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What do you guys think of paying down student loans vs. making retirement savings? I'm 26 with no real savings right now (already hosed, living in a box while I'm 80, never should've gone back to school, etc. etc.) and some significant student loans. Should I be paying the minimums and maxing out the 401k and IRA every year? Some people like to make that argument that your retirement will be multiplying while paying the student loan minimums during this holds those in stasis essentially for a low monthly payment, but I'm very uncomfortable with that and see that there is a significant opportunity cost to paying years and years of even minimums vs having these things knocked out in 18 months and being done with it, starting maxing out those accounts at the age of 27.
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Feb 13, 2014 03:33
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shovelbum posted:What do you guys think of paying down student loans vs. making retirement savings? I'm 26 with no real savings right now (already hosed, living in a box while I'm 80, never should've gone back to school, etc. etc.) and some significant student loans. Should I be paying the minimums and maxing out the 401k and IRA every year? Some people like to make that argument that your retirement will be multiplying while paying the student loan minimums during this holds those in stasis essentially for a low monthly payment, but I'm very uncomfortable with that and see that there is a significant opportunity cost to paying years and years of even minimums vs having these things knocked out in 18 months and being done with it, starting maxing out those accounts at the age of 27. I think the general idea is that you cannot go back and "fill in" missed contributions. If you had $15,000, say, in student loans, delaying paying those off at 6.8% interest for three years would cost you $1,020 in (deductible) interest. If your account grows at 4% a year, at the end of those three years you'd have made $1,550 in gains. Then that account would continue to grow until you retire. So the earlier you get money in there, the longer it has to gain, and that outweighs interest accrued on loans in general. I think. Hufflepuff or bust! fucked around with this message at 04:16 on Feb 13, 2014 |
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Feb 13, 2014 04:08
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shovelbum posted:What do you guys think of paying down student loans vs. making retirement savings? I'm 26 with no real savings right now (already hosed, living in a box while I'm 80, never should've gone back to school, etc. etc.) and some significant student loans. Should I be paying the minimums and maxing out the 401k and IRA every year? Some people like to make that argument that your retirement will be multiplying while paying the student loan minimums during this holds those in stasis essentially for a low monthly payment, but I'm very uncomfortable with that and see that there is a significant opportunity cost to paying years and years of even minimums vs having these things knocked out in 18 months and being done with it, starting maxing out those accounts at the age of 27. This is actually a really good question I would also second on opinions on.
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Feb 13, 2014 04:43
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Veskit posted:Yeah.... It's a bad amount of interest too, but I constantly hear about the 3 month buffer for your bills and such, and I thought a month was a good compromise for trying to pay off debt. Here I'll just show what I'm working with I was in the same position as you a while ago. Here's what I did: 1. I moved my CC debt onto the Chase Slate. This was a 0% transfer with 0% APR for about 14-16 months. The terms may be different at this point so I'd look around. This was so i could continue to pay off the debt without incurring stupid interest charges on top of what I was paying. I think went into the budget and made sure I could pay off the debt over the term of the CC. In your case, it comes out to around 524.25 a month at minimum to kill it off in 15 months. 2. I made sure every month that I was keeping up with my expenses to a minimum. Over time, I found that if I was hitting my goal minimum credit card debt payment, I was also able to build a buffer. The idea is not to build a buffer all at once. 3 months is pretty ambitious with that much debt. Start off by building 1 week's buffer, 2 weeks buffer and just build slowly. I think your goal is to get out of debt in 15 months. Its possible.
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Feb 13, 2014 05:13
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Shadowhand00 posted:I was in the same position as you a while ago. Here's what I did: My credit hasn't been good enough to be able to transfer over debt, so that option isn't good. I honestly want to just get it down to a managable amount like in the 2k~ range, and with that very decent 1k1 tax return coming in I should be able to come close to reducing my CC debt to 1-2k within a 12 month period. That's my goal anyway. It sounds like I can get by with bare bones. I'll fill up a savings of 500 bucks to keep me at bay and just drive down this dumb CC debt. Thanks everyone the advice is appreciated. I'll come back in a few months or so and post results... somewhere.
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Feb 13, 2014 07:38
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kaishek posted:I think the general idea is that you cannot go back and "fill in" missed contributions. If you had $15,000, say, in student loans, delaying paying those off at 6.8% interest for three years would cost you $1,020 in (deductible) interest. If your account grows at 4% a year, at the end of those three years you'd have made $1,550 in gains. Then that account would continue to grow until you retire. So the earlier you get money in there, the longer it has to gain, and that outweighs interest accrued on loans in general. I wholeheartedly agree. Also, there's a "Saver's Credit" from the IRS if you're fairly low income which is basically a government match on your money. If you qualify for that there isn't even a question of whether you should save over paying off loans, but as I said the income barrier is fairly low for single people: $18k for 50% match, $19k for 20% match, or under $29.5k for a 10% match on up to $2000 of savings.
