Quote:
Originally Posted by redpoint5
An employer match is like gaining 100% interest instantly. No need to run the numbers.
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I did it anyway!
I have seen many calculations using abstract numbers. I like realistic ones. I could do my situation, but I think we are required to contribute the maximum for retirement. I read somewhere most employers match 3 - 6%. Let's say yours is good for five.
That actually does not seem like much, but it sure does add up! Going with Ramsey's 12%.
The average credit card debt per person (household) is $16,883. The average interest rate is 15.07%. The per capita income for the overall population in 2008 was $26,964, but we will go with
the median salary for workers with an associate’s degree is $41,496. If you earn $41,496 yearly and your employer contributes 5% to retirement, that is $2,074.80. Say your minimum payment is 3%
(usually between 1 - 3%)
Let's say that you have just enough to make the minimum payment and max out employer contributions. That is $8,152.68. Ramsey says to get out of debt and then invest. RedPoint says to max out contributions and then get out of debt. So, some numbers! (but RedPoint is right)
Ramsey would have you get out of debt faster and the credit card accrues more interest than interest funds pay out, but is it worth paying interest in order to receive $2,074.80 each year? (Yes)
If you paid $8,152.68 towards your credit cards and then paid the same amount towards retirement, after fifteen years, you would have $281,686.82. If you paid the minimum of $6,077.88 each year, contributed $2,074.80 towards retirement, and your employer matched it, and then once you paid off your debt you contributed that money to retirement, after fifteen years, you would have $298,869.74. So, getting your employer to contribute another $4,149.60 yields another $17,182.92 after fifteen years.
However, arguably, Ramsey's method is safer.