Ask an Advisor: How Do We Save for Retirement While Paying Our Bills? We Have $140K Saved, Plus My Husband's $110K Pension

I am a 59-year-old human resource professional with $45,000 in a 401(k), to which I contribute 6%. My husband and I have $95,000 in the market, with $27,000 being in a Roth. My husband is a teacher and has $110,000 in his Kansas Public Employees Retirement System (KPERS) pension. We still have $40,000 to pay on our house and also a car payment. We’re not sure what is more important: paying off bills or saving, or both? We are also contributing $125 a month into the Roth. Any feedback or suggestions would be so appreciated.

– Melanie

Congratulations on building a solid foundation up to this point. Between your 401(k), Roth IRA, brokerage account and your husband’s pension, you’ve done a lot of the hard work already. Now, you’re at a point where cash flow is in focus: do you prioritize debt paydown or additional retirement savings? The answer depends less on any single rule of thumb and more on building a financial plan that clarifies your goals, contextualizes what you’ll need to achieve those goals and provides actionable interim steps you can take.

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Start with a Comprehensive Financial Plan

As with most financial planning pursuits, the answer to your question isn’t a clear-cut “do this” or “do that.” Your path should be guided by an understanding of how much you’ll need in retirement to support your desired lifestyle and the time horizon in retirement. You can then compare this optimal asset base with the resources you currently have. A sound financial planning process should help you answer a series of questions that will uncover how much you need to retire and how your current assets compare:

When do you plan to retire? Are both you and your husband targeting the same age or different timelines?
What lifestyle do you want in retirement? What level of annual spending will make you feel secure and fulfilled?
What income sources will you rely on? Your husband’s pension, your eventual Social Security and income generated from investments will all contribute, but are there others that have not been raised to this point that you can draw upon?
What are your current cash flow dynamics? Understanding your monthly income and expenses will reveal how much flexibility you have to accelerate debt repayment or increase savings.
What is your health status and family health history? How long is your retirement horizon? How will you fund healthcare expenses in retirement? Do you have long-term care insurance and/or life insurance to provide support in the event of the unexpected?

With these questions addressed, you’ll have a more concrete sense of the assets you’ll need to be able to retire on your desired terms. With a target asset value established, you can then begin to construct a cash flow strategy that will align with your retirement objectives. (And if you need help building a comprehensive financial plan, use SmartAsset’s matching to o l to connect with financial advisors for free.)

Clarify the Role of Debt in Your Plan

While debt can feel like a burden, especially as you approach retirement, not all debt should be viewed as categorically bad. For example, a mortgage with a low, fixed interest rate may be relatively inexpensive to carry, particularly if the funds you could use to pay it down might earn more when invested for retirement. In contrast, an auto loan with a higher rate of interest may be worth paying down faster. The same goes for credit card debt if applicable.

A comprehensive planning process would model different scenarios to help inform your approach to debt. One scenario could be pursuing an aggressive paydown strategy. This would require committing excess cash flow in the near term to principal payments and perhaps limiting the amount you contribute to retirement savings. A more balanced scenario might show paying off principal more incrementally while directing some excess cash to long-term savings. A third scenario might have you only paying interest until your loans mature and directing all excess cash towards your retirement goal.

Seeing how these options play out with explicit values attached to principal repayment and savings will provide more context to your situation and facilitate a more informed decision. (And if you need help mapping out and weighing your options, speak with a financial advisor.)

Potential Recommendations that Could Emerge

Without the benefit of your full financial picture and a complete understanding of your goals, it’s difficult to deliver concrete guidance on how to proceed. However, based on the information provided, a few actionable strategies could come out of the planning process:

Prioritize employer match: Six percent represents a common employer match limit in 401(k)s (50% up to 6%, for example), so you may already have this box checked. Confirm you are contributing enough to your 401(k) to receive the full employer match, as this is essentially free money toward retirement.
Reassess Roth contributions: If cash flow allows, increasing your Roth contributions could enhance your pool of tax-free retirement assets. With $1,500 in total annual contributions, you have ample room to increase contributions further depending on your annual income, filing status and ages. But again, your cash flow situation and scenario modeling exercises outlined above will help inform this.
Balance debt repayment: The cash flow modeling process could lead you to continue required interest payments on one of your major loans while accelerating payments on the other, depending on your interest rates. If the interest rate on your auto loan is high and your mortgage rate is low, then you might pay interest on the mortgage through maturity, pay off the auto loan sooner and once that is paid off, use excess cash to save for retirement.
Stress test retirement scenarios: As part of the planning process, you should run retirement projections under different assumptions. For example, retiring at 62 vs. 65; keeping one or both pieces of debt vs. paying one or both off; saving more aggressively vs. staying the course; contributing excess cash to different taxable and tax-efficient accounts; earning different rates of return on your investments; staging withdrawals from different account sources, and other key variables. This will highlight trade-offs and help you choose confidently.
Build flexibility: Consider keeping some assets liquid and accessible. Retirement often brings surprises—medical expenses, home repairs or family needs. A healthy emergency reserve reduces pressure on long-term accounts.

(And if you need help stress testing your retirement plan, balancing debt repayment or other areas of your financial life, consider working with a financial advisor.)

Putting it All Together

The question of whether to prioritize saving or debt repayment doesn’t have a single universal answer. It ultimately depends on your retirement goals, current assets, cash flow situation and the cost of your debt, among many other variables. By starting with a comprehensive financial plan, you’ll illuminate the path that best balances your current obligations with your long-term objectives.

With the right plan in place, you’ll be able to use your remaining working years to maximize retirement savings, align debt decisions with your goals and setting you and your husband up for the financial independence you’ve worked so hard to achieve.

Retirement Planning Tips

Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Strategically converting portions of a traditional IRA to a Roth IRA during low-income years can reduce lifetime taxes. For instance, converting enough to “fill up” the 22% tax bracket before hitting Medicare age may help you avoid higher IRMAA premiums later.

Jeremy Suschak, CFP®, is a SmartAsset financial planning columnist who answers reader questions on personal finance topics. Got a question you’d like answered? Email AskAnAdvisor@smartasset.com and your question may be answered in a future column.

Jeremy is a financial advisor and head of business development at DBR & Co. He has been compensated for this article. Additional resources from the author can be found at dbroot.com.

Please note that Jeremy is not a participant in SmartAdvisor AMP, is not an employee of SmartAsset and he has been compensated for this article.