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psychoslowmatic said:   If you plan to max 401k once you get out of debt, have you thought about maxing 401k then borrowing it back? I basically look at it like future you is borrowing from the present year's contribution limit.
  Wow!  That is an excellent point... that may change Suze Orman's tune if she thought about it like that.

rated:
Dus10 said:   
psychoslowmatic said:   If you plan to max 401k once you get out of debt, have you thought about maxing 401k then borrowing it back? I basically look at it like future you is borrowing from the present year's contribution limit.
  Wow!  That is an excellent point... that may change Suze Orman's tune if she thought about it like that.

Woah. Haven't thought about that at all. Will put some serious thought into this. Thanks

rated:
debtblag said:   
Dus10 said:   
psychoslowmatic said:   If you plan to max 401k once you get out of debt, have you thought about maxing 401k then borrowing it back? I basically look at it like future you is borrowing from the present year's contribution limit.
  Wow!  That is an excellent point... that may change Suze Orman's tune if she thought about it like that.

Woah. Haven't thought about that at all. Will put some serious thought into this. Thanks

  Well, in that situation, it only really makes since if you are choosing between maxing out 401k contributions or paying off debt.  If you are already maxing it out, it doesn't make since unless your alternative is to lower your contributions.

rated:
Dus10 said:   
debtblag said:   
Dus10 said:   
psychoslowmatic said:   If you plan to max 401k once you get out of debt, have you thought about maxing 401k then borrowing it back? I basically look at it like future you is borrowing from the present year's contribution limit.
  Wow!  That is an excellent point... that may change Suze Orman's tune if she thought about it like that.

Woah. Haven't thought about that at all. Will put some serious thought into this. Thanks

  Well, in that situation, it only really makes since if you are choosing between maxing out 401k contributions or paying off debt.  If you are already maxing it out, it doesn't make since unless your alternative is to lower your contributions.

I think it's accurate to say that I'm choosing between the two. In 2014, I sent over $40,000 to retirement accounts or student loan payments

rated:
debtblag said:   
Dus10 said:   
debtblag said:   
Dus10 said:   
psychoslowmatic said:   If you plan to max 401k once you get out of debt, have you thought about maxing 401k then borrowing it back? I basically look at it like future you is borrowing from the present year's contribution limit.
  Wow!  That is an excellent point... that may change Suze Orman's tune if she thought about it like that.

Woah. Haven't thought about that at all. Will put some serious thought into this. Thanks

  Well, in that situation, it only really makes since if you are choosing between maxing out 401k contributions or paying off debt.  If you are already maxing it out, it doesn't make since unless your alternative is to lower your contributions.

I think it's accurate to say that I'm choosing between the two. In 2014, I sent over $40,000 to retirement accounts or student loan payments

  What's the interest rate on your remaining debt?  If it's all student loans at <7% I think I'd rather max 401k and IRA then throw everything after that at the loans.  Of course, if you want a house or something that the debt is getting in the way of, that's one thing, but if you're just committed to bettering your financial situation then I think you'll be better off 30 years down the line by maxing retirement and taking longer to pay off the loans.  Either choice is great though.

rated:
psychoslowmatic said:   
debtblag said:   
Dus10 said:   
debtblag said:   
Dus10 said:   
psychoslowmatic said:   If you plan to max 401k once you get out of debt, have you thought about maxing 401k then borrowing it back? I basically look at it like future you is borrowing from the present year's contribution limit.
  Wow!  That is an excellent point... that may change Suze Orman's tune if she thought about it like that.

Woah. Haven't thought about that at all. Will put some serious thought into this. Thanks

  Well, in that situation, it only really makes since if you are choosing between maxing out 401k contributions or paying off debt.  If you are already maxing it out, it doesn't make since unless your alternative is to lower your contributions.

I think it's accurate to say that I'm choosing between the two. In 2014, I sent over $40,000 to retirement accounts or student loan payments

  What's the interest rate on your remaining debt?  If it's all student loans at <7% I think I'd rather max 401k and IRA then throw everything after that at the loans.  Of course, if you want a house or something that the debt is getting in the way of, that's one thing, but if you're just committed to bettering your financial situation then I think you'll be better off 30 years down the line by maxing retirement and taking longer to pay off the loans.  Either choice is great though.

The highest among them is at 7.65% (Originally 7.9% with the 0.25% discount for automatic payments) and my MAGI is high enough that I don't get to deduct student loan interest paid.

