Should I add to retirement savings or pay off debt?
by Amy Podzius

For most of us, the thought of paying back our student loans can be a little daunting, especially when we're fresh out of school and we're making less money than we'd like to be.
When you consider your principal balance, the interest, and 10 years of payments or more, it may seem like those loans are going to be one of the defining aspects of your adult life, making it that much harder to prioritize what to pay off or save for first, while also enjoying your hard-earned dollars today.

Student loans or retirement?

Even after you start paying them back, you'll be faced with some difficult questions. What about retirement? You will want to retire someday, so how do you save up for it with all of that student loan debt to deal with? Do you commit completely to your student loans and worry about retirement later? Do you try to handle both now, even if it means being a little less aggressive with your student loans?

Why should I pay off debt while saving for retirement?

Not everybody's situation is exactly the same, and it's going to be harder for some people than it is for others, but the truth is, it's possible to set aside money for both — maybe not easy, but definitely possible! It makes more sense to put even a little bit aside for retirement now, even while you're repaying your loans.
By nature, retirement savings are designed to grow over time, so starting to save sooner is better. While retirement may seem very far away, putting more aside today may mean less catching up later on.

How much to save?

Six percent of your income is a pretty good general rule for how much to set aside, and that's usually enough to qualify for any kind of matching program your employer may have set up. (That's free money you wouldn't be getting otherwise. Consider taking advantage of it!)
Also, if you can, remember to pay yourself first. If your employer offers the option, you can set up deductions from your paycheck to go directly into your retirement plan. Usually you can submit a form in person or online through your Human Resources department that allows you to elect what percentage of your income you would like deducted from each paycheck. By automating your deductions, you'll be less likely to ever miss the money you're setting aside.
Over a long period of time, there is the potential to earn more in a retirement plan than the amount you would pay in student loan interest. Even if you can only save a small amount, that money can go a long way.

Amy Podzius

Amy Podzius is a TIAA Financial Consultant based out of Chicago. Amy is a facilitator for TIAA's Women to Women Financial Education Workshops and hosts an array of financial education seminars for participants at all ages and stages of their careers. 
This article is for general informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons. It is not intended to be used, and cannot be used, as a substitute for specific individualized financial advice.
Please keep in mind that there are inherent risks in investing in securities, which may be subject to market and other risk factors.

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