Courtesy of Melanie Lockert
Melanie Lockert.
I always knew that saving for retirement was important, but when I was saddled with student loan debt, it didn't seem like a priority.
I borrowed a total of $81,000 for my education and after getting my master's I was determined to pay off my student loans as fast as possible. I was paying $11 per day in interest, which felt like a fire that had to be extinguished before I could focus on anything else.
I ended up paying the last of my debt in December 2015, at age 31. While I was happily debt-free, it was just the beginning of my retirement savings journey. Here's why I regret that I waited to start saving for retirement until I'd completely paid off my student loans.
1. I lost time and compound interest
When I first started working full-time when I was 22, I had $23,000 of student loan debt from my undergrad degree. I got a job in the nonprofit sector making $30,000. The job didn't come with a retirement match and given my low income and debt load, I decided to forgo saving. I figured I could save for retirement later when I earned more money.
Three years later, I was making $38,000 but then decided to quit my full-time job to move across the country and go to graduate school at New York University. This move required me to borrow $58,000 more in student loans. The "later" period of time in which I'd save for retirement kept getting pushed back.
I was so intensely focused on how much interest was accruing that I failed to realize how much interest I could earn by saving for retirement. Time is your best asset when saving for retirement, and I lost so much time and compound interest by waiting until all of my debt was paid off to save for retirement.
2. I didn't create the habit
Success requires creating good habits. While paying down my student loans became a habit and saving for my emergency fund was automated, I never created the habit of saving for retirement. So when I started saving for retirement at age 31 after my debt was paid off, it was in chunks.
At that point, I was self-employed and had a fluctuating income. I was also less aware of what retirement options I had being self-employed. I now save for retirement using a SEP-IRA and invest in index funds. But I've lost a lot of time and momentum by not building the habit and not starting earlier.
3. I started at zero
When your net worth is negative for so long, getting to zero seems amazing. But when the high of paying off debt wore off, I realized I was starting at ground zero for retirement savings.
So while I paid off a total of $81,000 plus interest, which was a huge accomplishment, I then felt daunted by starting over completely when it came to my retirement savings. The same dread and paralyzing feeling I had before I got serious about my debt followed me as I began to start saving for retirement.
Yes, I was debt-free, but there was still so much further to go. At age 31, I had nothing for retirement saved and a modest amount in emergency savings.
I often wonder how I'd feel psychologically if I had several thousand saved by the time I had paid off my debt. Money is very emotional and psychological. While I was paying off my debt, that's what felt like the "right" decision at the time because my debt had caused me so much anxiety and stress. Little did I realize that more of that was waiting for me around the corner.
I tend to have a very all-or-nothing personality, which can be good in some ways, but in most ways, balance is where it's at.
4. Feeling behind surges my anxiety
I am now 35 and it's been four years since I paid off my student loans. I've been saving for retirement the past several years and it's nice to be building wealth instead of paying off debt. I always say that it's better to be paying for your future or your present than your past.
While I'm happy that I've started the journey, I feel so behind at age 35. I am not nearly where I should be when it comes to retirement savings, and it feels difficult to believe that I'll catch up. Feeling so behind triggers my anxiety and makes me lose joy in the present. It results in persistent worry that maybe I'll never have enough. Despite that anxiety, I continue saving for retirement because I know that time and consistency will be the only way I can win the retirement game.
Being debt-free has paid dividends in my emotional and financial life. I am proud that I worked so hard to become debt-free but I also realize that I lost out on time, compound interest, and positive habits by not actively saving for retirement while paying off debt. If I could go back, I'd save at least $50 to $100 per month automatically and let time and the market do their thing.
Melanie Lockert is the founder of the blog and author of the book, "Dear Debt."
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