I'm 50, want to retire next year and have $30,000 in debt. Is maxing out my 401(k) contribution a good plan?

Unfortunately, as members of this generation get nearer to retirement, carrying substantial amounts of consumer debt becomes an increasingly big problem as it creates tough choices about whether to prioritize payoff or retirement savings. It also raises questions about whether it's even possible to retire with high monthly debt payments.

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Let's pretend, for example, that Stan is 50 years old, has $30,000 in credit card debt and is hoping to retire in just one year. Unfortunately, Stan has to decide whether he should max out his 401(k) to prepare for his future, or whether he should focus on paying off his credit card debt to eliminate this big obligation.

While Stan may want to focus on maxing out his 401(k) contributions, this may not be the best path forward for a couple of reasons.

For one, credit card debt is very expensive. The Federal Reserve Bank of St. Louis (2) reported the average interest rate was 21.00% as of April. A $30,000 credit card balance at 21% interest would generate $522.15 in interest over the course of 30 days.

Paying off the cards also effectively provides a 21% risk-free return due to the interest savings. No investment you can make in your 401(k) is likely to allow you to earn a return that's even close to comparable.

Stan could invest enough in his 401(k) to max out his employer match, as if his company matches 50% or 100% of his contributions up to a set percentage of his salary (a common arrangement) he would get up to a 100% ROI from maxing that out. However, he should redirect the rest of his money to his creditors until he's debt free.

"My advice would be to pay off the debt first," John Rafferty (3), a partner and investment advisor representative at Solomon Financial, told Moneywise.

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Unfortunately, the $30,000 in debt that Stan is carrying is probably not the only thing standing in his way of retiring next year.

Rafferty advised paying off the debt before maxing out a 401(k), but he also said that the clear next step is to "solve the problem that created the debt." And that very likely comes down to one major issue. "The situation resulted from not having enough liquid savings," said Rafferty.

If Stan had a substantial amount of savings accessible to him, he likely wouldn't have $30K of high-interest debt. So, in addition to paying off debt, he needs to prioritize cutting his spending, and building up a savings account as key goals to avoid getting back into debt in the future.

"Overall, this person is not ready to retire and should pay off the debt first," Rafferty summed up. "Then get an emergency savings account funded without accumulating more debt. Then they need to see if they have enough assets to retire."

Finally, Rafferty pointed out yet another issue that could prevent Stan from retiring at just 51 years old, especially with the debt he is dealing with.

"If you have $30,000 in debt, you cannot expect to retire next year," said Rafferty. "One main reason is your income. Where is it going to come from in retirement? You cannot draw from Social Security until you're at least 62 years of age. In general, any early distribution from a retirement plan comes with a 10% early withdrawal penalty from the IRS."