In this segment of the Motley Fool Answers podcast, Alison Southwick, Robert Brokamp, and special guest Ross Anderson from Motley Fool Wealth Management consider the right financial strategy when it comes to retiring your higher-interest credit card debt versus investing in your future via retirement account contributions. No matter how high the interest you're paying may be, though, there's likely a reason not to put all your eggs in the payoff basket.
A full transcript follows the video.
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This video was recorded on Nov. 7, 2017.
Alison Southwick: The next question comes from PT. "I am a 30-year-old investor and I contribute to an IRA and a retirement plan at work. Because of a life crisis incident, I have $14,000 in credit card debt. Should I reduce the contributions to my retirement accounts in order to pay down the debt? I should add I've been savvy about swirling around the credit card debt, keeping APR pretty low."
Ross Anderson: All right, PT. I think that, first of all, good job trying to keep that APR pretty low. Pretty low is always relative on credit cards. It could be anywhere from, let's call it 6-7% to 13-14%, would still be kind of in the low range. I think I would reduce your contributions in order to do that. I wouldn't give up a match, because if you're getting a 50% match on your 401(k) contributions...
Robert Brokamp: Yeah, I agree.
Anderson: ... it's unlikely that you're paying more than 50% in terms of the interest on your debt, but I think getting through that period and then going back to your full contribution is important, so I would see you reduce it to a level that you're not giving up the match, at least in the short term.
Brokamp: And I hope whatever the life crisis incident was has resolved itself and everything's going well.
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