[sdz]

At a very general level, accumulating savings while carrying debt only makes sense if you can get a greater (risk-adjusted) return on your savings than the interest rate you need to pay on your debt. So if your return on your savings is lower than the interest on the debt, paying off your loan with your savings is like getting the difference between the return and the interest rate for free -- i.e. you should definitely pay off your debt.

Of course, there are lots of complications to this general rule in the real world. The US, at least, taxes the returns on your savings (capital gains and dividends) and gives you tax benefits for your debt. When saving in a 401k, employers often match your contribution, which amounts to a guaranteed 100% return on your investment for the portion that's matched.

Liquidity is also a concern. For example, if you have a 30-year mortgage on your house at 5%, you probably wouldn't want to put all of your savings into paying down that mortgage since you can't get it out again until you sell your house. If you have a sudden need to raise cash, you'd need to get a home equity loan, which can be tricky if your house value has plummeted or if interest rates are high.

Thus the full answer is that, well, it depends on a lot of life factors, and although paying off your debts is generally good advice, especially for very high interest loans like credit cards, there are many factors to consider other than the spread between the return on your savings and the interest rate on your debt.