Debt and Retirement

We have debt but we still put away 25% of our income into retirement.

I know that’s counter intuitive and I know that goes against everything Dave Ramsey says… That’s the one part of his plan that I disagree with. I get the whole “getting out of debt faster” thing, but we can’t give up that many more years of contributing to our retirement.

We are coming up “over the hill” and about to be sliding down the slope towards retirement. Yes we have debt (lots of it) but we also need to be planning for our future. As we don’t want to have to work into our 70’s, we are planning for retirement now.

For various reasons in the past, we cashed out some or all of our retirement/pension accounts. Now, we are playing catch up.

Compared to most people our age, we are doing well, but looking at the statistics, that’s not saying much.

The Husband has a 3% match at his work, so when he first started there (7 years ago today, eek!) he contributed 3% to get the match. We have steadily increased his contributions with every raise he has received and his company automatically (with his permission) increased his contributions by 1% a year on his anniversary date. This year, we will fully max out The Husband’s retirement. He will contribute the maximum allotment of $18500 and his work will continue to contribute 3%. On top of that, they contribute an additional 6% profit-sharing with his first paycheck of each year (for a total contribution of 9% on their part).

On my side, things are a little different because I am a teacher. Because I am a part of CalSTRS, roughly 10% of my paycheck is automatically deducted for retirement. In addition to that, my district contributes nearly 11%. I contribute another $1000 above and beyond those contributions towards my retirement.

I know this is counter intuitive to Dave Ramsey’s plans as he says you should stop all retirement contributions (save any company match) until you are out of debt. I get it. I even understand how the math works. I pay way higher interest on my credit card debt than I will ever make on my retirement. But. There’s always a but. But I know I will get out of credit card debt and I know any time I lose not contributing to my retirement, I will never get back.

We are not saving much money right now, other than our retirement, and are basically living at our means, which isn’t ideal. We have college coming up in 4 and 5 years and although I don’t think it’s our responsibility to pay for our kids’ college, we do want to be able to help as much as possible. We are hoping that by paying off debt a little more slowly and maxing out our retirement accounts now, we will be stable enough in our future that we can help with college expenses.

*Random Update: My union has reached a tentative agreement with our district. Assuming it’s approved, we will get a $1250 increase to our benefits cap, a 1.56% raise retroactive to last year, and a 3.44% raise for this year and going forward. I plan to up my 403B contributions by $115 per month and then “keep” the rest of the raise for our monthly budgets. (I am expecting an additional $165 per month, net. Hopefully, the majority of this can go towards debt.)