Is it smarter to save money to pay off debt or start an IRA at 28 YRs. old?

What kind of debt are you talking about? If you're talking about high interest credit card debt, then pay it off first. If you're talking about a mortgage, a car loan, maybe a low interest school loan, then I would tell you to invest some monies. I always advise my clients not to pay off their mortgage early. It's nice having the tax deduction of the interest, and if you take a long time to pay off the mortgage, you're paying it off with money that has been eroded by inflation.

If your company offers a 401k, go into that before an IRA. Also, if your company offers you a retirement plan, you would only be able to do a Roth IRA and are limited to what you can invest.

Consult a financial profession to evaluate your individual situation and help you make the right choice.

It is so much smarter to pay off debt, in my humble opinion. It is true you can start to save at any time. Pay down the debt as fast as possible. Begin a savings account too and add regularly, this will get both habits going. Once the debt is cleared you can put all of that plus the tiny amount you may save now into the savings account and really watch it grow.

I am beginning to question Retirement Accounts, IRA ROTH IRA SEP IRA ETC. As someone who is 51 and has $120,000 in those damn IRAs I really can't touch. I want more flexability than they give. If I was 28 I would have a regular stock account (etrade, scottrade, etc) and a REIT and some gold, then I would circulate it around to get the best interest rate. I wouldn't want an IRA in any of these segments, I couldn't move it. Also if I found another investment I could jump into that.

Hope this helps

Well, basically you are going to do "what if" analysis.

Scenario 1: Use all discretionary income to pay down debt and defer investing until a future date.

Scenario 2: Pay minimum balances (or slightly more) on debt and invest the difference between those payments and your total discretionary income.

You'll have to make assumptions. One such assumption would be since you are relatively young if you invest we could assume you would buy mutual funds with your asset allocation mainly equities. On those, assume your annual rate of return will be 10% (conservative).

You will want to select the option that gets you the biggest net worth 30 or 40 years out.

One point though. If you have debt that is credit card or store card debt with interest rates in excess of 15% (some as high as 28%) then it's a no brainer. Pay those down entirely as SOON as you possibly can. Your investments will likely not come close to that kind of return and by paying it off it's like getting a 28% return immediately while alleviating a huge interest expense from your situation.

KEY: You have to make sure to reign in unnecessary spending as much as possible and be consistent and diligent. Reward yourself every once in a while with a treat but, don't go overboard.

Best of luck.

The Smart Move depends on what works for you. I have found that paying off the debt makes me feel better, even if I could have earned an extra % or 2 by doing minimum payments and investing money. But as most people say, pay off any high interest credit card or other debt first. Also look at your credit score, and try to keep that as healthy as possible. You may not be looking to buy a house or other large purchase now, but your credit history lasts 7 years, so keep it in mind for the future.

Do what makes the most sense for you at this time in your life, and please do the math.

There are several calculators out there to help you do that. I have a link to bankrate via my website.

High interest debt? Consider paying it off as quickly as possible. Retirement, whether it's IRA, 401(k) and variations - the earlier you start, the less you have to put away.

While you are deciding, which is more important, consider cutting back on something (if you can) and add that 'extra' money directly to the debt. At least that will not 'hurt'.

So here's the SIMPLE answer: Cut back on expenses as much as you can, pay down the high interest debt, and start a retirement account yesterday. It's your money and your life - take control.

Good luck!

I know the feeling.

You need to do both, unfortunately. I know it's easier said than done. What you need to do is figure out how much you can afford in discretionary funds for these two things each month. So, for example, let's say you have an extra $300 a month. Let's also say that you could pay the minimum on that debt, which would be $100 a month. It may be good to pay $200 on the debt (which would pay it off sooner and hence save you interest), and put $100 toward your savings.

To really make this work, you need to figure up your debt totals NOW, how much it would cost in interest to pay the minimum and for how LONG and see what that is. Then, look at what you'd be investing in, and figure out how much you could earn on the investment (hypothetically, as this could change). Compare the two. But, pay something to both if you can.

If it's credit card debt, I'd look to consolidating as much as possible on your lowest rate card. I'd also call the CC companies and ask them to lover your rate. A number of mutual fund companies allow an investor to open an IRA with as little as $50 a month.

If your employer has a 401k make sure that you are taking full advantage of the match program. If there is no 401k or no match program, then start a Roth IRA. Setup automatic monthly investment. Read up on money management - http://www.findlocalinsurance.com/management.html

Watch your spending and start paying down that debt.