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Don’t suspend 401(k) contributions to pay down loan

Feb 20, 2012 | | Comments Comments Off

Dear Liz: I have a 401(k) loan that I used to purchase a car. I plan on aggressively paying off the balance in 2 years or less. Should I continue making contributions to my 401(k) or should I stop and use the money I was contributing to pay the loan off faster?

Answer: Continue contributing to your 401(k), no matter what. You may save a few bucks in interest in the short run if you stop contributing to pay down the loan, but you’ll lose out on the much bigger compounded gains your contributions could have made over the coming decades.

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Categories : Q&A, Retirement