Originally Posted by Lazarus
I don't think it matters if you have debts as long as you have enough assets to pay them off. I saved in my 401K rather than paying off my house early. Much better tax advantages. Getting less so now that I cannot deduct interest on the house any more.
I'll agree with this. My post was a tangent on the thread so I didn't want to make it too long.
For most people, the debt/savings combination that works is a 401k and a mortgage. If the loan is on a credit card, or the saving is taxable, the numbers are likely to be different.
If I were advising someone who can do the math, I'd recommend looking at savings minus debt and focus on when that number will turn positive. I'd remind them that they need to take a haircut on the traditional IRA/401k assets to reflect the taxes they'll pay when they withdraw.
I think that some people will discover that they are on a path that will keep them net debtors until 60+, and that may help them understand their financial situation.
If I were making tax law, I'd get rid of the complexities in the tax law that simultaneously give people incentives to borrow and incentives to save.