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I would take the guaranteed 6.8% you'd save by paying off the loan early if it were me. Make sure you have at least a little safety net though.
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Aug 6, 2011 17:43
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amethystbliss posted:Are you sure about this? I've been making (very small) payments on my stafford loans for a few years now even though I'm a student, and they still don't officially go into repayment until my grace period is over in March 2012. Who do you work for, you may also get Agency contribution of 1% which will give you a total of 10% if you contribute 5. Do you like your federal job, will you plan to be there 10 years, are you eligible for an income based repayment plan? There is a little known plan that basically allows you to pay on a greater than 10 year schedule and then have the federal loans forgiven after 120 on time payments if you work for a public or non-profit entity. The extended repayment plan does not qualify. Basically, if you make less than a certain amount, you can pay less than what would be required to pay it off in 10 years and then have it all forgiven after 10 years (without forgiveness of endebtedness income too!) It's a bit of a gamble but it can be a bit of a nice benefit for working for the Federal Gov't if your income is low enough to qualify. With 60k, you make qualify. Saint Fu posted:I would take the guaranteed 6.8% you'd save by paying off the loan early if it were me. Make sure you have at least a little safety net though. But it's already guaranteed. It's not due until 6 months after he graduates (or stops attending), as in it doesn't even begin to start charging him interest. Tax dollars are giving him, and every other student, free money (me too)!
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Aug 6, 2011 19:10
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KennyG posted:Who do you work for, you may also get Agency contribution of 1% which will give you a total of 10% if you contribute 5. Do you like your federal job, will you plan to be there 10 years, are you eligible for an income based repayment plan? I am a girl  . I do get the extra 1% which makes it a total of 10%. Forgot about that part. My job is a 2 year term appointment with the possibility to renew for an additional 2 years if they still like me, so I highly doubt I'll be in this job for 10 years (though I'm not ruling out the possibility of a transfer to another agency). Either way, my husband earns a lot more than I do so we don't qualify for IBR or the public service loan forgiveness programs. Also, about half of my loans are unsubsidized and are already accruing interest which is why I want to start putting the full $1600 (or $1400) toward them as soon as I get my first pay check. We are also simultaneously building an emergency fund, so I'm not too worried about that.
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Aug 6, 2011 19:23
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amethystbliss posted:Are you sure about this? I've been making (very small) payments on my stafford loans for a few years now even though I'm a student, and they still don't officially go into repayment until my grace period is over in March 2012. I was referring to Eggplant Wizard's options. Although everyone is different. By all means you should pay off an unsub'd loan that is not CRAZY low interest. Also, there is a difference between starting payment and actually reducing the amount you take and paying the institution directly. During the academic year, you can just go to your institution and ask them to pay some of your loans and what they do is reduce the way the loans were dispersed. (At least that's what I had) this is why you pay the school and not the Department of Education until after you are out of school.
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Aug 6, 2011 19:47
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KennyG posted:I was referring to Eggplant Wizard's options. Although everyone is different. By all means you should pay off an unsub'd loan that is not CRAZY low interest. amethystbliss fucked around with this message at 20:07 on Aug 6, 2011 |
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Aug 6, 2011 20:03
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Even if that's the case, why would you want to pay a loan that is not accruing interest if you could use that money to pay something else or at the very least sit it in a 0 risk account and wait until it at least starts accruing interest? This is the thing with the fully subsidized student loans, there is an incentive not to repay them until you graduate. If you pre-paid them they aren't going to give you interest up until the point where they would have started. If you were in say Law School and had cash to pay your tuition but you school was offering you $10k a year in fully sub'd loans, you'd be better off sticking the $30k in a 0 risk savings account and @1% earning ~$1k over the 3.5 years.
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Aug 7, 2011 00:16
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KennyG posted:Even if that's the case, why would you want to pay a loan that is not accruing interest if you could use that money to pay something else or at the very least sit it in a 0 risk account and wait until it at least starts accruing interest? This is the thing with the fully subsidized student loans, there is an incentive not to repay them until you graduate. If you pre-paid them they aren't going to give you interest up until the point where they would have started. Half her loans are unsubsidized so they are accruing interest even though she doesn't have to make payments. I don't know how her system is setup, but she should only be paying money towards the unsubsidized loans and ignoring the subsidized ones for now (as you noted it's free money to earn a return on).
