Find the optimal balance between paying off debt and building retirement wealth
Employer matching is a guaranteed 100% return on your investment. If your employer matches 4% and you earn $60,000, that's $2,400 of free money annually. Never leave this on the table – it should always be your first priority.
If your loan interest rate is 5% but the market historically returns 7%, you're better off investing the extra money rather than paying down the loan aggressively. However, if your rate is above 6-7%, the guaranteed "return" of paying off debt becomes more attractive.
Retirement contributions to 401(k) or Traditional IRA reduce your taxable income now, while compound growth is tax-deferred. Student loan interest is deductible up to $2,500, but the retirement tax benefits often provide greater long-term value.
Every year you delay retirement investing costs you compound growth. $500/month invested at 25 growing at 7% becomes $1.2M by 65. The same amount starting at 35 becomes only $566K. Time in the market matters more than timing the market.
If you qualify for Public Service Loan Forgiveness, making only minimum payments while maxing retirement contributions is mathematically optimal. You'll have the loans forgiven tax-free after 10 years of qualifying payments while building substantial retirement wealth.
While math suggests investing at lower interest rates, some people prefer the guaranteed "return" and peace of mind from being debt-free. There's value in psychological well-being – the optimal strategy is one you'll actually stick with.