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Posted on 12/26/14 at 11:26 pm to hungryone
quote:
If you are already enrolled in a thrift savings plan with the govt, then good for you. Make sure you are maxing out the match funds or you are leaving free money on the table.
Depending on your tax circumstances, you may be better served with a traditional IRA. The trad IRA can't be touched until retirement without penalties, BUT it is potentially deductible on your 1040 (depending on your income levels).
The benefit to the Roth is liquidity: all contributions can be withdrawn at any point (earnings must stay in until retirement, but they are tax free when withdrawn). So you can treat it like a savings account of sorts.
The larger point is this: the earlier you can start saving, the better. Market advantages (earnings) are better over the longest term possible, generally speaking. Don't wait until you feel comfortable or secure to start saving for retirement. Build it into your budget as a non negotiable thing.
Think of it like this: your retirement savings are more important than cable, high speed internet, or a cell phone. Don't go paying for all of those until you pay yourself (retirement savings) first.
Dude get a 2nd job thats the only way you can get these paid off early.
Posted on 12/27/14 at 8:47 am to hungryone
quote:
The larger point is this: the earlier you can start saving, the better. Market advantages (earnings) are better over the longest term possible, generally speaking. Don't wait until you feel comfortable or secure to start saving for retirement. Build it into your budget as a non negotiable thing.
Think of it like this: your retirement savings are more important than cable, high speed internet, or a cell phone. Don't go paying for all of those until you pay yourself (retirement savings) first.
But if you have debt and you focus on retirement, it's like you're borrowing money at interest to invest in accounts to make interest. The loan interest rates are locked. Retirement account rates are not guaranteed.
Don't borrow money to save for retirement, except a mortgage. Focus on getting rid of the loans, not preparing a comfy room for them at your house.
Posted on 12/27/14 at 1:08 pm to LSUJay13
I feel like consolidation really wouldn't make sense for me. Perhaps if I wasn't planning on paying off the 6.8% quickly, but since I am, I don't think it'd be the right call.
Anyway, I think what I'm actually going to end up doing is paying the $100/week all to C at first (since I know now interest is tax deductible, I might as well put it all to C, rather than only $85 to C and then split up the rest of the $15 to B and A just to stay ahead of interest). And then once C's equal to A pay them roughly equally, etc., until C, B and A are all gone. I understand the snowball effect, but I'm really confident in my ability to keep up with this, so I think it makes more sense to lower the higher principal balance first rather than just eliminate one.
Looking at this conservatively and if I paid all of C first, which I'm not even planning on doing:
My interest right now for C is about $40/month. My automatic payment to C is about $90/month, so if I pay $100/week, we'll call it $500/month (it's actually a little more), which means I'm reducing $460/month from about $7,500. That would pay off C completely around early May 2016. And that doesn't even take into account the reduced interest amount.
For A, when factoring in interest and automatic payment, I'd be netting about $28/month off the debt, so in May 2016, the debt would be around $3,900. If I then pay my $100/week to A plus the automatic payment, that'd be (conservatively) about $430/month. This doesn't even factor in the extra portion of the automatic payment that would now go to A, since I no longer have that portion going to C. A and C are paid off by February 2017.
And lastly B. Here, I was netting about $16/month off the debt, so in February 2017, the debt would be at about $2,100. With the extra $100/week, I'd be paying (conservatively) $416/month. This doesn't take into account the extra portion from C in May 2016 and then A in Feb. 2017. That debt would be gone around July 2017.
Doing this, I'd have A, B and C ALL gone in July 2017. This uses conservative estimates and doesn't even take into account lowering interest payments and that I would pay A, B and C at a nearly equal rate once they get to similar balances, rather than continue paying more to C once it has a lower principal than B and A.
I will also set up a Roth IRA. I'll try to put in around $1,500 for the 2014 year in a few months and then hopefully max out for 2015, 2016 and 2017. It will require some real frugality, particularly for these next 12+ months until I get that pay boost to the low 50s, but it can be done. That would leave me at age 25 with around $18,000 in contributions to my Roth IRA (plus the TSP) and less than $9,000 total in undergrad debt at rates less than 4%. I'd be pleased. I'd be comfortable taking out loans for grad school at that point, because, if I'm going to go back, it's not to get a Masters in Art History. And if I don't go back, I'm on solid footing and have very little debt remaining.
That was a very long post, but it was largely for me, not anyone in particular. Wanted to plan it out a little bit.
Anyway, I think what I'm actually going to end up doing is paying the $100/week all to C at first (since I know now interest is tax deductible, I might as well put it all to C, rather than only $85 to C and then split up the rest of the $15 to B and A just to stay ahead of interest). And then once C's equal to A pay them roughly equally, etc., until C, B and A are all gone. I understand the snowball effect, but I'm really confident in my ability to keep up with this, so I think it makes more sense to lower the higher principal balance first rather than just eliminate one.
Looking at this conservatively and if I paid all of C first, which I'm not even planning on doing:
My interest right now for C is about $40/month. My automatic payment to C is about $90/month, so if I pay $100/week, we'll call it $500/month (it's actually a little more), which means I'm reducing $460/month from about $7,500. That would pay off C completely around early May 2016. And that doesn't even take into account the reduced interest amount.
For A, when factoring in interest and automatic payment, I'd be netting about $28/month off the debt, so in May 2016, the debt would be around $3,900. If I then pay my $100/week to A plus the automatic payment, that'd be (conservatively) about $430/month. This doesn't even factor in the extra portion of the automatic payment that would now go to A, since I no longer have that portion going to C. A and C are paid off by February 2017.
And lastly B. Here, I was netting about $16/month off the debt, so in February 2017, the debt would be at about $2,100. With the extra $100/week, I'd be paying (conservatively) $416/month. This doesn't take into account the extra portion from C in May 2016 and then A in Feb. 2017. That debt would be gone around July 2017.
Doing this, I'd have A, B and C ALL gone in July 2017. This uses conservative estimates and doesn't even take into account lowering interest payments and that I would pay A, B and C at a nearly equal rate once they get to similar balances, rather than continue paying more to C once it has a lower principal than B and A.
I will also set up a Roth IRA. I'll try to put in around $1,500 for the 2014 year in a few months and then hopefully max out for 2015, 2016 and 2017. It will require some real frugality, particularly for these next 12+ months until I get that pay boost to the low 50s, but it can be done. That would leave me at age 25 with around $18,000 in contributions to my Roth IRA (plus the TSP) and less than $9,000 total in undergrad debt at rates less than 4%. I'd be pleased. I'd be comfortable taking out loans for grad school at that point, because, if I'm going to go back, it's not to get a Masters in Art History. And if I don't go back, I'm on solid footing and have very little debt remaining.
That was a very long post, but it was largely for me, not anyone in particular. Wanted to plan it out a little bit.
This post was edited on 12/27/14 at 1:09 pm
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