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Aug 7, 2011 02:26
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My only loan is subsidized and has stayed at the same amount since I graduated from undergrad. And yeah, pretty much what KennyG said. Also I like having a safety cushion, and if I paid off my loan now, it'd wipe out pretty much all of that. I can only save so much a year on my salary (usually around $3k barring emergencies), so it will take me a long time to build up a cushion again.
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Aug 7, 2011 02:47
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amethystbliss posted:Are you sure about this? I've been making (very small) payments on my stafford loans for a few years now even though I'm a student, and they still don't officially go into repayment until my grace period is over in March 2012. You mentioned in a later post that half your loans are unsubsidized. I'll assume the other are subsidized. If that's the case, you should only be paying on the unsubsidized loans right now. There is no reason to pay down a debt that is not currently accruing interest (which the subsidized should not). As for what to do after, I'd still max out the Roth while paying down your loans. Besides the "use it or lose it" aspect, I think your overall return will be better. I don't think it's too far fetched to say you can get an 8% return on a Roth over the lifetime of it (that might even be too conservative). And the fact that you won't pay taxes on the earnings makes it even more profitable. And as mentioned, the principle is always available to you in case of emergency. So assuming you are making 8% on the Roth, you're technically making 1.2% on their money. Not to mention the huge tax advantages down the road (which you lose every year you don't use it) and the fact you should be able to write off the student loan interest on your taxes. It's a tough mental hurdle to get around initially, but you have to look at it as if you were a bank. You're borrowing money at an interest rate and turning around to use that money to make a higher rate in return.
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Aug 7, 2011 02:48
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Just want to say this thread is pretty awesome. I just finished reading The Four Pillars of Investing and A Random Walk Down Wall Street, and I've finally saved up enough to open an investment account with Vanguard. I'd honestly be a little more comfortable if the headlines were about adorable kittens being rescued from trees rather than the current economic pseudopanic. I figure that no matter what day I pick to invest, the economy could skyrocket or fall off a cliff the day after, so I may as well just get into it.
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Aug 7, 2011 04:42
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T-1000 posted:Just want to say this thread is pretty awesome. I just finished reading The Four Pillars of Investing and A Random Walk Down Wall Street, and I've finally saved up enough to open an investment account with Vanguard. Most retail investors do a great job of buying high and selling low for just this reason. Why? They see headlines that say "Stock market hot!" & "Up 75% in 2 years!" so they think, "Buy! Buy! Buy!" But what's coming around the bend is a downward correction. The market dips, depending on the situation, somewhere between 10 (what's happened so far) and ~40% (what happened in 2008). These people ride this roller coaster to the bottom,  and sell. They have now cashed out the bottom, will miss the ride to the top and bitch and moan about how the stock market lost them a bunch of money.  Just be patient, invest for the LONG TERM, and don't check your portfolio daily if you are the type that can make those knee jerk reactions. 
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Aug 7, 2011 15:36
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KennyG posted:Most retail investors do a great job of buying high and selling low for just this reason. Why? They see headlines that say "Stock market hot!" & "Up 75% in 2 years!" so they think, "Buy! Buy! Buy!" But what's coming around the bend is a downward correction. The market dips, depending on the situation, somewhere between 10 (what's happened so far) and ~40% (what happened in 2008). These people ride this roller coaster to the bottom, My father-in-law liquidated his retirement portfolio in the middle of March 2009.  No inheritance coming our way. TraderStav fucked around with this message at 17:36 on Aug 7, 2011 |
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Aug 7, 2011 17:30
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TraderStav posted:My father-in-law liquidated his retirement portfolio in the middle of March 2009. Did he explain why? One man in my family did the same thing, except two months earlier, and also citing concern that Obama might find a way to take it all on top of 'I got tired of seeing my retirement disappear.'
