Poll: Pay off debt or Invest in retirement account Forum

[Anonymous User]

I can pretty much pay off my loans in ~3 years on that amount. Goal is after 3 years I can have my loans paid off and 50k sitting in a retirement account making me money

Texas biglaw? otherwise, shutthefuckup

edit: it just occurred to me that you might have had a significant scholarship, so, nevermind

~120k debt starting in NYC. Pay ~40k a year, plus increases and bonuses and I think I can do it.

Wait, your starting pay is $40k per year, or you plan on putting $40k/year toward your loans?

40k towards loans.

Pay is NYC market. I figure 160 --> 140 after 401k --> 90 after taxes --> 50 after loans. If I can do that for 3 years then ill still be under 30, no loans, 50k in retirement. I'm originally from texas actually, so if I ever go back then the 401k seems even smarter since TX tax is less than NY/NYC.

[homestyle28]

There is a zero percent chance boomers won't raid our 401K's when theirs run out.

Somehow I think our generation is going to be just fine with making all the Boomers homeless/cutting benefits when the time comes...we'll just be all like "you fuckers didn't pay for it, you don't get to keep it"

[09042014]

There is a zero percent chance boomers won't raid our 401K's when theirs run out.

Somehow I think our generation is going to be just fine with making all the Boomers homeless/cutting benefits when the time comes...we'll just be all like "you fuckers didn't pay for it, you don't get to keep it"

They'll be a bigger voting block until they start dying off in huge numbers. And by then Gen X will be retiring. Our society is getting older.

And boomers think they DID pay for it. They are convinced, in fact, they have over paid.

[dingbat]

40k towards loans.

Pay is NYC market.

shutthefuckup

[09042014]

You can live on 60K post tax money near NYC (what it would take to pay 40K off). But I really doubt you'd want to.

[Anonymous User]

40k towards loans.

Pay is NYC market.

shutthefuckup

Nah dude, 50k after tax is plenty for me to live on. I live on half of that right now in major city and Im fine.

[dingbat]

40k towards loans.

Pay is NYC market.

shutthefuckup

Nah dude, 50k after tax is plenty for me to live on. I live on half of that right now in major city and Im fine.

I lived in NYC on about half of that, so I know it's doable. Doesn't mean I'd recommend it, nor would I assume someone who actually has a real income would be wiling to put up with that kind of living conditions for very long.

Yes, it is theoretically possible to pay down loans that fast, I just laugh whenever I see someone proclaim with full confidence that they'll do it, because, they probably won't

[Anonymous User]

40k towards loans.

Pay is NYC market.

shutthefuckup

Nah dude, 50k after tax is plenty for me to live on. I live on half of that right now in major city and Im fine.

I lived in NYC on about half of that, so I know it's doable. Doesn't mean I'd recommend it, nor would I assume someone who actually has a real income would be wiling to put up with that kind of living conditions for very long.

Yes, it is theoretically possible to pay down loans that fast, I just laugh whenever I see someone proclaim with full confidence that they'll do it, because, they probably won't

Most people I know did it.

[thesealocust]

Also, if you want to keep money in an emergency fund, series I savings bonds are absolutely insanely amazing but you can "only" buy $10,000 per year.

It's the world's greatest asset class, and if it weren't for the $10K/cap it'd be a major corner stone of every portfolio.

The only downside is your money is locked up for I think 3 or 6 months, and you lose some interest if you cash out in under a year - so it can't be your ONLY emergency source of funding, at least for a few months, but otherwise it's an incredible place for extra cash in our current economic environment.

[keg411]

Also, if you want to keep money in an emergency fund, series I savings bonds are absolutely insanely amazing but you can "only" buy $10,000 per year.

It's the world's greatest asset class, and if it weren't for the $10K/cap it'd be a major corner stone of every portfolio.

The only downside is your money is locked up for I think 3 or 6 months, and you lose some interest if you cash out in under a year - so it can't be your ONLY emergency source of funding, at least for a few months, but otherwise it's an incredible place for extra cash in our current economic environment.

What is the return like on that? I have a CD that basically has a dead interest rate and this sounds like something good to do with $10k of that. I'd throw it at my loans, but that money has been my safety net for years, and I'd like to keep it that way. (Or I can just leave it in the CD).

