Wisdom of Retirement

Is it crazy for me to consider opening an IRA when I can’t pay my bills? Initially, it would seem so, but I am not so sure. And, it appears, neither are the experts. One school of thought says to pay off all debt before thinking about saving. Another says, pay yourself first. Conventional wisdom says to get rid of debt and stop paying interest, or saving makes no sense. But I am learning that financial wisdom is anything but conventional. So, I’m asking myself some questions, considering the differing opinions and trying to come up with answers….

  • Is developing the habit of saving as important as the amount being saved?
  • Am I more stressed about my debt, or the fact that I have no retirement savings?
  • Which will benefit me more in the lang haul – paying off debt or starting the IRA?

I really don’t have that much unsecured debt, well below the national average, but I am struggling to make the monthly payments. I am trying to negotiate with my creditors, but am finding it surprisingly difficult. I guess you have to get a few months behind on payments before they will negotiate with you. Seems counter-intuitive, but I may have to go that route.

I once had a very nice 401k. After losing my job, I cashed it out. Of course that flies in the face of conventional wisdom, but I don’t regret doing it. It allowed us to pay off the majority of our debt and pay our monthly bills for a while. I also justify my actions with the knowledge of how the market tanked shortly afterward…maybe the money would be gone anyway? I know that is major rationalization, but I’m good with it.

Maybe it came with turning 45. I am more concerned with the fact that I have no retirement savings than I am with my struggle to pay my debt. The debt will eventually get paid. My credit score will eventually recover. But, if I don’t start saving now, I may never be able to retire.

I think I’ve just worked my way to a decision. I am going to open an IRA as soon as I can. There are some discount brokerages, such as E*Trade and Zecco that do not have minimum required deposits. I need to consider fees and commissions as well. It does seem that I can start an IRA with as little as $25 or $50 and put in $5 or $10  a month until I can afford more.

I admit to having no expertise in this area and would love to hear your thoughts. Have I made the right decision, or a totally stupid one? Tell me what you think.

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2 comments so far

  1. Jess on

    Peace of mind is a valuable thing. If it is comforting to you to have a little nest egg in an IRA, I say there is no harm in opening one. Plus, there are tax benefits. You are smart to be checking fee schedules. Read the fine print.

  2. Betsy Henry (zen-mama.com) on

    Good job thinking about opening the IRA. It’s amazing how $25 a month can add up. Looking forward to reading the rest of your blog.


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