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Aug 8, 2011 00:04
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Radd McCool posted:Jesus christ, that's when I started my investopedia paper trading account. It's up 90%. My aunt did the same, cashed out March 09, and in Feb. of this year, she commented that she was just starting to think it was safe to get back in the market. The sick thing is that she was one of those traders that Merril hired in the mid 80's to cold call old ladies. (Completely uneducated, think Michael Lewis) She should know better.
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Aug 8, 2011 00:43
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Radd McCool posted:Jesus christ, that's when I started my investopedia paper trading account. It's up 90%. Yup, he couldn't take it anymore. He refused to hire a professional, even his son-in-law who is in the business. Look up stubborn rear end in the dictionary....
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Aug 8, 2011 00:52
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T-1000 posted:I'd honestly be a little more comfortable if the headlines were about adorable kittens being rescued from trees rather than the current economic pseudopanic. I figure that no matter what day I pick to invest, the economy could skyrocket or fall off a cliff the day after, so I may as well just get into it. The best times to buy are often the times when everything looks lovely. You'd rather be buying now opposed to everything being great.
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Aug 8, 2011 02:27
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That assumes long-term there will be economic growth. What if global output declines for the rest of our lives? What if everything is "great" now, because it's only going to get worse? I'm fully invested in the market now, just sometimes wonder if that's the right choice. People look at for example 1950-2000 and say "oh well yeah there were ups and downs but long-term you're OK." But I really do wonder how well that will hold true for 2010-2060. Technology/science may be the only way out. Or BRICs. edit: which is to say, maybe I shouldn't be saving for retirement at all, instead taking advantage of what the world has to offer today zmcnulty fucked around with this message at 02:57 on Aug 8, 2011 |
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Aug 8, 2011 02:46
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The world has gone through a lot over the last 100 years. Major recessions, a depression, World Wars, and so on. There have always been ups and downs. This is just a bad, long down. But I'd still bet that it will be good someday.
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Aug 8, 2011 03:43
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If destroying Europe twice and western Russia once did not end everything, it's going to be hard to do this century. It's good for me that it's going down, I can buy more shares! Edit: I'm in for about 40 more years so I'll see more of this. I hope we don't get a new Utopian economy right when I retire though.  I'll be back in 40 years to ask you guys what investment vehicles or alien death camps I should move to in retirement. I hear the J'kark death camps are quick and painless.Edit 2: Once Greece and Italy are forced to default/be annexed as some stupid goons think will happen, expect the market to go down further. Yaos fucked around with this message at 04:44 on Aug 8, 2011 |
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Aug 8, 2011 04:22
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Yaos posted:If destroying Europe twice and western Russia once did not end everything, it's going to be hard to do this century. It's good for me that it's going down, I can buy more shares! Amen, I'm not buying stocks for next year. I'm buying them for 40-50 years from now.
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Aug 8, 2011 04:25
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Which is why I'm looking at setting up a Vanguard IRA now. I mean, I've been needing to and then everything went Splat friday and I got a cautious  about the idea.That said, for retirement fund purposes am I better off selecting one of their Target Retirement funds (I guess the target 2055, most likely) or tailoring my own setup and adjusting it as I go? Or to approach the question from a different direction, if I start one of their Target Retirement funds, am I able to later adjust what's in it myself (and I realize this may be a question for Vanguard rather than here but hey, its worth a shot).
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Aug 8, 2011 04:39
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Some say a pre-built fund, others say do it yourself. There's no resources on which, if either, is any better. I use the target retirement fund for an IRA and their LifeStrategy fund for a non-tax advantaged account. Some people say the LifeStrategy fund may not be very tax efficient, but I don't give a poo poo, maybe my not caring about my top tax rate will help feed/blow up a poor person one day. You can not choose the allocation of the retirement fund, just like you can't choose the allocation of any other fund on Vanguard. You can sell the shares, but I could contact Vanguard and find out how this would effect the value of the IRA and if the sale would cause you to be taxed on any of the gains if there are any gains. Being an IRA it should not be taxed, but you would want to check.
