401(k) match vs debt first+$3,599 ahead
Match first: $45,117 vs Debt first: $41,519 after 5 years. Take 401(k) match firstAt these inputs, capturing your 100% employer 401(k) match before paying extra on the 21.6% debt leaves about $3,599 more in after-tax net worth after 5 years ($45,117 vs $41,519).
Take 401(k) match first Pays more
Put $215/mo of after-tax cash ($283/mo pre-tax) into the 401(k) to capture the match and send the remaining $385/mo to the debt. This pays off the debt in 27 months and builds $45,117 of after-tax net worth by year 5.
Captures $17,000 of vested pre-tax employer match ($12,920 after tax) and pays $2,113 in total debt interest.
Pay debt first Trails
Send all $600/mo to the debt until it hits $0, then start 401(k) contributions. This pays off the debt in 16 months and builds $41,519 of after-tax net worth by year 5.
Pays $1,231 in debt interest (saving $881 of interest), but forfeits $4,250 of pre-tax employer match ($3,230 after tax) during debt payoff.
Break-even vesting: as long as at least 17.7% of your employer match vests before you leave the job, taking the 401(k) match first beats paying the 21.6% debt first.
Take match first net worth$45,117
Debt paid in 27 months ($2,113 interest). Pay debt first net worth$41,519
Debt paid in 16 months ($1,231 interest). After-tax match forfeited$3,230
$4,250 pre-tax match skipped during debt payoff. Extra debt interest (match first)
Side-by-side breakdown at the end of the horizon
Both strategies spend the exact same monthly after-tax cash budget over the full comparison horizon.
Side-by-side comparison of taking the 401(k) match first versus paying off debt first| Line | Take 401(k) match first | Pay debt first |
|---|
| Starting debt balance | $8,000 | $8,000 |
|---|
| Monthly after-tax cash budget | $600/mo | $600/mo |
|---|
| After-tax budget to 401(k) while in debt | $215/mo | $0/mo |
|---|
| After-tax budget to debt while in debt | $385/mo | $600/mo |
|---|
| Time to pay off debt | 27 months | 16 months |
|---|
| Total debt interest paid | $2,113 | $1,231 |
|---|
| Remaining debt at year 5 | $0 | $0 |
|---|
| Total employee 401(k) deferrals (pre-tax) | $34,062 | $35,222 |
|---|
| Vested employer 401(k) match earned (pre-tax) | $17,000 | $12,750 |
|---|
| Ending 401(k) balance before tax | $59,365 | $54,630 |
|---|
| Ending 401(k) balance after 24% tax | $45,117 | $41,519 |
|---|
| After-tax net worth at year 5 | $45,117 | $41,519 |
|---|
| Net advantage vs the other path | +$3,599 | -$3,599 |
|---|
After-tax net worth by year
After-tax 401(k) balance minus any remaining debt at the end of each year.
Take 401(k) match firstPay debt first
Year-by-year remaining debt, after-tax net worth under each strategy, and net advantage| Year | Debt left (match first) | Net worth (match first) | Debt left (debt first) | Net worth (debt first) | Match-first ahead (+) or behind (-) |
|---|
| 0 (start) | $8,000 | -$8,000 | $8,000 | -$8,000 | $0 |
|---|
| 1 | $4,808 | $529 | $1,952 | -$1,952 | +$2,481 |
|---|
| 2 | $854 | $10,205 | $0 | $7,269 | +$2,936 |
|---|
| 3 | $0 | $21,029 | $0 | $17,899 | +$3,130 |
|---|
| 4 | $0 | $32,653 | $0 | $29,297 | +$3,356 |
|---|
| 5 | $0 | $45,117 | $0 | $41,519 | +$3,599 |
|---|
What changes the answer most
These two inputs move the after-tax advantage of taking the 401(k) match first the most when varied one at a time.
- If the employer match rate were 25 points higher, the after-tax advantage of taking the 401(k) match first would rise by about $1,093; 25 points lower, it would fall by about $1,093.