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Feb 13, 2014 14:55
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baquerd posted:I wholeheartedly agree. Also, there's a "Saver's Credit" from the IRS if you're fairly low income which is basically a government match on your money. If you qualify for that there isn't even a question of whether you should save over paying off loans, but as I said the income barrier is fairly low for single people: $18k for 50% match, $19k for 20% match, or under $29.5k for a 10% match on up to $2000 of savings.
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Feb 13, 2014 16:20
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shovelbum posted:What do you guys think of paying down student loans vs. making retirement savings? There's a fairly insightful poster (my opinion) on the Bogleheads board that advocates maximizing tax advantaged retirement space before paying above-minimum on any low interest debt, to include student loans. The gist is that the time-advantage via compounding of your retirement savings can't be bought back once you fail to use it. Paying extra dollars in interest on a student loan (unless it's huge) can be small compared to the opportunity cost of 30 years of investment compounding in a tax advantaged account. http://www.bogleheads.org/forum/viewtopic.php?f=2&t=128808#p1893100 My opinion (without my own math to back it up) is that 6.8% student loans are pretty close to the break-even point: higher than that and I'd pay down the debt before contributing to the 401k pretax maximum, and lower than that I'd contribute first to tax advantaged retirement space. My own loans are at about 5.5% and I am paying minimums in order to max out the 401k and rIRA. EDIT: Bogleheads obviously caters to a higher-than-average income crowd, but I don't feel that it changes the opportunity cost of compounding argument.
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Feb 13, 2014 19:35
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shovelbum posted:What do you guys think of paying down student loans vs. making retirement savings? If you have the ability to knock them out in 18 months I would. From a purely math, only looking at interest saved on the loan vs investment return, you are better off investing. 2 problems with this though. The first is if you make the minimums on these loans, you will wake up one day and be in your 40's and still owe the money. But being debt free instead of having tons of payments spread out also gives you more flexibility, more choices, and the chance to make smarter career moves that would be the most lucrative way of all to get ahead. We all see people who need to keep a job that they don't like because they have too many bills, they have to take the first thing that comes along even if it's not a good fit. Imagine if they didn't have all the payments and instead they could invest in more education, certifications, start a side business doing something they love... All that said, I still wouldn't give up an employer match but I wouldn't go beyond that. Taking the match might mean it takes 24 months, not 18. I think delaying a few months to get thousands of dollars in free money is a good trade, but I don't think delaying 15 years to to maximize theoritical returns is
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Feb 13, 2014 20:22
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I paid off my (~23k @ 6.8%) of student loans during 2009-2012 which, in retrospect, if I had just paid the minimums and invested lets say 15k of that money in the market instead I'd have seen some pretty significant gains on it. However, I can say completely honestly that I have zero regrets paying down that debt. Having that debt gone was, and still is, a great feeling. With my car paid off now, too, it's liberating to be entirely debt free.
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Feb 13, 2014 20:31
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I'd say you ride a fine line between which is the smarter option. It's far safer to become debt free and then do retirement contributions. Now, if you aren't aggressively attacking your loans, you prob should do min and then aggressively save.... I'd opt to get debt free first in most cases.
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Feb 13, 2014 22:28
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Guinness posted:I paid off my (~23k @ 6.8%) of student loans during 2009-2012 which, in retrospect, if I had just paid the minimums and invested lets say 15k of that money in the market instead I'd have seen some pretty significant gains on it. On one hand, it was a pretty safe bet after 2009 that the stock market would rise pretty significantly (in the long run). On the other hand, there's no guaranteeing what's going to happen in the future (maybe the economy continues to tank and you'd have been better off holding on to that money for another couple years?) whereas your student loans are guaranteed. Just want to say that, even though you're not really regretful, someone in a similar situation may be, and they shouldn't be.
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Feb 13, 2014 22:31
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SiGmA_X posted:They have to open the Roth, but you can make a deposit Fbo: Them. It will not force them to invest it though, but just dump it into their sweep account. Make sure they have earned income, otherwise they're not eligible to put anything into the Roth.