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Aug 8, 2011 04:54
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Torael_7 posted:Which is why I'm looking at setting up a Vanguard IRA now. I mean, I've been needing to and then everything went Splat friday and I got a cautious Torael_7 posted:That said, for retirement fund purposes am I better off selecting one of their Target Retirement funds (I guess the target 2055, most likely) or tailoring my own setup and adjusting it as I go? Or to approach the question from a different direction, if I start one of their Target Retirement funds, am I able to later adjust what's in it myself (and I realize this may be a question for Vanguard rather than here but hey, its worth a shot). Yes, the retirement funds are easy and cover all your bases. If you want to get creative later down the road, you can sell shares from the retirement fund and put it toward whatever you want. But if you look at the retirement funds, they are typically made up of a lot of the smaller funds that Vanguard offers, just differences in allocation.
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Aug 8, 2011 06:27
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Niwrad posted:But if you look at the retirement funds, they are typically made up of a lot of the smaller funds that Vanguard offers, just differences in allocation. This is what I meant, really...can I change that allocation amongst the smaller funds myself with one of the target retirement funds (without selling shares and rearranging it) or is it locked in. And yes, I know it'll average out. A man can still have delusions though, right? 
mynnna fucked around with this message at 14:29 on Aug 8, 2011 |
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Aug 8, 2011 14:12
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Torael_7 posted:This is what I meant, really...can I change that allocation amongst the smaller funds myself with one of the target retirement funds (without selling shares and rearranging it) or is it locked in. Of course, only the portion you invest in the Target fund will be automatically reallocated by Vanguard as the target date approaches.
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Aug 8, 2011 17:17
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If you are in your 20s and have money to invest then I don't think I can express what a lucky thing this recession is for you and how much you stand to benefit from it.
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Aug 8, 2011 18:21
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Torael_7 posted:That said, for retirement fund purposes am I better off selecting one of their Target Retirement funds (I guess the target 2055, most likely) or tailoring my own setup and adjusting it as I go? Or to approach the question from a different direction, if I start one of their Target Retirement funds, am I able to later adjust what's in it myself (and I realize this may be a question for Vanguard rather than here but hey, its worth a shot). Usually if you are buying target retirement you "tailor" them by buying a closer date (less aggressive) or a further date (more aggressive) according to the risk that you want to take. If you're in a tax-advantaged account (Roth IRA, 401k, IRA) you can usually switch to another fund without any penalty but if not then you'll be taxed on the gains when you sell and rebuy.
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Aug 8, 2011 18:31
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So what's the suggestion regarding Roth 401(k)s? I just became eligible for 401k at my new job (my first 401k! a grownup!) and I'm not sure how I should contribute. I assume the logic is similar between Roth/Trad IRA and Roth/Trad 401k, in that as a young person I should use Roth as I'll presumably be in a higher tax bracket when I retire?
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Aug 8, 2011 19:31
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Gay Nudist Dad posted:So what's the suggestion regarding Roth 401(k)s? I just became eligible for 401k at my new job (my first 401k! a grownup!) and I'm not sure how I should contribute. What I did for my 401k was put in as much as my company matched (100% for the first 3 eligible percent, and 50% for the next two; which would be 5% total). Then I placed an extra percent, cause why not? I would start with 401k until your company did not match anymore, then place whatever money you have left into a Roth IRA.
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Aug 8, 2011 19:42
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Gay Nudist Dad posted:So what's the suggestion regarding Roth 401(k)s? I just became eligible for 401k at my new job (my first 401k! a grownup!) and I'm not sure how I should contribute. Roth 401(k) accounts are a bad deal for most people. Here's a page that makes a good case for sticking with the traditional 401(k) - http://thefinancebuff.com/case-against-roth-401k.html Roth IRAs are a great deal because they are self directed, have relatively high phase-out limits (traditional IRAs start to phase out at 56k while Roth IRAs start at 105k), and have no required minimum distributions. Roth 401(k)s enjoy few advantages over their traditional brethren beyond prepaying taxes, which is a dubious advantage in the absence of a defined benefit pension plan since it takes quite a lot of cash to fill in those lower brackets in retirement, while you will be prepaying at your current marginal rate.
