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Started By
Message
Budgetary allocation: Retirement vs Debt
Posted on 9/9/13 at 5:15 pm
Posted on 9/9/13 at 5:15 pm
I am currently putting in 14% in my 401k attributing for my contribution and the match.
I have a few hundred dollars "leftover" in my budget and I'm going back and forth where to put it.
One option is my Roth at Vanguard, which is appealing due to the flexibility and control it offers versus the 401k and the fact that I can play tax games at the moment to edge me into the 15% bracket, increasing the tax free growth appeal.
The other is to throw it at my student loans (my current budget is already paying them at ~40% more than the minimum payment, allocating the remainder will turn that into paying 100% over the minimum payment).
My current compromise thought is Roth till I'm at 25% tax bracket, then focus on the loans.
What say ye?
I have a few hundred dollars "leftover" in my budget and I'm going back and forth where to put it.
One option is my Roth at Vanguard, which is appealing due to the flexibility and control it offers versus the 401k and the fact that I can play tax games at the moment to edge me into the 15% bracket, increasing the tax free growth appeal.
The other is to throw it at my student loans (my current budget is already paying them at ~40% more than the minimum payment, allocating the remainder will turn that into paying 100% over the minimum payment).
My current compromise thought is Roth till I'm at 25% tax bracket, then focus on the loans.
What say ye?
4
Posted on 9/9/13 at 5:28 pm to Volvagia
APR on your loans?
Posted on 9/9/13 at 5:30 pm to Joshjrn
9.5
And yes, I know.
That by itself is almost a deal locker.
It's mostly the fact that I don't know when, if ever, I'll be able to make Roth contributions at 15% that is giving me pause.
And yes, I know.
That by itself is almost a deal locker.
It's mostly the fact that I don't know when, if ever, I'll be able to make Roth contributions at 15% that is giving me pause.
Posted on 9/9/13 at 5:35 pm to Volvagia
You can only put 5500 in a ROTH anyway
I would try to put more into paying down the debt
I would try to put more into paying down the debt
Posted on 9/9/13 at 7:44 pm to Volvagia
Pay down the debt
Your salary will increase as you age. That will help toward retirement
Your salary will increase as you age. That will help toward retirement
Posted on 9/9/13 at 8:10 pm to League Champs
I would pay down the debt and get that beast off your back.
Unless the law changes in the future, you can still put into a Roth IRA no matter your income. You just have to do a "backdoor" Roth IRA.
Unless the law changes in the future, you can still put into a Roth IRA no matter your income. You just have to do a "backdoor" Roth IRA.
Posted on 9/9/13 at 8:38 pm to Volvagia
I disagree with previous posts. If you are already crushing the minimum payments on your loans, I say go for the Roth. I'm assuming the chances of you exceeding the income limit well before retirement are reasonable (so you only have so much time to take advantage), and tax-free compounding interest is huge.
Posted on 9/10/13 at 3:40 am to acgeaux129
quote:
If you are already crushing the minimum payments on your loans, I say go for the Roth. I'm assuming the chances of you exceeding the income limit well before retirement are reasonable (so you only have so much time to take advantage), and tax-free compounding interest is huge.
This is a valid point.
Is it possible to lower your interest cost on the student loan somehow by taking on some lower-cost debt and paying off the loan that way? 9.5% is pretty high after all and should be aggressively addressed.
Posted on 9/10/13 at 9:53 am to Volvagia
Pay down the debt. Get the student loans off your back as soon as possible.
I don't have a lot of confidence in the long term regarding our leaders. They are liable to change the rules anytime concerning pensions.
I don't have a lot of confidence in the long term regarding our leaders. They are liable to change the rules anytime concerning pensions.
This post was edited on 9/10/13 at 9:54 am
Posted on 9/10/13 at 10:35 am to League Champs
quote:
Pay down the debt
Yeah - don't leave money on the table - but your APR is pretty much the deal cincher here.
Obviously, Ramsey would say "turn off" your retirement - but I don't think he means to leave money on the table, nor would I follow that part of his advice, anyway. So that's the starting point of the discussion - don't leave free money on the table, and if it makes sense to surge and pay off that almost 10% loan first, then shift back to retirement - do it.
The tax nuances of Roth versus traditional is another discussion, but most younger folks will be better with Roth long-term - admirable though your tweaking of your tax rate might be right now.
This post was edited on 9/10/13 at 10:36 am
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