Retire On Your Terms

Should You Budget for Retirement While Paying Off Credit Card Debt


Planning for retirement should start way before you actually plan to retire. It is recommended that you start saving for it in your 20s. This gives you the biggest advantage of compound interest and time. However, we know that there are many stages of life to get through as you prepare and save.

Some roadblocks to saving could be losing a job, having to save for other things like a house, college funds and the list goes on-and-on. According to our Consumer Financial Literacy survey, 39% of all households carry some form of credit card debt. It is hard to know if you should be putting all your effort to paying off your credit card debt and/or saving for retirement. If you have credit card debt, you are not alone. Here are our recommendations and tips as you prepare for retirement and pay off debt for a couple of scenarios.

Employer Matches to Your Retirement Savings

Some employers offer a match up to a set amount of your contributions to your retirement savings plans. This could be a 401k or a 403(b), depending on your company.

If you have credit card debt and are wondering if you should take advantage of the retirement matching benefit, consider this:

Do you struggle to make the minimum monthly payments each month?

  • If so, we do not recommend taking advantage of the company match at this time. It is essential to be able to pay down your debt so that you can effectively get on the right track financially. Once you get to the point where you have a clear plan and pay off strategy that you are not struggling to meet, reconsider your contributions.

If you are comfortably paying at least double your monthly payment and, on your way to paying off debt, it is ok to consider contributing to your retirement plan up to the amount your company offers to match so you can take advantage of the “free money.”

Employer Does Not Match Retirement Savings

Even if your employer does not match your retirement savings, it is imperative for you to save and prepare. However, we would recommend waiting to save for retirement and trying to pay off your debt as quickly as possible since there is no incentive of free money to take advantage of.  The only time we may recommend doing it anyway is if you are an older individual with very little set aside already.  

If you’d like to check out if your savings are on track for retirement, check out this calculator.

Our survey found one of the top financial worries is retiring without enough money set aside. If you are worried that you are not able to save enough, and debt is getting in the way, please reach out to an National Foundation for Credit Counseling certified financial counselor.                They will walk with you through the steps to create a plan that empowers you to get on track to pay off debt and plan for retirement.

Author: Courtney Nagle is the Digital and Social Media Specialist for the National Foundation for Credit Counseling.