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Aug 8, 2011 20:37
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Ulf posted:If you are in your 20s and have money to invest then I don't think I can express what a lucky thing this recession is for you and how much you stand to benefit from it. Speaking of being able to invest, not too long ago there was an article about how there is a fairly high percentage of people over 40 that do not have over $20,000 for retirement or something like that. The biggest investment help for me is living with my parents. Even if you don't have that option, with your parents not mine, you can try to live with roommates to decrease housing and utility costs allowing you to put a little more money into retirement or other investments. Edit: I don't think this is the article I saw, but it's close enough. In 2010, 54 percent of those surveyed had less than $25,000 saved for retirement. http://www.cbsnews.com/8301-503983_162-20000180-503983.html Yaos fucked around with this message at 21:13 on Aug 8, 2011 |
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Aug 8, 2011 20:54
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Ulf posted:If you are in your 20s and have money to invest then I don't think I can express what a lucky thing this recession is for you and how much you stand to benefit from it. assuming you, your family, and anyone else you are financially linked to, has a job and can keep it long enough for this to ride out.
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Aug 8, 2011 21:10
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Torael_7 posted:This is what I meant, really...can I change that allocation amongst the smaller funds myself with one of the target retirement funds (without selling shares and rearranging it) or is it locked in. As others said above, you can't adjust their retirement accounts. However, you can sort of create your own using their smaller funds that make up the target retirement ones. Also worth noting that you don't have to buy the fund tied to the year you retire. If you want more stocks, you can pick a year farther away and if you want to be more conservative, pick one that ends sooner. In a nutshell, here is how it works. Target Retirement Fund X = Fund 1 + Fund 2 + Fund 3 + Fund 4 So you are free to just buy Fund 1 through Fund 4 on your own if you want to and allocate what you want to each. The Target Retirement Fund is just an easy way of doing it and particularly helpful if you don't have a lot of money since each of the funds has a minimum buy-in that is waived if it's part of the bigger target fund. I hope that made some sense.
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Aug 8, 2011 21:11
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One tangible disadvantage of Vanguard's TR funds is that the underlying holdings are all Investor Share class. Eventually, one should expect to be able to save on expenses by owning Admiral Share class of individual funds in an appropriate ratio.
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Aug 8, 2011 21:15
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Gay Nudist Dad posted:So what's the suggestion regarding Roth 401(k)s? I just became eligible for 401k at my new job (my first 401k! a grownup!) and I'm not sure how I should contribute. You should max out the amount your company will contribute to it and nothing more in your 401k. The biggest problem with a 401k is that you typically don't have as many options with a company plan. But you should milk every penny out of those guys you can. Then if you want to do more, open a Roth IRA and put in as much as you can/want. Remember that your own Roth IRA allows you to pull out principle tax/penalty free, so it's there in case of an emergency.
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Aug 8, 2011 21:17
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I have a large pile of cash (~100K) doing nothing - is now a good time to go long some index funds?
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Aug 8, 2011 21:32
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var1ety posted:Roth 401(k) accounts are a bad deal for most people. Here's a page that makes a good case for sticking with the traditional 401(k) - One key advantage not mentioned in this article is that a Roth account allows you to put in more after tax dollars than a traditional. If you are able to max it out you can get tax free growth on ~25% more money. This has a powerful effect on the ultimate balance. However if you can't afford to max it out, the point about marginal tax dollars is critical and something you should consider.
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Aug 8, 2011 21:33
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shrike82 posted:I have a large pile of cash (~100K) doing nothing - is now a good time to go long some index funds? Depends where the rest of your money is allocated. But if you have nothing but cash, I'd say it's a great time to pick up some stuff and not look at it for awhile.
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Aug 8, 2011 21:43
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shrike82 posted:I have a large pile of cash (~100K) doing nothing - is now a good time to go long some index funds?
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Aug 8, 2011 23:55
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cowofwar posted:Wait until you start to see signs of a rally, nothing to lose, lots to gain. This is the long term thread. If he needs the money in a few years, it's always a terrible time to buy equity indexes. If he doesn't need the money for 10+ years, it's a great time to buy an equity index, which is true of last week, this week, and next week.
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