# Lifestyles & Discussion > Personal Prosperity >  Is it wise to temporarily lower 401k contributions to payoff cc debt?

## The Freethinker

I am considering temporarily lowering my 401k contributions (but even if I do this I will still be 4% above the minimum required to get a full match from my employer). If I do this, I'll have a few hundred bucks every month and this should help me kill off some credit card debt more quickly.

This is ZERO PERCENT cc debt. I want to do this so I can simply be done with it. I have other credit cards, which I pay in full every month.

Who here has done this? And if you did, was it hard at all to go back to a higher 401k contribution percentage after the debt was paid off? For me it should be fine because the extra after-taxes pay will not be used for fun but rather, strictly to pay off debt.

----------


## rp08orbust

How long is the 0% interest rate for?

----------


## flaversaver

We need more info in order to do the math. 

- How much money do you make?
- How much debt is on that card?
- How much can you put towards that card each month?

----------


## angelatc

You should pay off the cards that aren't 0% first. The rest is a judgement call, but as long as you're getting the full match I'd pay off the debt.

----------


## brooks009

I'm doing this now(for 2 years). I almost have my dept paid off and will start contributing again to my 401K soon.

----------


## amy31416

I'd take my time with the 0% and go with the minimum payment on those, while paying everything else off ASAP--even if it meant lowering the contribution to the 401k.

My 401k is doing well right now, but understand that that money is essentially locked up and you're at the mercy of the gov't if you ever want to get to it before you're 65--and that age can change, the rules can change, and the gov't has access to it should things get really bad. Hardship withdrawals skim 10% off the top and you have to jump through a ton of hoops to get it that way. Other options for withdrawal go up to 35% if I recall correctly.

----------


## cbc58

My brother in law thinks that the govt. is going to go after the retirement savings of everyone in a way like the ecb wanted for Cyprus bank depositors.  When you look at how everything is structured as far as tax penalties and who manages most investment accounts - the writing is on the wall.  Bastard banksters and politicians have a plan.

----------


## Matthew5

Take advantage of the sure scenario. I'm sure that 0% won't last forever. Debt is alot more burdensome than your 401k taking a hit (which is at the mercy of markets anyway). Which is more advantageous to your family in the event of your death? Being debt free would be my priority #1. 

Just a layman's opinion, of course.

----------


## amy31416

> My brother in law thinks that the govt. is going to go after the retirement savings of everyone in a way like the ecb wanted for Cyprus bank depositors.  When you look at how everything is structured as far as tax penalties and who manages most investment accounts - the writing is on the wall.  Bastard banksters and politicians have a plan.


The conspiracy side of me says that you're possibly right, but 401k's have been structured that way for a long time. It actually makes me a bit uncomfortable that my 401k is doing so well when things are so tumultuous--is it artificial to get people to keep their money in? I don't know. In order to attempt to protect myself against this unknown, I'm doing all the research and getting the docs together to pull out, which is good to know regardless of your notions on the matter.

----------


## KingNothing

> I am considering temporarily lowering my 401k contributions (but even if I do this I will still be 4% above the minimum required to get a full match from my employer). If I do this, I'll have a few hundred bucks every month and this should help me kill off some credit card debt more quickly.
> 
> This is ZERO PERCENT cc debt. I want to do this so I can simply be done with it. I have other credit cards, which I pay in full every month.
> 
> Who here has done this? And if you did, was it hard at all to go back to a higher 401k contribution percentage after the debt was paid off? For me it should be fine because the extra after-taxes pay will not be used for fun but rather, strictly to pay off debt.



So, you're still getting every dollar that you can potentially get from your company?  That's what matters.

Secondly, don't pay a penny more than you have to on any debt that is interest-free. Pay down your high interest loans first, starting with the highest.

Always max out your employer's contribution to your 401k.  ALWAYS.  Then, pay down your debts, starting with the highest interest loans.  After that, consider your situation and whether or not it makes sense to pay down a 0-interest loan.  It probably does not hurt you to leave it hanging around, so long as you pay it off in its entirety before the interest rate increases (Assuming you got something like an 18-month financing deal from retailer, etc).

