What if it will take me 15 years to pay off my debt? Should that ALWAYS be what I pay down first?

  • You are Canadian but didn't tag this as such. Asking - are employer based Canadian retirement accounts similar to the US 401(k) where a company match is available. You and Chris see that come up in answers all the time, it would be good to know if our 401(k) answers translate to Canada, too. Dec 17 '11 at 20:12

I would definitely pay down the debt first. If it is going to take 15 years to do so, you probably need to allocate more money to paying down debt. Cut expenses by going out to eat less, and keeping spending to the bare necessities. You might even consider getting a second job, just for paying down the debt. If that isn't enough, consider selling off some assets. You should be able to come up with a plan to be debt free (excluding maybe a regular mortgage) within 3-5 years.

Once the only debt you have is a home mortgage, then its time to look at putting money towards retirement again.

Note, you should not take money out of a 401k or IRA to pay off debt. The costs for doing so are nearly always too great.


This is something that will vary from situation to situation. What is the secured debt? What is the interest rate? Does your retirement account have a match? What are your other financial obligations? How much money do you have available after meeting all of your minimum financial obligations. All of these are very important factors in deciding what the best course of action would be.


The answer will vary person to person and situation to situation. But the basic concept to always consider is this: What interest rate am I paying on my debt? 10%? 18%? And what interest rate am I making on my savings/investment, etc? 3%? 7%? It won't give you a hard and fast answer, but will definitely let you know if you should take a closer look at it.

I'd suggest talking to a financial planner about it. Find a fee-based planner that you can turn to intermittently to make sure you are on the right track...not a commission-based planner, a fee-based one. (with respectful apologies to any commission-based planners who may read this.)

My instinct is usually to pay off the debt, try to clean everything up so you don't have anything outstanding that is charging you interest. Debt is clutter, it's stressful, it can be a reminder of money you wish you hadn't spent. As long as you have access to money in case of emergency, job loss, etc, get your debt paid off and keep it paid off. You'll sleep much better.


One should fund a 401(k) or matched retirement account up to the match, even if you have other debt. Long term, you will come out ahead, but you must be disciplined in making the payments. If one wants to point out the risk in a 401(k), I'd suggest the money need not be invested in stocks, there's always a short term safe option.

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