Lately things have been a bit tight. Between student loan payments, my HSA, my 401(k) and bills my account balance isn't going up or down, its stagnant. I am wondering if I should decrease my savings into 401(k) or HSA so that my account balance is on a steady rise even if it's a minimal rise. Perhaps I should decease my student loan payments?

The problem, as I see it, is that currently if I were to lose my job I would only have a couple months at most to find a new job before my account was empty and that scares me. Perhaps, that's all I should have? I might be able to penny-pinch a bit more (eg. drop Netflix) which would give me an extra $15 a month but that's about it. On the whole, after taxes, HSA, 401(k) and vision I deposit approximately 70% of my gross pay per pay check into my bank account.

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    If your checking account balance is going up, it means you have money available to allocate to 401k, student loans, etc. A stagnant checking balance is the ideal; it means you aren't overspending and you have some money ready for unexpected expenses.
    – chepner
    Jun 19, 2019 at 18:05
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    @quid What would you call it, then? And what would qualify as an emergency fund in your estimation? I was a bit surprised to read your comment; I would have accepted Rob's comment about his e-fund at face value.
    – Brian
    Jun 19, 2019 at 21:13
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    @quid Isn't that the definition of semantics lol? If you have self control you don't need to physically separate the two, right? Perhaps I am missing something important here.
    – Rob
    Jun 19, 2019 at 21:52
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    No. It should be physically different. What if there is fraud in your spending account? Now your emergency money is locked up too; it has nothing to do with self control. This is also why emergency money should not be in the market, it's for emergencies.
    – quid
    Jun 19, 2019 at 22:00

3 Answers 3


Purely financially, giving up the employer match is hard to argue. It's mathematically a free 100% return, but you can't get to it for many years. So it's a great benefit for the future.

On the other hand, paying off student loans gives you a return equal to your interest rate. Hopefully that's less than 100% :-), but you need to weigh that against locking up retirement funds for decades.

Paying off debt can have other benefits other than just return. If you have no debt to deal with, you have more room to take risks in your investments, and gives you more options when you don't have a debt payment hanging around your neck. It also sounds like it would be a boost to you psychologically.

So it comes down to how fast can you pay the loans off if you temporarily stop the 401(k)? If you can pay them off in a year or two, you still have plenty of time to make up for it in future 401(k) contributions. If it will take you many years whether you stop the 401(k) or not, then your problem is income, not retirement.

In the meantime, it would be best to not take on any more debt (mortgage, car payment, credit cards, etc.) until you have the student loans taken care of.

Also, as @dwizum suggests in a comment, if losing your job is a concern, then perhaps a modest emergency fund is appropriate. I wouldn't put more than a few months of expenses there, though, since you could always fall back on part-time or other work while you're looking for a job in your field.

Note: for those that will flame me for giving up the "free" 401(k) match - I completely get the mathematical argument and only propose it as a temporary measure to jump-start debt repayment. However, I am a firm believer that paying off debt can be a huge emotional boost, and don't agree that the best choice is ALWAYS the one with the best return.

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    +1 just for your last sentence. People can be motivated by cash flow, risk, emotional goals, and so on. Answers that automatically assume "maximize $$$" usually strike me as narrow.
    – dwizum
    Jun 19, 2019 at 17:24
  • TBH the loans don't bother me as much as the thought of losing my job and not having enough money to pay bills while I look for another one...
    – Rob
    Jun 19, 2019 at 17:24
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    @Rob in that case you may want to optimize saving until you have a few months (or however long you think a job search would take) of expenses in cash (ideally in a high yield savings account) and then consider the 401k vs loan question.
    – dwizum
    Jun 19, 2019 at 17:26
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    The 401(k) money is only really locked up until OP leaves the current employer. If he gets 100% match, but loses his job, and then cashes out the match part of the 401(k), even after penalty and taxes he'll have free money to use to tide him over until his next job.
    – stannius
    Jun 19, 2019 at 20:15
  • "On the other hand, paying off student loans gives you a return equal to your interest rate. Hopefully that's less than 100% :-), but you need to weigh that against locking up retirement funds for decades." - that's exactly their question. The question is essentially "is the compound interest on my loan more or less than the tax free savings I'll make". The answer to that is "you need to provide a whole lot more information". A useful answer is impossible for the information provided.
    – UKMonkey
    Jun 20, 2019 at 10:31

There are at least 3 things to consider when allocating money like this: 1. Expected return. 2. Risk and opportunity. 3. Psychological factors, stress and comfort.

Most 401k's have an employer match of 50% to 100% of at least some portion of your contribution. That's an awesome return: 50% or more, instantly, risk-free. I have always maxed out my 401K when my employer offered one. Yes, I can imagine situations where my money was so tight that I just couldn't afford it, but I think that should be way down on your list of things to cut.

Student loans are usually government subsidized, so they have a relatively low interest rate, and they are tax deductible on top of that, which effectively reduces the interest rate yet further. (If you're talking about a 401K and an HSA I assume you live in the US.) I'd put paying more than the minimum on a student loan fairly low on my priority list.

It's a very good idea to have an emergency fund in case of, well, emergencies, like a medical expense, your car breaks down, if you own a house, if you have some major home maintenance expense, etc. I'd say that at current prices, about $2,000 is usually adequate for this. If you have less than $2,000 in ready cash, I'd put money into building up such a fund before I made extra payments on debts or put a lot into retirement.

Longer term, it's good to have an unemployment fund, enough money to live on for a while if you were to lose your job. I often hear financial advisors say this should be equivalent to 6 months pay or more. Personally I think that's a ridiculous goal for most young to middle-aged people. Sure, it would be nice. I'd like to have a million dollars in the bank in case of emergencies. But there's no way I'm going to save up that kind of money. Realistically, if you lose your job, you should be able to find ways to reduce your expenses drastically. You don't need enough to maintain current spending.

