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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?"
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“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.”
View full answer
- Gregory R.
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