Should I pay off debt or save for the future?

I'm currently 23 years old as an O-1 in the Army. I'm all about retirement and saving as much as I can for my Wife and I's future. Unfortunately, a lot of our income goes to paying off debt. Combined we have over $100,000 in debt (school loans and car loan). I was contributing to my Roth IRA and Roth TSP, but decided recently to stop saving all together and put all of our money towards paying off debt. After going through the numbers, we can have the debt paid off within 3-4 years. Is it smart for me to put all of our money towards debt, or should we still invest some money in the Roth IRA and TSP simultaneously ? Any advice would be greatly appreciated.

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Answers (1)

Answers (1)

Thank you so much for reaching out and this is a question many Americans have.  Also, thank you for your service.  I remember my days as an O-1 and completely understand where you are coming from.   While each person’s situation is different, let’s talk about a few things.


First, I want to commend you on seeking a plan to pay down your debt while achieve your other financial goals, specifically saving for retirement.  One of USAA’s Core Advice Principles is to “Have a plan, review it annually and update with major event” and it sounds like you are on track to accomplishing that. 

The answer to the question you asked boils down to “prioritization of cash flow.”   Each person needs to analyze their current situation in relation to the priories below and determine how to allocate their available cash flow.  On a side note, I highly recommend creating a budget and using USAA’s Debt Manager as both will help you prioritize and stay on track.  Follow the steps below to help you prioritize.


1.  Obtain adequate insurance protection (auto, home, umbrella, health, life, etc.).  This is first because with proper insurance in place, your financial goals may be at risk.

2.  Meet all your monthly obligations, including your student and auto loans.

3.  Build an emergency fund of at least $1,000.  Without this cash buffer, you will be forced to increase debt by paying for unexpected expenses with credit.

4.  Begin saving for retirement – start early, start small (if necessary) and stay committed.  Strive to save at least 10-15% of your gross income.

5.  Pay extra towards high interest rate consumer debt to save time and money.  The “extra” is after you have accomplished steps 1-4 and still have money left over at the end of the month.    


 So back to your original question, “Is it smart for me to put all of our money towards debt, or should we still invest some money in the Roth IRA and TSP simultaneously.” Strive to accomplish both goals simultaneously. In the financial pyramid of priorities, saving for retirement is secondary to insurance protection, emergency fund, and making debt payments.  However, if you are able to free up enough cash flow to meet your debt payments, pay your monthly bills (including insurance bills), set $100-200 per month aside to build your emergency fund, and put money towards retirement, that is the best situation to be in.  If you put all your cash flow towards debt and wait to invest money in tax advantaged accounts, you miss out on the $5,500 per year contribution for yourself and your spouse, and you miss out on the most important factor in saving for retirement, TIME!​​​​​​​