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Feb 13, 2014 23:38
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Not sure if this warrants its own thread, but here's my situation and I'm looking for advice. Because of the slightly oddball situation I'm not even sure what questions I should be asking. I recently moved to the US (Oregon) while still working for my Australian employer. I've since left that employer, but my ability to stay and work in the US isn't affected. I've never filed taxes in the US. I will be trying to find a personal accountant to get some professional advice in the next week. Do people suggest I go for someone local, or hit up a larger organization like H&R Block? After taking the holiday period off, I've put my foot back out there and find myself in a great position. I'm in the advanced stages of the hiring process for two full-time positions and once I started networking after the holidays, I had a number of offers of flexible consulting/contracting. If I end up taking a full-time position, what should I be doing with regards to the consulting work? Some of it will be consistent income, some of it will be ad hoc on a monthly basis. Due to the nature of my AU-US transition, I have essentially no grounding in the way taxes, 401k, etc work in the US so feel free to point me at stupid newbie resources. Finally, I have a significant amount of savings still in Australia. I don't plan to return any time soon. Aside from waiting for a good exchange rate, what should I take into account with regards to moving the funds? If people think this is too complex for this thread, I can start my own.
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Feb 14, 2014 09:47
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Any advice on how to handle the estate of someone who died without a will?
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Feb 14, 2014 14:24
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Christ Pseudoscientist posted:Any advice on how to handle the estate of someone who died without a will? Try the legal thread. Probate\Estates is a minefield especially if its in any way contested. They'll tell you to lawyer up\get actual insured advice for anything remotely significant.
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Feb 14, 2014 17:24
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Christ Pseudoscientist posted:Any advice on how to handle the estate of someone who died without a will? Yeah, you absolutely need a lawyer, since it's completely dependent on the facts (family, debts, etc.), state of death, date of death (statutes change, so it matters which was in effect at the time of death). Depending on the assets, probate may not be too expensive, at least. Get thee to a lawyer. (IANAL.)
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Feb 14, 2014 17:38
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Cast_No_Shadow posted:Try the legal thread. Probate\Estates is a minefield especially if its in any way contested. Makes sense. We are planning on getting a lawyer to help us out with the situation. Do you have a link to the legal thread? I hate to be that guy but I didn't see it on this subforum or Ask/Tell.
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Feb 14, 2014 17:38
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devoir posted:Not sure if this warrants its own thread, but here's my situation and I'm looking for advice. Because of the slightly oddball situation I'm not even sure what questions I should be asking. I would run these questions by the tax thread. I know quite a bit but its been a few years since I have done them professionally. Based on the info given I do not know your tax status, if you are a non-resident for tax purposes or not, and what you qualify for or not. The quality of tax preparers at H&R Block varies from first year people who are data entry with a bit of training to highly skilled, professionals who can handle specialized situations. http://forums.somethingawful.com/showthread.php?threadid=3394641 The tax thread has a number of professionals who would be qualified to do your taxes too. They will answer general questions for you but won't do the entire thing for you for free
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Feb 14, 2014 19:31
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Christ Pseudoscientist posted:Makes sense. We are planning on getting a lawyer to help us out with the situation. Do you have a link to the legal thread? I hate to be that guy but I didn't see it on this subforum or Ask/Tell. The All New Legal Questions Mega-O-Wamma They're going to tell you to hire an estate lawyer.
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Feb 14, 2014 19:34
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Are employer contributions to a 401k included in the $17500 max or is it just employee/personal contributions? Edit: oops wrong thread
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Feb 14, 2014 21:18
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No, just personal contributions.
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Feb 14, 2014 23:41
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So I just left college, without having to take on a student/personal loan, and am in need of a credit history so I can do stuff like get an apartment or a car loan easier. I tried applying to my bank[Chase] for a card and they said Nope, get a credit history first. What are good options for me? Doing some light research I've found two options, getting a Secured Card or getting a retail card. I don't really want to do a secured card, because the APR on those things look to be about 23% and charge an annual fee. I would rather do a Walmart/Kmart/Target and would end up shopping there more often if that would actually build a credit history for me, because they don't appear to charge an annual fee. How long would I need to keep the card around before my credit score goes from non-existant to good? Once I get the score I want can I just cancel the card without penalties?
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Feb 15, 2014 00:45
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Zeta Taskforce posted:I would run these questions by the tax thread. I know quite a bit but its been a few years since I have done them professionally. Based on the info given I do not know your tax status, if you are a non-resident for tax purposes or not, and what you qualify for or not. The quality of tax preparers at H&R Block varies from first year people who are data entry with a bit of training to highly skilled, professionals who can handle specialized situations. Thanks, I've posted in that thread as suggested.
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Feb 15, 2014 01:07
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KildarX posted:So I just left college, without having to take on a student/personal loan, and am in need of a credit history so I can do stuff like get an apartment or a car loan easier. I tried applying to my bank[Chase] for a card and they said Nope, get a credit history first. What card did you apply to with Chase? I'd be surprised they don't have a real bare bones card they could get you.
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Feb 15, 2014 02:05
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Freedom card. It is the barest of bones card they have.
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Feb 15, 2014 02:18
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I'd try one of the capital one cards that doesn't have cash back. They're pretty lax on credit standards.
