re: Paying Down Debt Vs Saving

Definitely do not pull anything out of the 401, doing that before retirement involves paying steep penalties. Besides, next year it may gain everything back and then some, you never know. That's the thing about investing, sometimes you lose and sometimes you win, you simply have to take a long-term view.

5.6% interest is kind of a breakeven point IMHO. I suspect you could go either way, meaning either stop further 401 contributions and focus on the loan, or continue min payments on the loan while you keep investing in the 401. I lean toward the former since reducing your loan payments will help if you want to buy a house.

But definitely do not pull money out of your 401 due to the penalties. If you're going to focus on cutting debt then cut your current 401 contributions and use the extra cash. If you are getting a company match, that comes first since it is free money, don't cut below that amount.

Example: If you are getting a company match on your first 3%, then contribute 3% before knocking out student loans. If you aren't getting a match at all, consider finding a new employer but until then feel free to go ahead and knock out the loans. But do not withdraw what you've already put in.