[fatduck]

There is a zero percent chance boomers won't raid our 401K's when theirs run out.

that's why i keep all my money in gold and Hoverounds

[thesealocust]

Also, if you want to keep money in an emergency fund, series I savings bonds are absolutely insanely amazing but you can "only" buy $10,000 per year.

It's the world's greatest asset class, and if it weren't for the $10K/cap it'd be a major corner stone of every portfolio.

The only downside is your money is locked up for I think 3 or 6 months, and you lose some interest if you cash out in under a year - so it can't be your ONLY emergency source of funding, at least for a few months, but otherwise it's an incredible place for extra cash in our current economic environment.

What is the return like on that? I have a CD that basically has a dead interest rate and this sounds like something good to do with $10k of that. I'd throw it at my loans, but that money has been my safety net for years, and I'd like to keep it that way. (Or I can just leave it in the CD).

Floating rate based on inflation (CPI-U). Changes every 6 months; a year or two ago it was 4.6% per year (!) but it's lower now. And it floats, so as rates/inflation increase so will the rate they pay.

Traditional fixed interest bonds drop in value as interest rates rise (and interest rates are so fucking close to zero that's all but inevitable, just hard to predict). Corporate floating rate bonds have lots of fees and you take on credit risk. But sweet, sweet series-I bonds are fully liquid and backed by the full faith and credit of the US.

[XxSpyKEx]

Max out contributions to Roth IRA each year. How is that even a question? Roth IRA is like a tax scam the IRS lets you run on it.

[EvilClinton]

Also, if you want to keep money in an emergency fund, series I savings bonds are absolutely insanely amazing but you can "only" buy $10,000 per year.

It's the world's greatest asset class, and if it weren't for the $10K/cap it'd be a major corner stone of every portfolio.

The only downside is your money is locked up for I think 3 or 6 months, and you lose some interest if you cash out in under a year - so it can't be your ONLY emergency source of funding, at least for a few months, but otherwise it's an incredible place for extra cash in our current economic environment.

What is the return like on that? I have a CD that basically has a dead interest rate and this sounds like something good to do with $10k of that. I'd throw it at my loans, but that money has been my safety net for years, and I'd like to keep it that way. (Or I can just leave it in the CD).

Floating rate based on inflation (CPI-U). Changes every 6 months; a year or two ago it was 4.6% per year (!) but it's lower now. And it floats, so as rates/inflation increase so will the rate they pay.

Traditional fixed interest bonds drop in value as interest rates rise (and interest rates are so fucking close to zero that's all but inevitable, just hard to predict). Corporate floating rate bonds have lots of fees and you take on credit risk. But sweet, sweet series-I bonds are fully liquid and backed by the full faith and credit of the US.

Okay this is shitty advice. The composite rate on an I-bond right now is 1.76%. You can not cash them in for at least 1 year and after that you lose 3 months of interest if the bond is less than 5 years old. A safety net or rainy day fund is meant to be at least semi liquid. These bonds are not.

You can find money market account and CDs that are FDIC insured (and therefore 0 risk just like the bond) that pay the sam or better rates.

[Brassica7]

If you are earning above a certain amount, you may not contribute to a Roth IRA. According to wikipedia:

"Single filers: Up to $110,000 (to qualify for a full contribution); $110,000–$125,000 (to be eligible for a partial contribution)
Joint filers: Up to $173,000 (to qualify for a full contribution); $173,000–$183,000 (to be eligible for a partial contribution)
Married filing separately (if the couple lived together for any part of the year): $0 (to qualify for a full contribution); $0–$10,000 (to be eligible for a partial contribution)."


OP, I don't know how much you make, but if you are single and earning NYC market pay, 401k is your only choice (at least that I know of).

[EvilClinton]

If you are earning above a certain amount, you may not contribute to a Roth IRA. According to wikipedia:

"Single filers: Up to $110,000 (to qualify for a full contribution); $110,000–$125,000 (to be eligible for a partial contribution)
Joint filers: Up to $173,000 (to qualify for a full contribution); $173,000–$183,000 (to be eligible for a partial contribution)
Married filing separately (if the couple lived together for any part of the year): $0 (to qualify for a full contribution); $0–$10,000 (to be eligible for a partial contribution)."


