Should You Pay Off Debt or Save For Retirement?

Rick Orford
6 min readJan 19, 2021

Are you in a situation and wonder whether to pay off debt or save for retirement? If so, this article is for you. Being able to retire means having enough passive income to cover your monthly expenses. Since debt payments eat into your monthly surplus, paying off debt is as essential as saving for retirement. However, striking a balance between paying off the debt and saving is like walking a tightrope.

I can certainly understand and appreciate someone might favor saving for retirement over paying debt. Or vise versa. In my 20’s, I spent all the money I made, and then some! At the time, I didn’t understand the difference between good debt and bad debt and how high-interest debt could cripple my finances.

No doubt, there are many arguments to consider before deciding whether to save for retirement or pay off your debt. A financial adviser may encourage you to clear the debt first -depending on various factors — and then start to save for retirement. But before you decide, you will have to weigh the interest rates and the potential returns on your investments.

Let’s assume you are carrying $10,000 in credit card debt at 20% APR. If you pay off the debt, you’ll have a GUARANTEED 20% ROI on your money. And, considering the S&P500 appreciates about 10% a year, this an excellent deal!

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Rick Orford

Rick’s passion is personal finance, and works tirelessly to deliver content in an easy-to-understand manner. He is an author, investor, mentor.