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Mr. Peanutbutter

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Re: Student loan payments: Actual numbers

Post by Mr. Peanutbutter » Fri Jan 13, 2017 3:08 pm

So, I've never really looked into Roth 401k because it seems kind of crazy to not take advantage of the tax savings while my income is high, but then someone else in my group was talking about how it's actually a better deal over time. Is he right or is he assuming he'll make a lot more money in retirement than what is probable?

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Rowinguy2009

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Re: Student loan payments: Actual numbers

Post by Rowinguy2009 » Fri Jan 13, 2017 3:19 pm

Mlk&Ckies wrote:So, I've never really looked into Roth 401k because it seems kind of crazy to not take advantage of the tax savings while my income is high, but then someone else in my group was talking about how it's actually a better deal over time. Is he right or is he assuming he'll make a lot more money in retirement than what is probable?
I had this same discussion with a friend the other day - she was advocating for Roth because she planned to work through retirement, and thus reasoned she would have a higher income during retirement than she does now. Like most things I think the answer depends on you and your circumstances, but I think the vast majority of people are going to make more during their working years (especially during biglaw) than they will in retirement, thus making a traditional 401k the right choice.

FWIW I split the baby and do a traditional 401k with a Roth IRA.

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Tiago Splitter

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Re: Student loan payments: Actual numbers

Post by Tiago Splitter » Fri Jan 13, 2017 3:29 pm

If you invest the tax savings from making pre tax contributions then traditional and roth are effectively the same. If you blow the tax savings on hookers then it's just a utility question.

In any case it's not a bad idea to have some of both (plus taxable savings) so you can strategize down the road.

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Re: Student loan payments: Actual numbers

Post by arklaw13 » Fri Jan 13, 2017 5:09 pm

Mlk&Ckies wrote:So, I've never really looked into Roth 401k because it seems kind of crazy to not take advantage of the tax savings while my income is high, but then someone else in my group was talking about how it's actually a better deal over time. Is he right or is he assuming he'll make a lot more money in retirement than what is probable?
http://www.bankrate.com/calculators/ret ... lator.aspx

I can see his point in theory but there's a lot of variables to consider. At 180k, an 18k contribution to a traditional 401k only costs you $12,960 - minus state tax exemption. So that's 5k+ you're saving in taxes that you can then dump into a Roth IRA or other investment account. That extra 5k then starts earning 7% per year tax-free until you retire. But the 401k earnings will be taxed.

Vs. 18k contributed to a Roth 401k costs 18k, but the earnings aren't taxed.

According to that calculator, a roth 401k makes the most sense for me now, but idk if it reinvests the theoretical traditional 401k into a tax-advantaged account like a Roth IRA or just assumes no tax savings. edit: actually the calculator does reinvest it in a roth.

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Re: Student loan payments: Actual numbers

Post by Mr. Peanutbutter » Fri Jan 13, 2017 6:04 pm

I'm assuming I will never make this much money again, in which case regular 401k makes the most sense. If I do live in that 2% probability universe where I'm in basically a 36% tax bracket (when you combine state local and fed taxes) at retirement, then I don't think I'll be like "oh boy I sure wish I had saved that extra $20k over 40 years in tax savings because look how rich I turned out!"

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JenDarby

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Re: Student loan payments: Actual numbers

Post by JenDarby » Fri Jan 13, 2017 6:15 pm

Mlk&Ckies wrote:I'm assuming I will never make this much money again, in which case regular 401k makes the most sense. If I do live in that 2% probability universe where I'm in basically a 36% tax bracket (when you combine state local and fed taxes) at retirement, then I don't think I'll be like "oh boy I sure wish I had saved that extra $20k over 40 years in tax savings because look how rich I turned out!"
:lol: I can't wait until you're a bitter partner

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Re: Student loan payments: Actual numbers

Post by Johann » Tue Jan 17, 2017 3:34 am

Mlk&Ckies wrote:I'm assuming I will never make this much money again, in which case regular 401k makes the most sense. If I do live in that 2% probability universe where I'm in basically a 36% tax bracket (when you combine state local and fed taxes) at retirement, then I don't think I'll be like "oh boy I sure wish I had saved that extra $20k over 40 years in tax savings because look how rich I turned out!"
Yep I do a lot of my financial planning this way. A dollar to a rich man is not the same as a dollar to a poor man so i routinely turn down the best dollar maximization or whatever for the best roi in a median outcome.

