Budgetary allocation: Retirement vs Debt | TigerDroppings.com
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Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41573 posts

Budgetary allocation: Retirement vs Debt

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?




Joshjrn
LSU Fan
Baton Rouge
Member since Dec 2008
6576 posts

re: Budgetary allocation: Retirement vs Debt
APR on your loans?


Volvagia
LSU Fan
Baton Rouge
Member since Mar 2006
41573 posts

re: Budgetary allocation: Retirement vs Debt
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.


Powerman
LSU Fan
Corpus Christi, TX
Member since Jan 2004
121036 posts

re: Budgetary allocation: Retirement vs Debt
You can only put 5500 in a ROTH anyway

I would try to put more into paying down the debt


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League Champs
Bayou Self
Member since Oct 2012
3682 posts

re: Budgetary allocation: Retirement vs Debt
Pay down the debt

Your salary will increase as you age. That will help toward retirement


rjt
Member since Aug 2013
16 posts

re: Budgetary allocation: Retirement vs Debt
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.


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acgeaux129
USA Fan
We are BR
Member since Sep 2007
15011 posts

re: Budgetary allocation: Retirement vs Debt
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.


foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
31223 posts

re: Budgetary allocation: Retirement vs Debt
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.


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Blakely Bimbo
Alabama Fan
Member since Dec 2010
1170 posts

re: Budgetary allocation: Retirement vs Debt
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.
This post was edited on 9/10 at 9:54 am


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Ace Midnight
LSU Fan
Currently asymptomatic
Member since Dec 2006
36508 posts

re: Budgetary allocation: Retirement vs Debt
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 at 10:36 am


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