Should I contribute to my IRA or pay off my car loan first?
"I have a car loan at 3% interest. I have the $6,000 to pay off the loan, or, with that cash, I can max out my Roth IRA contribution, which is earning about 7%.
Which one should I do first?"
Answer provided by
Answered on Jun 07, 2021
“It’s all about your preference. If you still have time to maximize your yearly IRA contribution, that can clearly wait.
However, your car loan will continue to gain interest. Conversely, the $6,000 might be better spent on the IRA because you’re getting a better return.
Thus, the choice is up to you. If you want to get out of debt more quickly, go with the loan. But if it’s not crippling you, don’t stress and contribute to your IRA.”
Did this answer help you?
Ask us a question by email and we will respond within a few days.
Have a different question?
You can meet us at our office and discuss the details of your question.
Browse by topics
What others are asking
If I pay the loan off my Chevy Silverado, will it instantly increase my credit score?
"I have the cash to pay off the final two years of my car loan on a Silverado. Will paying this loan off instantly increase my credit score, or will it have a different effect?"
Jun 07, 2021
Can I decline a car loan for a Volkswagen Tiguan I was approved for?
"My boyfriend and I applied for a car loan on a 2018 Volkswagen Tiguan, but then we moved to an area with great public transportation. Can we decline this car loan?"
Jun 07, 2021