Oh, which brings up your comment that if you had to economize, you could cut out Netflix. Well, nice I guess, but is that really the only thing you could possibly cut? All your other spending is the bare minimum for survival? That may be true, but I doubt it. If I had to cut expenses (because I lost my job, or had some huge unexpected bill, or whatever), I'd start by quitting eating out. That would probably save $200 to $250 per month right there. When eating at home I could switch from steak and shrimp to chicken and tuna. Of course I wouldn't buy any new toys, any new computer games or the like. I'd cut out vacations and other long trips. I'd put off buying new clothes or shoes. If this was an issue that I wasn't likely to resolve in a few months, I'd consider selling my house and moving to some place with a lower rent or mortgage. Do my wife and I really need to each have our own car? Probably not. Etc. For most Americans, maybe 20% of our spending is on things that are actually necessary for survival, like food and shelter. (I just made up the 20% number but I think it's the right ballpark.) Unless you are literally living in a tiny efficiency apartment that you share with a roommate and are eating ramen noodles, there are things you could cut if you had to.

Advice about what debts to pay off and balancing between debts and investment often leaves off practical and psychological factors. For example, I think that generally you should pay off the highest-interest rate debts first to save the most on interest. But I think there's much to be said for getting smaller debts paid off first, even if they have lower interest rates. It's psychologically satisfying to pay off a debt, and that my give you the motivation boost to pay off others. And there's the practical effect matter that the more bills you have, the more likely you are to make a mistake sooner or later, forget to pay one on time, and get hit with late fees. I have a bunch of credit cards, but I try to primarily use just one of them and my wife uses another, so we have just two credit card bills to pay each month and are less likely to lose track.

Debt limits your options. When special needs (or wants) arrive, you can always defer adding to your investments, but you can't just decide to not make debt payments this month. (I'm not recommending diverting money from your retirement fund to pay for entertainment, but I wouldn't consider it outrageous to do that now and then.)

So that was a very long-winded discussion that didn't give you a definitive answer. Here's my short answer: If at all possible, keep putting money into the 401K. After that, pay the minimums on the student loan and any other debts while you build up an emergency fund. After that it gets trickier. I'd probably make more than the minimum payments on the student loan if I could, but also put money into the HSA and whatever retirement fund.

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    I started to think about it at lunch. I think if I were to move out of my current place and into a place with more roommates I could save about $150 a month. Cutting out Netflix and start shopping at the cheaper grocery stores could save me another $150. So realistically I could save an extra $300. I don't have any outstanding debt outside of my student loans.
    – Rob
    Jun 19, 2019 at 20:50
  • Nitpick, but a loan being subsidized means the govt pays the interest while you're in school. The relatively low interest for federal loans (compared to other unsecured loans) comes from the fact that they're guaranteed by the govt.
    – D Stanley
    Jun 20, 2019 at 1:33
  • While it is true that most Americans are in a position to dramatically cut their expenditure if necessary, there are a very substantial number who are not. The OP doesn't sound like he is one of them, but other readers may be. Jun 20, 2019 at 5:44
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    @MartinBonner Obviously true that some Americans have more room to reduce expenses than others. If someone is already sharing a tiny apartment with a roommate, eating mac & cheese and ramen noodles, etc, maybe he doesn't have a lot of room to cut. I'm guessing the OP isn't wallowing in luxury, I don't suppose that his problem is that he just HAS to have a second helicopter because you can't expect him to shuttle the same helicopter between both his yachts. But most Americans spend substantial amounts on eating out, entertainment, and other things that are certainly not essential. ...
    – Jay
    Jun 20, 2019 at 14:26
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    ... Let me make clear that I'm not saying there's anything wrong with enjoying your money. If, and this is the big if, you can afford it. If you have sufficient income to pay your bills, be making serious payments on your debts and saving for retirement, and you have money left after that and you use it to got to concerts or travel or buy electronic toys or whatever, good for you. Where I have a problem is when people say how they're just getting by and there's absolutely nothing left in the budget to cut, while they have 3 luxury cars in the driveway, are going on expensive vacations, etc.
    – Jay
    Jun 20, 2019 at 14:29

I suspect this will be a reasonably unpopular answer but, I think step one to a robust foundation for personal finance is a strong allergy to debt.

Debt is a financial tool, and I'm not advocating never ever making use of debt, merely that when there's a decision between X and paying down debt, it (in my opinion) almost always tilts toward paying down debt.

You don't have to turn your 401K contribution to zero, but you can absolutely turn it down. I understand that you'd be "leaving money on the table" but you're in your early 30s, you've got some long term debt and you're at 70% of pay shoveling money to a tax jail before you have more than a few months of emergency financial foundation.

If I were you, I would cut my 401k contribution in half and put the resulting additional take home pay in to your emergency fund until you're not anxious at all about losing your job. Then use that excess to accelerate your student loan repayment. Then crank your 401k contribution back up.

I understand completely the value of retirement savings and giving those contributions time to grow. But 70% of pay is overboard if you still have debt.

  • There might be some confusion here. I amended my question. I am taking home about 70% of my gross pay not the other way around XD
    – Rob
    Jun 19, 2019 at 18:23
  • Not going to argue, I understand we all have different levels of risk and debt aversion. Just a point - OP hasn't shared any numbers. The % match, the limit, and what he's putting in. If company matches up to say, 5% (as mine did), I'd agree 100%, deposit to the match and get a bit of room in budget. If they match to 10%, and he's just at 10%, I'd not change a thing. (still +1 for well-reasoned answer) Jun 20, 2019 at 12:29

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