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JenDarby

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Re: Student loan payments: Actual numbers

Post by JenDarby » Tue Jan 17, 2017 1:11 pm

Debt at graduation in 2014: 194k
Interest rates: 72k at 7.65%, 41k at 6.55%, 36k at 6.16%, 20.5k at 5.160% (returned some $$ after disbursement to avoid the fee)
Interest paid in 2014: 17.5k

Debt at refinance in 02/2015: 176k
Payment and VARIABLE interest rate: ~1,850/mo at 4.16% that gradually increased to 4.68% - 10yr term
Interest paid in 2015: 7.95k
Interest paid in 2016: 7.15k

Debt at refinance in 01/2017: 145k
Payment and FIXED interest rate: ~1,450/mo at 3.75% - 10yr term
Last edited by JenDarby on Wed Jan 18, 2017 1:33 pm, edited 2 times in total.

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Re: Student loan payments: Actual numbers

Post by Mr. Peanutbutter » Tue Jan 17, 2017 3:34 pm

Getting closer! How much longer until you have a 0 net worth?

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boredtodeath

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Re: Student loan payments: Actual numbers

Post by boredtodeath » Tue Jan 17, 2017 3:55 pm

Debt: $295k @ avg interest rate of 7%. All federal.
Salary: First year NYC biglaw $180k.
Rent: $2k/month

Have a refi offer from Earnest for 4.7% fixed/3.7% variable at a $3k/month minimum payment (at the fixed rate this is close to 11 years, variable is close to 10).

Also been talking to a banker at First Republic who says I should be approved for their 3.75% fixed/10-year loan which would also be a $3k/month payment.

If I am approved for the FR loan seems like I should go with that. Terrified of leaving biglaw in 3-4 years and being completely fucked, though.

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Re: Student loan payments: Actual numbers

Post by JenDarby » Tue Jan 17, 2017 4:16 pm

Mlk&Ckies wrote:Getting closer! How much longer until you have a 0 net worth?
sometime under 2 years, probably closer to 1.5. buying a car this past year slowed me down some

I'm hoping to have my loans paid off in around 5 years and be done with this. all money post 401k this year will probably start funneling to my loans since I've built up a 6 month emergency fund

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Re: Student loan payments: Actual numbers

Post by Mr. Peanutbutter » Tue Jan 17, 2017 4:23 pm

boredtodeath wrote:Debt: $295k @ avg interest rate of 7%. All federal.
Salary: First year NYC biglaw $180k.
Rent: $2k/month

Have a refi offer from Earnest for 4.7% fixed/3.7% variable at a $3k/month minimum payment (at the fixed rate this is close to 11 years, variable is close to 10).

Also been talking to a banker at First Republic who says I should be approved for their 3.75% fixed/10-year loan which would also be a $3k/month payment.

If I am approved for the FR loan seems like I should go with that. Terrified of leaving biglaw in 3-4 years and being completely fucked, though.
Maybe only refi what you think you could pay off in 3-5 years? Or get on PAYE until you're sure you'll be able to keep your income high enough to afford paying them off? Refiing 300k in loans your first year sounds really really risky.

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JenDarby

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Re: Student loan payments: Actual numbers

Post by JenDarby » Tue Jan 17, 2017 4:35 pm

Mlk&Ckies wrote:
boredtodeath wrote:Debt: $295k @ avg interest rate of 7%. All federal.
Salary: First year NYC biglaw $180k.
Rent: $2k/month

Have a refi offer from Earnest for 4.7% fixed/3.7% variable at a $3k/month minimum payment (at the fixed rate this is close to 11 years, variable is close to 10).

Also been talking to a banker at First Republic who says I should be approved for their 3.75% fixed/10-year loan which would also be a $3k/month payment.

