Reduce 401k contributions temporarily?

[Anonymous]

Due to necessary home renovations and unexpected car repairs, we are currently about 20k in debt. We have been paying it off at rates higher than the minimum, but feel like we’re hardly making a dent. We recently met with a financial advisor who suggested we temporarily reduce the % of contribution to the 401k to what the employer matches so that there is more income to allow higher payments each month towards lowering the debt. Each of us has about $1M saved and don’t plan to retire for another 10 years . Would bump it back up once the debt level is manageable.

Would anyone concur with this?

[Anonymous]

What's the interest rate on the debt? If it's high, then yes, this makes sense to me as long as you trust yourselves to bump them back up once the debt is gone.

[Anonymous]

I would transfer to zero percent credit card first. Even with up front fees you’ll save something like $3k or 4k in interest over a year. Then if you still need to reduce contributions do that

[Anonymous]

I would. The interest rate on the debt is almost certainly higher than what you can expect to earn in your 401k.

[Anonymous]

In a heartbeat.
If you get caught up this year, you can go back to a higher than today amount to try to get closer to the limit this calendar year.

[Anonymous]

Keep your eye on your tax withholding so you are not caught with a higher bill next year than you expect due to more taxable income.

[Anonymous]

Yes

[Anonymous]

Anonymous wrote:Keep your eye on your tax withholding so you are not caught with a higher bill next year than you expect due to more taxable income.

I usually get a refund, so if it is smaller than that is fine.

[Anonymous]

I would do it.

[Anonymous]

Yes, sounds reasonable.

[Anonymous]

Yes, of course. You both have 1M in savings. You didn't state your age, but I'm it's likely you wouldn't need to save another dime to retire comfortably.

[Anonymous]

Anonymous wrote:I would transfer to zero percent credit card first. Even with up front fees you’ll save something like $3k or 4k in interest over a year. Then if you still need to reduce contributions do that

+1. Look into this first.

[Anonymous]

Yes.

[Anonymous]

Is there spending you can cut?

[Anonymous]

Yep. It’s temporary. Once you pay off your debt, increase your 401k again.