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Feb 15, 2014 02:25
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KildarX posted:Freedom card. It is the barest of bones card they have. does the rate you apply for affect whether you qualify ($500 limit vs $3000 limit)? Best way to get your credit up is get some free card with a low limit, put one or two light monthly bills on it and pay it off every month on time. The rest just takes time.
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Feb 15, 2014 13:12
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Duckman2008 posted:does the rate you apply for affect whether you qualify ($500 limit vs $3000 limit)? It didn't apply for a specific rate, I believe they[chase] do it in reverse, they credit check you and give you a limit based on the check.
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Feb 15, 2014 15:38
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KildarX posted:How long would I need to keep the card around before my credit score goes from non-existant to good? For sanity's sake, please don't think about this in terms of credit score. Your actual "score" has very little to do with this...instead, what they are looking for is credit history (which is part of your score, to be fair). They just want to see that someone else has given you credit in the past and that you didn't gently caress them over (you paid on time). You can accomplish this in myriad ways, the easiest of which is probably to get a credit card. Unless you think you will not be able to pay the card off on time (which you should not), the interest rate doesn't really matter - because you won't be charged it if you pay your bill in full every month. A year of having the card and paying on time should do the trick, I think. There is no actual answer to this because we are trying to see into the crystal ball of whichever bank's risk management software that computes whether it is safe to give you access to credit or not. Once you are approvalable for other card, you can cancel the card if you want. If the card has no annual fee, it may be better to just leave it open in a drawer somewhere, as this does slightly improve your credit score (but not in any super significant way, which is why I also say you can cancel it...definitely cancel it if it carries any sort of annual fee at all).
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Feb 15, 2014 16:37
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Thanks for all the loan vs retirement saving chat. All my student loans are now at 5.125% interest or lower now, so maybe I have some things to consider now that I've managed to get that done. Or I could dump another $800 bucks extra on my student loans this month thanks to my tax return and bring up the total loan repayment I've done in February to like $2300. 
100 HOGS AGREE fucked around with this message at 03:29 on Feb 16, 2014 |
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Feb 16, 2014 03:27
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I did some dumb poo poo when I first started getting credit card offers, racked up about $1500 in debt which went to collections and I eventually settled with them for $1000. It didn't go to court or anything. This was ~6 years ago and I have not had a credit card since. I paid off my car in full and have no other loans or debts. I recently got a secured card through 53, they wouldn't approve a normal one due to lack of credit history. I've used the secured one and paid it off ahead of the bill even coming and started spending on it again. Is this behavior I should continue, obviously the paying it off early, but should I just spend x amount per month on it and then switch back to my normal debit card or keep spending on the secured card and paying with the debit or does it not matter. I have score monitoring through them and not only do I have credit history showing up now but 2/3 of the agencies show me above 700.
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Feb 16, 2014 20:36
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If you're paying it off before the due date it might be showing no activity, which isn't really helping you with your goal.
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Feb 16, 2014 21:38
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Has anyone had problems with mint.com lately? It takes nearly five minutes to load the webpage, if it loads at all. This has been going on for about two weeks. What budget software should I use instead?
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Feb 16, 2014 23:39
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I just tried to check to my credit score. Last time I did it, it was 3 years ago. Went to annualcreditreport.com and after inputting all my info, the websites asks me questions that I have no idea how to answer: - Your credit file indicates you may have an installment account (personal loans, electronic/appliance accounts, jeweler accounts, auto loans, etc.), opened in or around [month] 2012. Who is the credit provider for this account? - Your credit file indicates you may have a student loan, opened in or around [month] 2013. Who is the credit provider for this account? Problem is, I never applied for student loans or installment accounts. I can't check my score and I don't know what to do...
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Feb 17, 2014 08:23
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They usually have a "not applicable" or "none of the above" as an option, and they usually ask at least one question where that's the right answer. At least in my experience.
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Feb 17, 2014 08:27
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slap me silly posted:They usually have a "not applicable" or "none of the above" as an option, and they usually ask at least one question where that's the right answer. At least in my experience. I did select those. They then tell me that they cannot verify my identity and to mail in a paper request. O_o
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Feb 17, 2014 08:28
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Welp, bummer. When that happened to me one time I just gave up, so I can't help any more 
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Feb 17, 2014 08:32
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Genewiz posted:I did select those. They then tell me that they cannot verify my identity and to mail in a paper request. O_o Yeah, sometimes their systems malfunction or whatever  , but that doesn't mean that you were wrong. I've had that crap happen to me several times in the past year, and when I finally get my credit report there's nothing on it I wasn't expecting.
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Feb 17, 2014 14:44
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Yep, sometimes the automated system gets messed up, doesn't necessarily mean anything. Mine doesn't ever work because of a slight misspelling in a previous address or something. Just send in for the paper report, it is pretty straightforward and nice to have for your filez.
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Feb 17, 2014 17:44
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