If I am approved for the FR loan seems like I should go with that. Terrified of leaving biglaw in 3-4 years and being completely fucked, though.
Maybe only refi what you think you could pay off in 3-5 years? Or get on PAYE until you're sure you'll be able to keep your income high enough to afford paying them off? Refiing 300k in loans your first year sounds really really risky.
Alternatively the 15yr / fixed 4.1% First Republic might be something to consider. .35% higher interest for 5 more years and a lower monthly payment will give you more flexibility, still with the ability to prepay. I considered it for my 145k, but figured since I was already pushing my 8yrs remaining out to 10yrs that I would take the 3.75%

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boredtodeath

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Re: Student loan payments: Actual numbers

Post by boredtodeath » Tue Jan 17, 2017 4:40 pm

Mlk&Ckies wrote:
boredtodeath wrote:Debt: $295k @ avg interest rate of 7%. All federal.
Salary: First year NYC biglaw $180k.
Rent: $2k/month

Have a refi offer from Earnest for 4.7% fixed/3.7% variable at a $3k/month minimum payment (at the fixed rate this is close to 11 years, variable is close to 10).

Also been talking to a banker at First Republic who says I should be approved for their 3.75% fixed/10-year loan which would also be a $3k/month payment.

If I am approved for the FR loan seems like I should go with that. Terrified of leaving biglaw in 3-4 years and being completely fucked, though.
Maybe only refi what you think you could pay off in 3-5 years? Or get on PAYE until you're sure you'll be able to keep your income high enough to afford paying them off? Refiing 300k in loans your first year sounds really really risky.
I'm on PAYE right now. I don't want the balance to balloon any further while I'm in my years of making biglaw money (unless I'm saying fuck it and riding PAYE until the bitter end).

I guess I could refi half and keep the other half federal and on PAYE (but pay it down as if it was also refi'd while I have the income). Just hate the idea of paying more than I have to in the long run.

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Re: Student loan payments: Actual numbers

Post by boredtodeath » Tue Jan 17, 2017 4:44 pm

JenDarby wrote:
Mlk&Ckies wrote:
boredtodeath wrote:Debt: $295k @ avg interest rate of 7%. All federal.
Salary: First year NYC biglaw $180k.
Rent: $2k/month

Have a refi offer from Earnest for 4.7% fixed/3.7% variable at a $3k/month minimum payment (at the fixed rate this is close to 11 years, variable is close to 10).

Also been talking to a banker at First Republic who says I should be approved for their 3.75% fixed/10-year loan which would also be a $3k/month payment.

If I am approved for the FR loan seems like I should go with that. Terrified of leaving biglaw in 3-4 years and being completely fucked, though.
Maybe only refi what you think you could pay off in 3-5 years? Or get on PAYE until you're sure you'll be able to keep your income high enough to afford paying them off? Refiing 300k in loans your first year sounds really really risky.
Alternatively the 15yr / fixed 4.1% First Republic might be something to consider. .35% higher interest for 5 more years and a lower monthly payment will give you more flexibility, still with the ability to prepay. I considered it for my 145k, but figured since I was already pushing my 8yrs remaining out to 10yrs that I would take the 3.75%
Thought about this as well. Gets me to a monthly payment of about $2200 instead of $3000. I feel like if I took the pay cut that would inform this type of flexibility, I'd still be screwed at $2200/month.

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Johann

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Re: Student loan payments: Actual numbers

Post by Johann » Tue Jan 17, 2017 4:45 pm

Absolutely do not refi 150k of debt and leave 150k in govt loans racking up the high interest. It's the worst possible outcome. If you aren't ready to commit to a 3k payment and 300k refi, you need to RE/PAYE and save all your money.

Half assing gives you the dangers of unplayable debt with a private lender AND bad interest with your student loan debt (which you'll be incentivized to pay off last despite the higher interest because of the protections that come with it).

