Should I reduce my 401(k) contribution to pay off my debt?

Should I reduce my 401(k) contribution to pay off my debt?
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I am 30 years old and am looking to pay down approximately $9,000 of credit card debt (no interest until next April) so that my partner and I can purchase a house. I make $40,000/yr and have about $86,000 in student loans (that said, I work in non profit and am 5 years away from having my loans forgiven under the non profit loan forgiveness plan, should that aid program stay in place under the new administration). I currently contribute 8% of my salary to my 401(k) with a 150% match from my employer and have about $36,000 in my 401(k), currently. I have adjusted and readjusted my budget to aggressively pay down my debt, but my take home income of $2,200/mo doesn’t give me much leeway after bills.


A 150% employer match on 8% is a really attractive benefit, so it goes without saying that you should do anything possible to keep maxing out the employer match while still paying down this debt.
Assuming you can’t find another method to pay down the credit card debt, you probably should halt your 401(k) contributions for a couple months and aggressively pay down this debt.
I will note, however, that the worst thing you can do is fail to explore the cause of this credit card debt in the first place. If you learn from that experience, then your long term financial plan won’t be damaged much by taking a year or two off of retirement saving.
Adam C. Harding, CFP
Disclosure: For informational purposes only. Not to be considered investment, tax, or legal advice. My responses on Nerdwallet are for educational purposes only and action should not be taken until a thorough analysis has been done by me or your financial advisor. Investing involves risk of loss and diversification does not ensure protection against risk of loss.


Before considering stopping your 401k contribution, see if this route will help.
To start with, make a budget. Total up all your monthly take home pay. Next, start to subtract all of your expenses. You will want to subtract your housing, car, gas, food, entertainment, clothing, insurance just to name a few.
If you aren’t sure where your money went, go to your checking account online or in your register. Take a 30 day period and start to categorize your spending. If it’s groceries, put the dollar amount under the heading groceries. Do the same for eating out, snacks and drinks, entertainment, clothes, or any other category you discover.
Add up the columns so you have an idea of what you spend on each one for a month. Put those figures into the budget. Once you’ve completed that task, subtract the total spending from the total income. Hopefully you have a positive number. If not, you need to go through each category and decide where you can cut back until you do have a positive number.
Doing this will allow you to free up extra money to put towards your debt, and will also allow you to keep putting money into your 401k each month.
To set up a debt reduction plan, you can go to It’s a free website. You will put in all of your debts, including the dollar amount owed, what the interest rate is, and the minimum payment. From there you put in the extra money you have to apply each month. It will calculate how long it will take you to get out of debt, and even print you a calendar showing how much to pay on each debt, each month. (the directions for this sight are right on the homepage on the right hand side).
Another option is to work with a credit counseling agency. They will negotiate lower payments, or lower interest rate, or both with your creditors. From there, you pay them a small monthly fee along with the total new monthly payments and they make your payment for you.
This can be extremely helpful if you are feeling overwhelmed, are receiving phone calls, or can’t get out from under the debt due to huge interest rates. You can find a legitimate credit counseling agency at, or if you prefer to work with me, you can contact me through
Good Luck!


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