401K contribution even when employer is not matching

[FoolFromAZ]

Is this a good idea contributing $15500 every year to 401K from pre-tax income? My employer is not matching. Our overall household income is 175K, I have credit card balance of 50K. But average intrest rate is around 7%. Should I contribute to 401K while paying off the CC debt? if so, maxing out is a right thing to do? or I have to reduce it to around 5K per yr and pay off the CC debt faster?

[disneysteve]

If it were me, I wouldn't be comfortable carrying 50K in credit card debt.

[FoolFromAZ]

If it were me, I wouldn't be comfortable carrying 50K in credit card debt.

Say i have paid down my cc balance to 25K in 6 to 8 months, can I start contributing aggressively to my 401K?

[jIM_Ohio]

Is this a good idea contributing $15500 every year to 401K from pre-tax income? My employer is not matching. Our overall household income is 175K, I have credit card balance of 50K. But average intrest rate is around 7%. Should I contribute to 401K while paying off the CC debt? if so, maxing out is a right thing to do? or I have to reduce it to around 5K per yr and pay off the CC debt faster?

How much are you paying each month on the CC?
What is you overall tax bracket (taxable income) and AGI for 2007?

It makes sense to max out to get the tax deduction.
But it may not make sense to max out if you have that much debt.

15k is only 8.5% of 175k, so I would actually suggest you need to set aside more than 15k for retirement. Maybe 30k.

[FoolFromAZ]

How much are you paying each month on the CC?
What is you overall tax bracket (taxable income) and AGI for 2007?

It makes sense to max out to get the tax deduction.
But it may not make sense to max out if you have that much debt.

15k is only 8.5% of 175k, so I would actually suggest you need to set aside more than 15k for retirement. Maybe 30k.

totally 30k (me and my wife).

last yr our total gross income was 160K, this year its going to be 175K, so we are not eligible for roth IRA.

[jIM_Ohio]

totally 30k (me and my wife).

last yr our MAGI was 160K, this year its going to be 175K, so we are not eligible for roth IRA.

Do you own a house?
Do you itemize on income taxes?

Seems wierd to me if you gross 175k, and put away 30k to 401ks, that taxable income should be no more than 145k. What gives?

What are monthly cc payments?

[FoolFromAZ]

Do you own a house?
Do you itemize on income taxes?

Seems wierd to me if you gross 175k, and put away 30k to 401ks, that taxable income should be no more than 145k. What gives?

What are monthly cc payments?

Yes I do own a house. My monthly mortgage payment in $2000. For CC, the minimum payment comes around $600, I pay around $2500 if I put 30K pretax income into 401K. If I dont opt for 401K, I could pay $4500 towards CC payment.

[jIM_Ohio]

Yes I do own a house. My monthly mortgage payment in $2000. For CC, the minimum payment comes around $600, I pay around $2500 if I put 30K pretax income into 401K. If I dont opt for 401K, I could pay $4500 towards CC payment.

$2000 to 50k cc balance is a good move. Payoff will take around 2 years.

I would continue on current plan (max 401ks and pay down the debt at same time). Make sure you do not accumulate more debt in meantime.

[FoolFromAZ]

$2000 to 50k cc balance is a good move. Payoff will take around 2 years.

I would continue on current plan (max 401ks and pay down the debt at same time). Make sure you do not accumulate more debt in meantime.

Thanks. Thats what I was thinking, but I heard from some of my friends that I should concentrate on my CC debt first and then go for 401K as my employer is not matching.

[jIM_Ohio]

The lack of 401k match is a concern, but there is a tax savings you need to factor in. In addition you could fund a Roth once the debt is paid off.