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Re: Student loan payments: Actual numbers

Post by JenDarby » Tue Jan 17, 2017 4:48 pm

I paid $1,800+/mo at well below biglaw salary working in NYC for quite a while. I didn't live lavishly (or arguably too comfortably at times), but I managed. Also paying $2200 a month would enable you to save an additional $800 a month in the meantime and build up a more substantial emergency fund in case you took a pay cut or lost your job.

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Re: Student loan payments: Actual numbers

Post by bk1 » Tue Jan 17, 2017 5:10 pm

JohannDeMann wrote:Absolutely do not refi 150k of debt and leave 150k in govt loans racking up the high interest. It's the worst possible outcome. If you aren't ready to commit to a 3k payment and 300k refi, you need to RE/PAYE and save all your money.

Half assing gives you the dangers of unplayable debt with a private lender AND bad interest with your student loan debt (which you'll be incentivized to pay off last despite the higher interest because of the protections that come with it).
Agree with this. Either go all in on refi or don't refi at all.

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Re: Student loan payments: Actual numbers

Post by kitsunelover » Tue Jan 17, 2017 8:05 pm

Graduated May 2015.

Salary: $180k, will get bonus and raise by the end of this month
Debt: $85k @ 3.49%
Monthly payments: $3k

Currently looking into refinancing with First Republic to get that interest rate below 3%. I'd heard they did a referral program where both parties could get $200; does anyone know whether that's still active and if so, wants to send me their referral code?

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Re: Student loan payments: Actual numbers

Post by Nebby » Tue Jan 17, 2017 8:33 pm

kitsunelover wrote:Graduated May 2015.

Salary: $180k, will get bonus and raise by the end of this month
Debt: $85k @ 3.49%
Monthly payments: $3k

Currently looking into refinancing with First Republic to get that interest rate below 3%. I'd heard they did a referral program where both parties could get $200; does anyone know whether that's still active and if so, wants to send me their referral code?
Are you maxing your 401k?

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Re: Student loan payments: Actual numbers

Post by kitsunelover » Tue Jan 17, 2017 8:57 pm

Nebby wrote:
kitsunelover wrote:Graduated May 2015.

Salary: $180k, will get bonus and raise by the end of this month
Debt: $85k @ 3.49%
Monthly payments: $3k

Currently looking into refinancing with First Republic to get that interest rate below 3%. I'd heard they did a referral program where both parties could get $200; does anyone know whether that's still active and if so, wants to send me their referral code?
Are you maxing your 401k?
Yep--few legitimate excuses for not doing so when in biglaw imo.

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Re: Student loan payments: Actual numbers

Post by Anonymous User » Wed Jan 18, 2017 10:42 pm

Graduating in May with slightly under 40k, 10k from undergrad at ~5%, 21k at 6.21% and 6k at 7.21%. Going to NYC big law. I should refi ASAP, right?

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Re: Student loan payments: Actual numbers

Post by RaceJudicata » Wed Jan 18, 2017 10:47 pm

Anonymous User wrote:Graduating in May with slightly under 40k, 10k from undergrad at ~5%, 21k at 6.21% and 6k at 7.21%. Going to NYC big law. I should refi ASAP, right?
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Re: Student loan payments: Actual numbers

Post by Danger Zone » Thu Jan 19, 2017 8:10 am

With that little debt, it really doesn't matter if you plan to pay it off in the next year or two. The amount of interest paid would be negligible over such a short time.
Last edited by Danger Zone on Sat Jan 27, 2018 3:04 pm, edited 1 time in total.

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JenDarby

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Re: Student loan payments: Actual numbers

Post by JenDarby » Thu Jan 19, 2017 9:18 am

Danger Zone wrote:With that little debt, it really doesn't matter if you plan to pay it off in the next year or two. The amount of interest paid would be negligible over such a short time.
disagree

assuming good credit, the poster can probably get ~2.5% down from the current 6.05%. on two year terms he would pay ~$1,050 in interest on the refinanced loans and about ~$2,570 on the non refinanced loans

and the best part about refinancing is it would give the freedom to pay off on a longer term considering the interest savings. there's no risk to losing federal protections at that debt level so refinancing ASAP is the best option

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