OP, I don't know how much you make, but if you are single and earning NYC market pay, 401k is your only choice (at least that I know of).

You can convert traditional IRAs to Roth IRAs which has effectively made these limits meaningless.

[kryptix]

40k towards loans.

Pay is NYC market.

shutthefuckup

Nah dude, 50k after tax is plenty for me to live on. I live on half of that right now in major city and Im fine.

I lived in NYC on about half of that, so I know it's doable. Doesn't mean I'd recommend it, nor would I assume someone who actually has a real income would be wiling to put up with that kind of living conditions for very long.

Yes, it is theoretically possible to pay down loans that fast, I just laugh whenever I see someone proclaim with full confidence that they'll do it, because, they probably won't

Yeah no reason not to max out a matching contribution but I never plan to be in a low enough tax bracket where cashing out 401k early will ever be worth it. (Paying big law bracket already). Personally I just take it out and invest it myself, but banking background... Lets just say that if you want to try to live in NYC on 50k after tax you better live at least a 75 minute commute from your job and not have a family or an expensive girlfriend because I'm working with more than that after paying tuition and I guarantee you my lifestyle is nice but nowhere near lavish. Don't forget that unless you live in a dump, 25k at least is going into housing and 10k into food. Your in big law you need to at least buy some nice suits. That doesn't leave much...

[markeconrad]

Why don't you try one of those online financial advisers? Somehow I think professional help getting your ducks in a row when you are working Big Law is a good idea.

[Tiago Splitter]

Max out contributions to Roth IRA each year. How is that even a question? Roth IRA is like a tax scam the IRS lets you run on it.

If that's your philosophy and your plan allows for it, you can get 23K a year in Roth deferrals between 401k and IRA.

[Anonymous User]

Honest question: If one is being payed NYC market and has no loans, how should one invest? And how much should one save per year?

[dingbat]

Honest question: If one is being payed NYC market and has no loans, how should one invest? And how much should one save per year?

How one should invest is too broad a category, but unless you know what you're doing, I'd suggest a combination of index funds. Vanguard has an excellent website for giving general allocation breakdowns and has a good variety of funds to stick your money in.

As a general rule, do not invest in stocks directly.
Many mutual funds have (relatively) high fees and underperform their index
Because of incredibly low yield rates, bond funds are likely to decrease in value whenever interest rates rise again

disclaimer: none of this should be construed as investment, tax, or legal advice. Please see your accountant, lawyer, or investment professional for personalized advice

[albusdumbledore]

Max out contributions to Roth IRA each year. How is that even a question? Roth IRA is like a tax scam the IRS lets you run on it.

TITCR. Anyone who says otherwise doesn't understand math or how compound interest (i.e. investment interest) versus simple interest (i.e. student loan interest) works.

[fatduck]

Honest question: If one is being payed NYC market and has no loans, how should one invest? And how much should one save per year?

How one should invest is too broad a category, but unless you know what you're doing, I'd suggest a combination of index funds. Vanguard has an excellent website for giving general allocation breakdowns and has a good variety of funds to stick your money in.

As a general rule, do not invest in stocks directly.
Many mutual funds have (relatively) high fees and underperform their index
Because of incredibly low yield rates, bond funds are likely to decrease in value whenever interest rates rise again

disclaimer: none of this should be construed as investment, tax, or legal advice. Please see your accountant, lawyer, or investment professional for personalized advice

i'm construing this as all of the above. deal with it.

[fatduck]

Max out contributions to Roth IRA each year. How is that even a question? Roth IRA is like a tax scam the IRS lets you run on it.

TITCR. Anyone who says otherwise doesn't understand math or how compound interest (i.e. investment interest) versus simple interest (i.e. student loan interest) works.

explain to me, using hypothetical numbers, how the difference between investment interest and loan interest makes a difference in this situation.

[MapsMapsMaps]

I dont/wont have any income for CY 2013. Is there anyway to backdoor money into my Roth IRA, which requires earned income to contribute? Ive maxed out every year since I was 19 (Im 27 now), and I'd be a bit sad if I didnt... compounding interest and all (and minimal debt).