Stop investments to pay off car, and withholding ?

[wikiwiki]

We have a $9k car loan that we want to pay off asap. We can put at least $1k/month from my job to it but are also considering stopping our extra 401k and Roth payments (keeping DH's contribution to get the company match) to funnel it all to the car. ($800/month) That is the Dave Ramsey way.... what is your opinion? If we did that, we could get rid of the car loan in 4-5 months rather than 9 months. And then the plan is to up the retirement by at least 1% when the car loan is gone and save more with the extra $.

Will 4 months of minimal retirement really affect us in the long run? We are 35 and 37 yrs old. $83k/yr (DH) and $25k/yr (me) We have just over $100k in there now.

Also--is it best to get a little tax refund or to set withholding so you "break even" - that's what happened this year with us and it's disheartening to not get a refund but also good to know we are getting our money throughout the year.

We are really trying to get on a good track this year. We aren't far off, just need to rein in spending a bit. Thanks for your help.

[disneysteve]

I would not stop retirement to repay the car a few months earlier. The difference is minimal and why lose the tax benefit of contributing? Stick it out. Maybe look for any other ways to tweak the budget if you really want to get rid of the car loan faster. Go bare bones for a couple of months if you want to.

[phantom]

We're talking about such a short period of time that I think it's unlikely to make a huge impact on your financial future either way. Personally, I'd keep the retirement going if for no other reason than starting and stopping sounds like extra work. It sounds like your car loan has either 0% or otherwise negligible interest, so it's not really hurting you much to keep it around a few extra months.

[siggy_freud]

Seems to really depend on what your car loan interest rate is. If it's more than you reasonably expect to see in return on your IRA investment, pay it off sooner.

[lhkorn99]

Seems to really depend on what your car loan interest rate is. If it's more than you reasonably expect to see in return on your IRA investment, pay it off sooner.

Agreed - if the car loan rate is "reasonable" like 5% or less, I would keep doing what you're doing, not much of a difference between 5 and 9 months. Timing the market is difficult to do and what if there is a sudden surge in the market that you missed by being on the sidelines?

[wikiwiki]

Car loan is 6%.

[lhkorn99]

Car loan is 6%.

6% is not terrible - I'd still continue contributing to the 401k while paying off the car loan.

[siggy_freud]

Dunno what returns are on your retirement. I'd guess if you're doing 6% a year that would be pretty good. I'd stop contributing extra to the retirement and pay the loan off quicker. Money saved is money earned. Every year you shave off the car is a nice 6% return, guaranteed.

[tqf258]

Dunno what returns are on your retirement. I'd guess if you're doing 6% a year that would be pretty good. I'd stop contributing extra to the retirement and pay the loan off quicker. Money saved is money earned. Every year you shave off the car is a nice 6% return, guaranteed.

The differance between paying it off over 9 months or 5 months in intrest is only 135 bucks, so not much there. I would keep contributing to the retirement accounts and pay the car off over the 9 months like you are currently doing!

[Tree0164]

I would keep the retirement as is-just focusing on paying what you can.

I like Dave Ramsey but never really liked the stopping paying for retirement part.

[kaleida]

I tried lowering my 401K payments once - not even stopping them completely, just lowering them - and the increase in my take-home pay was only 1/3 of the difference. The rest was higher taxes. It sucked. I went back to maxing out my 401K the same day I saw my paycheck.

I guess it depends on your tax bracket and how much you're already contributing though...for you it might not be so bad.

I'd totally postpone Roth IRA payments to pay off debt though. That sounds like a good idea to me.

[snafu]

Good on you for looking at ways to get that car loan paid off as quickly as possible. I too think it's best to continue the retirement deduction as is and suggest making cuts in all the other discretionary spending for the short term. For example... meal planning reduces spending, buying non food items [paper products/cleaning etc] at a discount stores, seek no cost/low cost local entertainment, plan routes/use gas buddy/reduce driving & associated costs, plan no spend days, brown bag lunch, avoid take-out/fast food/restaurant & even prepared foods, drop change in a jar, eliminate impulse buying etc. All those small savings combine remarkably to apply to the loan's principle