A recent Forbes.com article entitled “Yes, you can save for retirement and pay your student loans” featured advice by Cheryl Sherrard regarding the desired approach for tackling student debt while also saving for the future.
An excerpt from the article follows:
Fund your emergency savings account. Once you’re doing the basics in terms of retirement savings and student loan payments, start stashing money in an emergency savings account. If an unexpected event occurs, having a rainy day fund will keep you from borrowing from your retirement account or taking on credit card debt. “You’ve got to have a cushion for emergencies,” says Cheryl J. Sherrard, a certified financial planner and director of financial planning and clearview wealth management in Charlotte, N.C.
Increase payments strategically. After you’ve got your emergency account squared away, you can start thinking about the best way to direct any additional funds. If you have high-interest, private student loans, using extra cash to pay those off first is a smart move. If your student loans have low interest rates, you may be off better putting money in the markets where your long-term returns will likely be higher than the interest rate you’re paying on the student loans.Once you’ve paid off your loans direct the extra cash toward retirement savings.