Sykotyk;1167405 wrote:If you're in debt, any kind, you by default are not saving for your retirement.
For instance, if you have a credit card that is at 18% interest it is pure stupidity to put money in any bank unless you can beat that 18% return to make money. Secondly, as you pay off the debt you pay less interest, thereby making your return on investment better.
So, setting money aside is a losing proposition. Pay off your debt, then you can save for retirement.
A mortgage, especially at these rates, would be an exception. The bubble aside, it has historically been the largest nest egg for about 90% of Americans.
Student loans at low, subsidized rates would also be an exception. Perhaps auto financing, as well, if, as you mentioned, you can beat those rates in the market. Anyway, the former two can actually be viewed as investments and the auto financing is just an ROI proposition. But technically, the principal repayment in a mortgage is saving.
Everyone should be contributing as much as they can to a 401k or an IRA (which may be more appropriate for people in low tax brackets that expect to be in higher ones in retirement). Foolish not to take advantage of the compounded, tax-free growth. And it can still be a safety net as you can take hardship loans (though generally recommended only as a last resort).
People that rack-up credit card debt are just stupid. Temporarily it can make sense if you need some short-term business financing or might be out of work, but if your living beyond your means it's the surest way to financial ruin.
.
