The 401k

Alright, time to come clean: I stopped contributing to my 401k. Trust me, it wasn’t an easy, straight-forward option. I’m still not 100% sure it was the right decision. But, it’s the decision that I made for now.

The biggest reason for stopping my 401k contributions is because I’m trying to focus all of my attention on debt payoff. The bathroom remodel is officially complete, and I have $3,000 set aside for other work around the house. Stopping my 401k contributions allowed me to bump up my weekly “extra” amount to $170. I’m now putting that money into my savings account, in a category marked “student loan”. I’m worried that something may come up with trying to sell the house, so I want to keep that money available until I’m sure. Which is why I’m not just sending it directly to the student loan company each month. Also, my student loan is setup on auto-withdrawal, which gives me a very small % discount on interest. Sallie Mae is notorious for messing things up when you try to pay ahead. So, I figure it’s better to wait, at least until I have a big chunk set aside that I can send in.

Looking for a new job also made me more interested in stopping my contributions. I’m not sure why that is, since I already know that I’ll be switching everything to a Vanguard IRA when I leave here. But something about putting money into a plan that you don’t intend to be with long-term seems off. But not to worry, stopping my contributions doesn’t mean I’ll lose any company funds; My company contributes 6% to my 401k, whether or not I ever put in a dime. And it’s 100% vested, so I won’t lose any of that money when I roll things over.

Pretty much every financial planner out there will tell you that contributing to your retirement is the most important thing. Some would make exception for paying off debt. By not putting that money into my 401k, I’m losing out on compound interest. But, that extra little bit every week is helping me to pay off my debts much sooner, which is saving me interest. If everything goes according to plan, I’ll be able to pay off the student loan by the end of the year. That’s 8 years sooner than if I continued making the minimum payments! And that’s assuming that I don’t sell the house; If the house sells, I’ll have even more money to throw at the student loan! When the student loan is paid, I’ll be able to roll forward with paying off my car. Once I’m debt free, I’ll be able to really attack my retirement savings!

It isn’t a perfect solution. But, it’s what works best for me right now. And, the good things is, if I change my mind, I can change my contributions at any time. I’m not stuck with my decision.

– Cindy W.


  1. I absolutely agree with your decision. You’re not stopping contributions because you want to go off and have more fun, you’re doing it to pay down debt. That logic sounds good to me.

    I’ve tried to convince my husband that we should stop fully-funding our retirement accounts at least until we’re out of debt, but he won’t budge. I also personally think that my husband and I should start using the 0%APR (no fees!) option that we have on our credit card until June so that we have more cash to pay off the 2% interest loan, but alas, I can’t convince him of that either.

    Anywho, point being, sounds like you’re doing the right thing for you and I think that’s fantastic.

    1. Thanks Zoe! It’s hard when there are two people involved in the decision making process. The boyfriend is still pretty hands-off about “my money”, but we still have a lot of disagreements when it comes to credit cards and loans, etc.

  2. I’m doing the same thing right now. I feel kind of weird about it, since I have SO little in my retirement account ($2280, LOL) but I decided that I would just keep maxing out my loan repayment until I finish this job and switch to the new one in July. Since that’s the path I’m on…. and I’ll have paid off my loans a year after graduation, instead of 10 years out, and saved thousands of dollars in interest.

    But yeah, it’s a tough call. I spent a long time googling “paying down student loans vs. retirement” and things like that. Good luck!

    1. Yeah, looking at my retirement balance is pretty depressing, especially when I compare it to other PF bloggers around my age. But I can’t wait to have this student loan behind me! I was luckily able to pay cash for the graduate classes I took, so that helps. But it makes it even more depressing that this loan is from back in my undergrad days. I graduated in 2000! Ugh!

  3. That’s pretty amazing that your employer contributes regardless! Sounds like you really thought things out in a tricky situation. You know what’s best for you above anyone else.

    1. It is an amazing benefit! Like every job, there are good things and bad. But the benefits are excellent!

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