Luckily (?!), I have nearly $35,000 of that high-interest debt -- enough that making decisions about <7% debt is something I won't have to deal with for at least another year.

rated:
debtblag said:   
psychoslowmatic said:   
debtblag said:   
Dus10 said:   
debtblag said:   
Dus10 said:   
psychoslowmatic said:   If you plan to max 401k once you get out of debt, have you thought about maxing 401k then borrowing it back? I basically look at it like future you is borrowing from the present year's contribution limit.
  Wow!  That is an excellent point... that may change Suze Orman's tune if she thought about it like that.

Woah. Haven't thought about that at all. Will put some serious thought into this. Thanks

  Well, in that situation, it only really makes since if you are choosing between maxing out 401k contributions or paying off debt.  If you are already maxing it out, it doesn't make since unless your alternative is to lower your contributions.

I think it's accurate to say that I'm choosing between the two. In 2014, I sent over $40,000 to retirement accounts or student loan payments

  What's the interest rate on your remaining debt?  If it's all student loans at <7% I think I'd rather max 401k and IRA then throw everything after that at the loans.  Of course, if you want a house or something that the debt is getting in the way of, that's one thing, but if you're just committed to bettering your financial situation then I think you'll be better off 30 years down the line by maxing retirement and taking longer to pay off the loans.  Either choice is great though.

The highest among them is at 7.65% (Originally 7.9% with the 0.25% discount for automatic payments) and my MAGI is high enough that I don't get to deduct student loan interest paid.

Luckily (?!), I have nearly $35,000 of that high-interest debt -- enough that making decisions about <7% debt is something I won't have to deal with for at least another year.

  Well, you've got 57,800 + 18000 for this year = 75,800.  I'll ignore the match.  You can typically borrow 50%, so you could borrow 37900 which would wipe out the 7% debt.  A loan kind of counts as a bond since it'll return whatever interest rate you're paying, so your asset allocation will be way too bond heavy for a while.  And there's all the limitations about immediate payback if you separate from your employer, and very important, you need to make sure your plan will let you continue to contribute to the 401k with an outstanding loan, some don't.  Also you may not be able to pay extra toward this loan unless you pay the whole thing off.  But if you can live with these limitations and your plan is good it might be worth it.

If you don't want to, 7% is pretty close to the long term average stock/bond return, so your plan to contribute to the match then switch to debt paydown is probably going to give you the best outcome.

rated:
Time for a February 2015 update. Last month, I:

  • paid off $2,400 of Student Loan Debt to bring it down to -$102,800
  • added $1,500 to Retirement Savings to increase it to $59,300

  • In total, I added $3,900 to Net Worth to increase it to -$43,500

What I'm proud of: Paying off $2,400 in student loan debt is good! After a 2014 where I had some good months and long stretches where I hardly paid off any debt at all, I'm looking for both progress and consistency this year. I'm proud of this strong start.

What was challenging: I had a surprise monster cavity that needed an expensive crown, for which I had to pay a budget-busting $500 out of pocket! Luckily, I have an emergency fund to deal with these sort of surprises -- and a Health Savings Account for tax-advantaged payment. The lesson here was definitely to brush and floss more frequently.

Here's how I spent money in January:

  • 59% Debt repayment and retirement savings. Slightly lower than my 61% goal for the year
  • 15% Rent
  • 15% Food, health, and personal care. Stupid crown...
  • 7% Travel and transit. A bit overblown because I prepaid for some travel I'm doing in February and March.
  • 4% Utilities and everything else

As for my greater goal of getting to a net worth of zero by the end of this year, $3,900 gets me 8% of the way there, so I'm definitely on track. Thanks for reading and thanks for all the advice!

rated:
Good job debtblag

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Looks like we're at the start of a new month, so it's time for a March 2015 update: In February, I

  • Paid off $2,500 of debt, bringing it down to -$100,200
  • Added $5,700 to Retirement savings to bring it up to $62,500

  • In sum, this brought my net worth up $8,200 to -$35,100

What I'm most proud of this past month: I'm most proud that I'm keeping my debt payments consistent this year. Last year, different months saw payoff amounts falling in the wide range of $0 and $3,500.  After two months of 2015, my range is almost negligible. 
What challenged me: The thing most likely to have blown up my budget was a wedding several states away that I extended a couple days into a mini-vacation.  However, because it was in low-cost Charleston, SC, I didn't spend much more over the course of the trip than I would have had I stayed home in high-cost New York City.
Lessons for next month: I'd like to look into doing my taxes next month as well as review where my career's headed -- both of which have a pretty big effect on my debt pay-down.

Thanks as always to the kind words, advice, and motivation to keep on trucking. Hope everyone else had a solid February

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