Also, in this economy, you really can’t have too much cash accessible. I don’t want to scare you, OP, because the likelihood of this happening is probably low, but there’s definitely a chance that biglaw firms defer incoming associates next fall and/or rescind offers they have to their summers. We just don’t know the extent of coronavirus economic damage yet. Anything could happen. If worst comes to worst, you can defer your student loan payments. You can’t make cash appear out of thin air.The Lsat Airbender wrote: ↑Wed Aug 19, 2020 2:19 pm"Debt-free" is nice psychologically but it's not worth ransacking your savings for (unless the interest is crazy high). The numbers that matter most are liquid assets, in the short term, and net worth, in the medium/long term. You're harming both here.Anonymous User wrote: ↑Wed Aug 19, 2020 1:40 pm3L here. Yearly tuition after aid = $28k. My spouse works in a relatively low-income job and just barely covers our living expenses during law school.
Debt load: I just paid off my accumulated 7.2% interest loans ($42k total) from 1L and 2L. No undergraduate loans as I paid those off when I worked before law school. I have an after-aid $13.5k tuition bill for the next two semesters.
IRA: ~18k
Cash on hand: 20k
Taxable investments in brokerage account: 16k (I recently liquidated $42k to pay off my 1L/2L loans).
I have accepted a biglaw job in a major market for next year. I've been thinking about taking an interest-free loan to cover tuition for this fall. On Jan 1, I can withdraw my IRA proceeds penalty-free to pay for Spring tuition, and pay off the interest-free loan out of pocket. By delaying my IRA withdrawal, I defer having to pay the tax on that income until 2021. Am I an idiot to do this? I know the conventional wisdom is to not touch the IRA money, but it'd be great to get out of school debt-free.
Definitely leave the money in the IRA. Its long-term value is much higher there (better long-term returns and it's tax-advantages). That money is sacred until you retire. Even drawing down the taxable account is negative RoI, reduces your liquidity, and probably is tax-inefficient to boot.
eta: Interest-free loan? That's a free lunch. Don't throw free lunch in the garbage.
Take out the loans for tuition and don’t worry about it. You are barely going to have any debt.