pay off your loan at the standard rate and focus on investing as much as possible into your retirement.

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