A viewer, Caitlin, asks: “I’m a recent college graduate, should I start saving for retirement or pay off my student loans?” Our moneyman, Paul Fain, president of Asset Planning Corporation, has the answer with 5 tips for your Sunday Money.
PAUL, FOR NEW GRADUATES THIS IS A GREAT QUESTION: PAY DEBT OR START INVESTING?
- 56% of young Americans postpone retirement savings because of student loans.
- Miss out on the benefits of compounding.
- Solution: Tackle both!
SO WHAT SHOULD BE THE ORDER OF BUSINESS: LOANS OR INVESTING?
1. Student loans: Make the minimum loan payments. Build credit.
2. 401k: “Free money.” Take advantage of 401(k) match.
WHAT IF YOU DON’T HAVE AN EMPLOYER RETIREMENT PLAN?
3. Open a Roth or Traditional IRA. Contribute up to $6,000 a year.
IN AN IDEAL SITUATION, WHAT IF YOU HAD ADDITIONAL FUNDS TO USE?
Assuming no credit card debt and already have an emergency fund:
4. Pay additional funds against your highest-interest-rate student loan.
5. Use windfalls (gift, bonus) wisely: Reduce student debt and save!
QUESTION FOR OUR MONEYMAN?
Send them to Paul@assetplanningcorp.com!
You can also reach Paul by using the contact page on APC’s website.