- If your expected vesting percentage were 20 points lower, the after-tax advantage of taking the 401(k) match first would fall by about $874.
How this estimates
Equal monthly take-home budget. Both strategies use the exact same monthly after-tax cash budget over the comparison horizon. Pre-tax 401(k) contributions reduce your current income tax at your marginal rate, so $1 of take-home cash funds $1 divided by (1 minus your tax rate) of pre-tax employee contribution, capped at one-twelfth of the 2026 IRS elective deferral limit ($24,500 a year). At the end of each year, pre-tax 401(k) balances are converted to after-tax dollars at the same marginal tax rate so retirement balances and credit card debt are compared on the same after-tax basis.
Take 401(k) match first vs Pay debt first. Under Take 401(k) match first, enough of your monthly budget goes to the 401(k) to capture your employer match and the rest pays down the debt; once the debt hits $0, the entire monthly budget flows into the 401(k). Under Pay debt first, 100% of your monthly budget goes to the debt until it reaches $0 (forfeiting the employer match during those payoff months), and then the entire monthly budget flows into the 401(k) with the monthly match from that point forward.
Vesting and high APRs. Your own 401(k) deferrals are always 100% vested immediately, while employer matching contributions may follow a cliff or graded vesting schedule. If you expect to leave your job before the match vests, lowering the vesting percentage shows the exact cutoff where paying off high-interest debt first wins.
What this leaves out
Minimum debt payments required by your card agreement (if your monthly budget after taking the 401(k) match is smaller than the card's minimum payment, you must cover the minimum first to avoid late fees and credit damage), 10% early withdrawal penalties if you pull money out of a 401(k) before age 59.5, employer true-up provisions (some plans only match per pay period unless they offer a year-end true-up), and credit score improvements from lower utilization are not in the math.
IRS limits and vesting rules
Per IRS Notice 2025-67, the 2026 employee elective deferral limit for 401(k), 403(b) and most 457 plans is $24,500 (plus $8,000 catch-up at age 50 or older, or $11,250 at ages 60 to 63), and the total employer plus employee limit under IRC Section 415(c) is $72,000. Per IRS vesting rules, employer matching contributions must vest at least as fast as a 3-year cliff schedule or a 6-year graded schedule.
Sources and date checked
Every starting value and statutory limit is listed in the sources table below with the date checked (2026-10-18). An estimate from the numbers you typed. Not tax, legal or investment advice. Check your plan's summary plan description for its match formula, vesting schedule and true-up rules.
Benchmark sources and dates
Starting assumptions are example benchmarks, not binding quotes. Change any input to match your own bills or offers.
| Assumption / Input | Starting value | Source | Checked |
|---|
| 2026 401(k) elective deferral and total contribution limits | $24,500 employee elective deferral limit ($32,500 at age 50+, or $35,750 at ages 60 to 63); $72,000 total employer plus employee limit under IRC Section 415(c). | IRS Notice 2025-67 | 2026-10-18 |
| Debt APR | 21.6%. Sourced benchmark, edit this. | Federal Reserve Statistical Release G.19, Consumer Credit | 2026-10-18 |
| Debt balance and monthly budget | $8,000 debt balance and $600 monthly after-tax cash budget. Typical, edit this. | Federal Reserve Survey of Consumer Finances | 2026-10-18 |
| Employer match rate and salary cap | 100% match up to 4% of an $85,000 annual salary ($3,400 a year). Typical, edit this. | U.S. Bureau of Labor Statistics National Compensation Survey and Vanguard How America Saves plan design benchmarks | 2026-10-18 |
| Expected vesting percentage | 100% default; 20% in the unvested job-changer preset. Typical, edit this. | IRS Retirement Topics, Vesting | 2026-10-18 |
| Marginal income tax rate | 24%. Typical federal plus state bracket, edit this. | IRS Revenue Procedure 2025-32 | 2026-10-18 |
| Yearly investment return and comparison horizon | 7% yearly return over 5 years. Typical, edit this. | Historical U.S. balanced portfolio convention; round typical values | 2026-10-18 |