A MoneyPlanSOS podcast listener sent in a question about investing while in debt. He makes a great case study for us to examine if there is a one-size-fits-all get-out-of-debt plan, or not?
Letter from a future investor:
Steve, I listen to your podcast and I love the show!  There's always something new to learn about money.

I have a question about whether I should invest in a retirement account or pay down debt.  My wife has some student loan debt (which we are just now beginning to pay on) and we do have a car payment (4 more years).  There isn't any credit card debt or mortgage (we rent) so we don't have any other debt.

The student loan debt will take quite a long time to pay off (likely 10 years) since we can't afford to pay much over the required monthly payment.  Is it wise to begin saving what little money we have left each month on a retirement account (likely a Roth IRA) or use it to pay down the loan debt and wait another 10 years for the student loans to be paid off and invest more money at that time?

I know you teach paying down the debt as fast as possible but you've also said that setting aside money in a retirement account early is best due to the compounding interest.  Is one always better than the other or does it depend on the situation?

Again I love the show and would appreciate any advice you could give me. Thanks, "Joe"
The 12 steps to building a house of financial freedom
You probably already know the answer, but let's walk through the 12 steps to financial freedom, or at least the steps that take us up to where they can invest:

Work
Plan
Give
Pay for necessities
Save $1,000
Pay for some "wants"
Pay off all non-mortgage debt
Save 3-6 months of expenses
Save for short-term goals
Invest wisely
Pay off the house
Build wealth

Don't give up your options by keeping debt
Making the commitment to only pay the minimum for 10  years is a difficult commitment. You lose options when keeping debt around - no matter how good the interest rate. What if you had a job loss or a spouse wanted to stay home with the kids? Those options are gone with thousands of dollars of debt.
You already knew my answer
Hi "Joe",

I love that you are paying attention. Now for some of the advice that will help you keep from paying interest: 

The choices you make today can erase the choices you made in the past (car & student loan), but it will take hard work and money. If you don't attack the consumer debt first then it will be very difficult to make progress on anything (diluting your wealth by staying in debt). It would also be great to have $0 debt in case you guys have a career change that involves a move or children or medical event or... (get the picture).

Yes, it is better to start investing young but you have already committed your future earnings for the college degree and a vehicle. In other words, the decisions you made in the past have already answered your question. My advice is to take whatever you can to pay off the car and the student loan. If you have 4 years left on the car then it may be too expensive of a vehicle for your family. Why not consider selling the car, even if that means losing a little on it, buying a cheaper get-around-car with cash until you get this mess cleaned up and throw everything you have at the student loan? No car payment means more money to attack the student loan and get out of it quickly - very quickly!

It sounds like you two are young (under 30?) so you have PLENTY of time to save for retirement. And without any debt you will be able to save some real money, not just a measly 1-3% as the typical American would.

Don't be normal, be weird - that's what millionaires are.

 
Holla from the Impala segment: Reasons to stop saving for retirement while in debt
5. Increasing your take-home pay will help fund an emergency account and keep you from accruing more debt.

4. The focused-intensity will get you out of debt faster

3.