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My neighbor in Phoenix said he stopped his 401k contributions to pay off his car loan faster
He argued the 7% interest on the loan was a guaranteed loss, while his retirement fund was just 'hoping for gains'. I've always been told to max out retirement first, no matter what. Which approach actually makes more financial sense for someone with a steady income?
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perry.nancy3mo ago
Bro your neighbor just traded a 7% loss for a 10% average gain. That's like skipping a free lunch to pay full price for a snack. The math is not mathing. Sure, the loan interest is a sure thing, but so is missing out on decades of compound growth. That 401k money grows tax-free, which is a huge deal. Gotta love the confidence of someone who thinks they can outsmart the entire financial planning industry.
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willow_ellis3mo ago
Lol reminds me of my tenant who sold his crypto to buy beanie babies.
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skyler_anderson652mo ago
A 30 year old putting 10 grand in the S&P 500 could see that turn into over 170 grand by retirement time, tax free in a Roth 401k. But nah, let's cash it out to save 7% on a 4 year car loan instead. That's literally leaving 160 grand on the table to avoid paying maybe 2 grand in interest over the life of the loan. The really wild part is people think they're being financially smart by "avoiding debt" when they're actually giving up the single biggest wealth building tool regular people have access to. A 401k loan should basically be reserved for "my house is literally falling down" emergencies, not "I want a lower monthly payment" situations.
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