----------


## Matthew5

I know there's a financial argument for all of this, but what about a moral argument? Shouldn't one repay their debts before savings, especially if saving abundantly? I understand a SHTF fund, but if you've got excess in an untouchable account, it seems like debt should always take precedence.

----------


## Acala

The US government has made financial promises it can NEVER meet.  There is no question that it WILL default.  The only questions are when and how.  Nearly as certain as the eventual default is that before the default, the government will become more rapacious, gobbling up every bit of wealth it can sink its teeth into.  That includes your savings.  The banks and brokers who handle your 401k will instantly freeze your account on government command and turn it over without hesitation.  And that will be the end of your investment.

I suppose I am more risk-averse than some, but at this moment I would not put ANY money into either the stock market (which is held up by Fed money and forced low interest rates) or an account managed by any of the criminals responsible for the current fragile condition of the world economy.  Proceed at your own risk.

----------


## bwlibertyman

I agree with a lot of what's said here.  I would invest up to your match then get gazelle intense at the rest of your debt.

I have 40,000 in student loan debt. I take out 5% for investing and pay the minimums on all of my debts except the one with the highest interest rate.  On that one I pay as much as I can.

I would not risk leaving the 0% out there simply because it is at 0%.  If that cc is your last debt I would go ahead and pay it off.  I would say that it is probably better to pay off the higher interest rates first.

I say do whatever you want.  I would agree that we have a moral obligation to pay our debts off.  I would also do it as soon as possible because of the risk.  If you lose your job and you still have debt you are still obligated to pay.

----------


## The Freethinker

Fellow liberty lovers, thanks for the replies; here is a summarized answer to several of your posts.

1.	The 0% APR lasts until mid-December 2013.
2.	I have 3 credit cards that I use regularly, but they are all paid off every month. One of them is used for home internet, cable TV, auto insurance (electronic); another for wireless service (also electronic).
3.	My 401k is doing well too; I’m up nearly 10% 2013 year-to-date.
4.	I agree with being debt-free being a top priority, and I too believe in the moral impetus to be debt-free. I have been prepping/saving for retirement/acquiring real m0ney for some time now, and experience has taught me that I can do all this while paying off debt (takes tons of discipline and juggling and some timely DCAing).
5.	I am getting every cent/dollar my company offers (the first 6%, 50 cents to every dollar). I was at 10% in 2012, and gradually worked my way up to 16% right now (but I’ve only been at 16% since early February).
6.	Other than credit cards the only debt I have is a mortgage, which I plan to refinance this year.

----------


## Zippyjuan

You are paying zero pecent on that credit card right now (but be sure to pay it off before the free period ends or they will charge you interest for the whole time you have had it).  You are getting a match for your funds at work (basically free money).  If the not contributing to the 401k means getting the credit paid off before the zero interest expires, go for it.  If you would be able to pay off the CC before the zero intrest expired anyways, then keep making contributions. 

What you want to be looking at is what are known as "opportunity costs"- what else you could be doing with the money and what gives you the best return (or the least loss). If the option was to pay off a 25% interest credit card vs missing a 10% match from your employer on the 401k- that would be easy- pay the credit off. If the option was to BORROW from a 401k to pay off something, we would have to look at the penalties for the borrowing and compare that to the costs (interest rate) on the credit card. 

In general,  you want to get rid of whatever is charging you the highest interest rate. When you aren't paying interest any more, then you want to put the money into where you think you can get the highest return (including relative risks).

Congrats on trying to get rid of your debt.  That mean you get to keep more of your money every month instead of giving it away in interest payments.  On that refi: check into a shorter term than starting over with another 30 years.  Say you have paid ten years on the loan.  Would a 15 year loan be affordable for you?  Reaon being is that you go back to where only a small amount of your payment is going to principal.  A shorter term helps reduce the principle faster. If you have only a short time left on the loan (say less than ten years) it may be not worth it to refi. I just made my last mortgage payment at the end of last year.

----------

