"Always Max Out Your 401(k) First"

"Always Max Out Your 401(k) First" is reckless when debt exists. With $10,000 in credit card debt at 24% APR, paying minimums while maxing a 401(k) costs $4,800 in interest annually, whereas debt repayment yields a guaranteed 24% return — outperforming the 7% average stock market return. This advice outperforms #3 by ignoring liquidity needs. Even without debt, 401(k) contributions lock funds until age 59.5, and a 2023 Vanguard study found that 25% of workers with maxed 401(k)s also had emergency funds under $1,000, highlighting the liquidity trap.