Alice Morgan, Photo Illustration for Investopedia by Getty Images
The Key Takeaways
- Nearly half of Americans (46%) who wished they had saved more for retirement said that debt—such as credit cards, student loans, and car loans—kept them from doing so.
- Some 62% said they were balancing multiple financial goals but don't know what to focus on.
- Experts suggest prioritizing earning your employer's 401(k) match if offered and then making payments on your debt, focusing on paying down high-interest debt.
Balance multiple financial goals can be challenging. According to a survey, people who are in debt may neglect saving for retirement.
About 46% of respondents who wished they had saved more for retirement said non-housing debt–like auto loans, credit cards, and student loans—kept them from saving more, Allianz's 2024 Annual Retirement survey found. Millennials are more likely than Gen Xers or Boomers to have trouble saving for retirement because of non-housing debt.
More than one-third (34%) of respondents who wanted to save more for retirement said that their housing debt was a barrier. Of respondents who had wanted to save more for retirement, more than one-third (34%) said that their housing debt (Allianz refers to housing debt as a mortgage or rent) Their retirement savings was inhibited.
"Limiting retirement saving because of debt can leave you vulnerable to outliving savings in retirement," said Kelly LaVigne, VP of consumer insights at Allianz Life.
What Should you do? Pay down debt or save for retirement?
More than 60 percent of the respondents to our survey said that they had so many goals to achieve financially, it was very difficult to determine what should be their top priority.
Experts recommend that those who are struggling with debt pay it off by first earning the company’s match on their 401(k), if your employer offers one, and using any additional savings for debt repayment, particularly high-interest debt such as credit cards.
"The employer match equates to an immediate, guaranteed, 100% return on your investment," said Clark Randall, Director of Financial Planning at Creekmur Wealth Advisors. "Once the employer match has been earned, it is best to focus on paying off debt since the interest rate on consumer debt is high."
Legislative changes have also been made to assist people in achieving their different financial goals. SECURE 1.0, a federal retirement act, permits workers to apply their matching retirement contributions towards student loan repayments instead of funding their 401 (k) accounts. However, this is not yet widely available. Workers would lose out on the opportunity to grow their retirement savings but could reduce their debt quicker.
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