Sometimes, you gotta start small.
A question that even I've pondered in my own personal attempts to broaden a semblance of a retirement plan is one that's probably shared by many of your clients and plan participants: How do I get a start on a real plan when the only thing making a ton of money on interest rates is my credit card company, not my investments? Would I be better taking the money I have in savings and paying off the cards?
It's a valid concern - and one that can eat away a bit of your soul every month when you look at the statements and realize it's like a retirement plan in reverse: Rather than saving money, you're actually watching your potential investable assets dribble away in finance charges.
The answer - or at least an answer - seems to be the realistic advice that paying off that credit card debt can indeed get you out of the red and start you on the path to real savings. Getting to a point, maybe, where what once were sizeable credit card payments could instead be used to go for a full contribution, plus match, to a 401(k) or 403(b). Or an IRA.
[What you choose to do with your student loan debt, I do not know. I am not touching that issue with a 10-foot pole.]
In the credit card issue, the best path for clients seems to simply pay it off. Bankrate.com got the same question - should I use my existing retirement savings to pay off my credit cards - and the advice they gave was to leave the retirement savings alone (agreed) and instead work as hard as possible to pay off the debt through conventional means.
That could include, at first, shopping around for a card offer with a lower overall interest rate: If you've got moderately good credit, it's not an impossible task, and while there are often transfer fees involved, getting down to a 9 percent (or less) card is not impossible.
I've also had mixed luck in negotiating lower interest deals or even payoff programs with a few of my credit cards. Provided you are not automatically sent to an overseas call center (thank you, Barclays Bank), hit the right domestic credit counselor at the right time on the right day and, credit score intact and payment history in the black, a lower rate or a structured payoff can indeed be secured.
It also involves biting the bullet and making much more substantial payments to liquidate the debt.
Not unlike the 401(k) fee disclosures which have now appeared (and are now being groused about for not exactly disclosing what some participants or even plan sponsors hoped they would, or certainly not in particularly plain English, or with no financial context), the credit card payoff timeline information that now appears on each monthly statement ought to put the fear of God into any credit card bungler like myself.
Make those payments, diligently - and cut up the four extraneous, seemed-like-a-good-idea-at-the-department-store cards - and in just a three-year period, those payments can be turned into a very solid monthly contribution to retirement savings.
How to maximize on those retirement savings ... well, that's another story. And part of the magic the retirement advisor should be able to provide. The debt part ... that's up to the client.