Ask An Expert·6 min read

Yes, You Can Tackle Debt While Also Saving for Retirement. Here’s How.

A couple in bed on their laptop
March 19, 2024

When Anne Lester was the head of retirement solutions for J.P. Morgan, she was managing billions of dollars. But in her own life, she was struggling to get a handle on her own retirement strategy. It just goes to show that managing your finances isn’t a matter of being “good with money.” It’s about creating smart financial systems that actually work for you. Ahead, the author of “Your Best Financial Life,” explains how to deal with debt, plan for retirement, and feel good about your financial decisions, all at the same time. 


Anne Lester

Anne Lester - Retirement expert and author of “Your Best Financial Life

I’m paying down debt. Should I hold off on saving for retirement?

It depends. If you have a 401(k) plan at work and your company is matching what you contribute, you should get some of that free money from your company. If you’re able to contribute up to your match, that’s fantastic. That might be aggressive, depending on how much debt you're trying to manage, but get at least some of that free money. 

The reason the match is so important is because it basically doubles what you're contributing. That money will compound (let's say at 7%), which means that your money will double every 10 years. By not saving a little money now, you're going to have to save significantly more later. If paying down debt is taking over all of your discretionary income that can be tough, but the goal would be to at least be able to set aside enough for your match, as quickly as possible.

I relied on credit cards during a tough time. How do I get back on track?

Start saving again. You've got a hole to fill, and the easiest way to fill it is to increase your savings rate. Every time you get a raise, save half of it. That way your savings rate goes up, but you still get to enjoy some of that extra money. Depending on the size of the hole that you’re digging yourself out of, you may not be able to do that and you might have to really maintain frugality. But it's important to get in front of it because interest rates are so high. This is not easy.

What's the best way to approach paying off debt?

The guiding principle should be to pay off high-interest debt as quickly as possible. I think the way to do that with the least brain damage is to just focus on paying off the debt with the highest interest rate first, and then making minimum payments on the next-lowest rate debt until that first debt is cleared.

When it comes to whether or not consolidation makes sense, it's going to depend on your specific circumstances and interest rates. If you have low-interest debt like federal student loans (and by low I mean anything below 8%) pay the minimum on that, and don't worry about it for a while. Get the stuff that's at 25% or 30% interest, and pay it off as fast as you can. 

How do I stop feeling guilty about my financial situation?

We intend to save more money, and when we don’t live up to those expectations, we blame ourselves. We think we’re stupid, dumb, or lazy, but it’s not our fault. The most important thing to understand is that human beings are not fundamentally rational. We have different parts of our brains that take charge in different situations, and a lot of those instincts are not lined up with long-term thinking. When you see something you want, you quickly come up with a whole bunch of reasons to justify the purchase, and that's your brain doing short-term thinking. So, combat this by making it easier to save. Set up guardrails and automate as much as you can. It’s really easy to spend money, and it's really hard to save money. What you need to do is make it easy to save money for yourself and harder to spend it. 

My finances are fine, but I’m anxious I’m not hitting my money goals fast enough. What should I do?

To the best extent possible, remind yourself that you don't know what's going on inside any other person's financial life. Things may look fine on the outside, but you don't actually know how they're doing. We all make choices — and if you're making choices that you think are appropriate for your career, your housing, or relationships — then there's a reason you made those decisions. Re-anchoring yourself into the mindset behind those reasons may help mitigate some of those feelings. 

I want to work with a financial advisor, where do I start?

I think that, in general, brand-name firms tend to have pretty reliable, quality advice, so pick one of those. You should also think about why you want to hire a financial advisor. A good financial advisor will help you make plans and stay the course so that you reach your financial goals, and save and invest appropriately. They aren’t going to be picking stocks for you.

Many financial advisors get a percentage of the money that you're asking them to manage. Depending on the size of your portfolio and that specific advisor, it may make more economic sense for both of you to have a fee-only arrangement where you're paying by the hour for specific advice and planning. Most people who are just starting out don't have very complicated financial lives with lots of different accounts and asset pools. It may be more cost-effective to see somebody for an hour, write them a check for a financial plan, check in with them periodically, and have your money invested in index funds. 

This interview has been edited and condensed for clarity.

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