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Brobocop
LSU Fan
Baton Rouge, LA
Member since Feb 2018
502 posts

Pay off Debts or continue to Max Roths?
Here's a summary of our outstanding Debts:

Investment Property - 5% int, 9 years remaining (currently pays for itself)
Lot - 5.45% int, 20 years (we were planning to pay this off in ~7 years)
Vehicle - 1.9% int, 5 years

Home - 4.25%, 25 years remaining.

Currently we pay the minimum payment on all 4 of these loans, but both Max Roths each year.

I ran the numbers, if we took the 12K/yr and threw them at our debt, we'd be completely debt free in 10 years, or debt free minus home in 3 years.

Paying off the first 3 frees up $1200/mo.

What do y'all feel is the wiser decision?
This post was edited on 8/7 at 5:18 pm


JohnnyKilroy
New Orleans Pelicans Fan
Cajun Navy Vice Admiral
Member since Oct 2012
20340 posts

re: Pay off Debts or continue to Max Roths?
Depends on what you want.

You'll be better off in the long run maxing the roths most likely. Then again, having an extra 14.4k/year in cash would be pretty nice.



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100
castorinho
Oklahoma Fan
13623 posts
Member since Nov 2010
59498 posts

re: Pay off Debts or continue to Max Roths?
What is your income prospect for the next few years?

Obviously backdoor would be available, but if you're going to exceed the phase out start or the limit in the near future, then Roth makes even more sense with those fairly manageable interest rates.


Brobocop
LSU Fan
Baton Rouge, LA
Member since Feb 2018
502 posts

re: Pay off Debts or continue to Max Roths?
I doubt we'll exceed the threshold in 3 years.


Popths
LSU Fan
Baton Rouge
Member since Aug 2016
1883 posts

re: Pay off Debts or continue to Max Roths?
Pay off debt. I’ve saved more in my 50’s than I did the rest of my life because I was debt free.


CajunTiger92
LSU Fan
Member since Dec 2007
1832 posts

re: Pay off Debts or continue to Max Roths?
quote:

Pay off debt. I’ve saved more in my 50’s than I did the rest of my life because I was debt free.


I’m all for paying of debt but when it is at the expense of investing tax free in a bull market, I’m not so sure it’s the thing to do. The time value of money is huge and the earlier you start saving makes all the difference in the world when you are ready for retirement.


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70
castorinho
Oklahoma Fan
13623 posts
Member since Nov 2010
59498 posts

re: Pay off Debts or continue to Max Roths?
quote:

I’ve saved more in my 50’s than I did the rest of my life because I was debt free.
time in the market matters


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110
TigerintheNO
LSU Fan
New Orleans
Member since Jan 2004
31701 posts

re: Pay off Debts or continue to Max Roths?
quote:

I doubt we'll exceed the threshold in 3 years.


but with the extra $1200 a month, you'll max out your Roth by the 4th of July


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41
632627
Southern Cal Fan
LA
Member since Dec 2011
8974 posts

re: Pay off Debts or continue to Max Roths?
I think the interest rates are low enough that you should max the Roth rather than pay down the debts. Certainly don’t pay off the car loan at such a cheap rate.


yatesdog38
Mississippi St. Fan
in your head rent free
Member since Sep 2013
6875 posts

re: Pay off Debts or continue to Max Roths?
Can the investment property be refinanced at a lower rate where you have a higher profit margin? or use the equity in the investment property to lower the rate on the lot? It isn't a bad time to use leverage. What do you plan on doing with the lot?

an extra 20 bucks a month goes a long way over time. reduce spending in a couple spots if you can. Do you have a financial Advisor? Do you have kids? lot more details would help but you should go meet with a Financial Advisor.



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USA
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yatesdog38
Mississippi St. Fan
in your head rent free
Member since Sep 2013
6875 posts

re: Pay off Debts or continue to Max Roths?
max the roth for sure, but on the surface it seems as if there might be a couple things to do to maximize your long term financial goals. In otherwords do you have equity in your investment home if so refinance it since it is paying for itself. Take that equity and put it to work. You could go with something conservative and fixed like preferred stock. Then take those monthly dividends to pay off non-investment property or reinvest it in something else.
This post was edited on 8/8 at 9:23 pm


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Teddy1388
LSU Fan
I-10
Member since Aug 2017
301 posts

re: Pay off Debts or continue to Max Roths?
quote:

Pay off Debts or continue to Max Roths
I ask myself the same thing quite often. Not sure who has the answer


bbesse
LSU Fan
Waveland, MS
Member since Nov 2005
6942 posts

re: Pay off Debts or continue to Max Roths?
Definitely, the lot and the investment property first. Being debt free reduces so much stress in life. Sure, the Roth has a higher chance of upside, but you are taking decent guaranteed money.


Chris4x4gill2
Alabama Fan
North Alabama
Member since Nov 2008
2957 posts

re: Pay off Debts or continue to Max Roths?
Pay off the car for sure. Then I'd pay off the lower balance of the lot or rental.

Then go back to maxing the Roths and use the freed up cash flow to pay down the house and lot/rental


iAmBatman
USA Fan
The Batcave
Member since Mar 2011
9006 posts

re: Pay off Debts or continue to Max Roths?
quote:

Pay off the car for sure.


why??? at 1.9%, it's basically free money


LSU6262
LSU Fan
Member since Jun 2008
4981 posts

re: Pay off Debts or continue to Max Roths?
quote:

Home - 4.25%, 25 years remaining.



Got any equity in this?

Some banks offer no fee, no closing cost HELOANS under 5%

Consolidate these 2 and rerun numbers

quote:

Investment Property - 5% int, 9 years remaining (currently pays for itself)
Lot - 5.45% int, 20 years (we were planning to pay this off in ~7 years)


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cgrand
New Orleans Pelicans Fan
HAMMOND
Member since Oct 2009
17657 posts

re: Pay off Debts or continue to Max Roths?
quote:

Pay off debt. I’ve saved more in my 50’s than I did the rest of my life because I was debt free.


ditto


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JOJO Hammer
Nicholls St. Fan
Getting a barbed wire tribal tat
Member since Nov 2010
9659 posts

re: Pay off Debts or continue to Max Roths?
Payoff you debt aggressively. Then once it is paid off begin saving your money.



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3morereps
Illinois Fan
The Gym
Member since Jun 2015
5214 posts

re: Pay off Debts or continue to Max Roths?
quote:

Home - 4.25%, 25 years remaining.


refinance this now


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Fat Bastard
Atlanta Braves Fan
Member since Mar 2009
41115 posts

re: Pay off Debts or continue to Max Roths?
quote:

why??? at 1.9%, it's basically free money




agreed. i am normally for getting vehicles paid off and just milk your low interest house note if you have one but that rate is so low milk it also.

paid my house off back in 2012 but interest was high and didn't pay to refinance with amount left so just paid off.


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