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Hi all. I'm curious about what I should do in my situation. I'm 24, and soon to be entering a PhD program. My career plans are such that I likely won't have anything a stable job with a good retirement plan until my mid-30s, but I'll also be retiring later than most. For the next ~5-ish years, I'll be making $30,600 in Boston. I currently have ~$10,500 in savings/checking, mostly because I was saving up to buy a car. I won't be needing that car anymore, since I decided to move to Boston. I have no investments, and my only debt is in my student loans. The student loans total $15,655, but most of this is in subsidized loans, so they will not gather interest while I'm back in school. The rest is ~$6,000 at a variable rate of 2.23%, which will gain interest, but do not need to be paid. I'm going to wait until after the move to do anything, but I feel like that's a bit too much money to just have sitting in savings. I'm not certain what my expenses will be after moving, either, but I know I can definitely cover them with my stipend, and hopefully I'll still be able to save a bit. What does it make the most sense to do? Should I pay down my student loans? Or, since I'm not paying much interest, should I open something like a Roth IRA (even though I couldn't make the max contribution)? I have no particular goals in mind for what I should be saving for... I might be looking at a car in six years, a down-payment on a house in nine years, and of course, retirement. Reading a few posts here in similar situations, I'm thinking that I definitely want to let the subsidized loans sit there, and I should put whatever I can manage into some kind of investment (Roth?) I don't know what to do about the unsubsidized loans... should I ignore them, because of the low rate, or pay them down?
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Mar 8, 2010 07:09
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| # ¿ May 5, 2024 12:36 |
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Strict 9 posted:I assume your rent is being paid for by your program, or that you're living in a dorm? Just because you said you'll easily cover them with your $30,600, but you also can't live in Boston making that amount of money if you're actually paying rent. Sure I can, but I won't be living alone. I'll be getting a two- or three-bedroom place. I won't have a ton of spending money, but it's definitely livable. It's harder to estimate non-rent expenditures, so I'm not sure what will be left over, but I'll have beer money at the least. Strict 9 posted:Wanting to save for retirement early on, especially in such a low tax bracket as you will be in, is a great thing to try to do. And you'll almost certainly beat the 2.23% interest rate on your loan by investing in the market right now. This doesn't really make logical sense to me, though... if I pay down the loans completely, then I wouldn't have money for the down payment on a house regardless. I'd think that if it's likely I could beat the interest rate on the loans, then it wouldn't be prudent to put money into the loans. So the bigger question is whether I should be looking at something more liquid than a Roth, so I can plan to immediately pay down the $10,000 of loans that are stuck at 6.5% after I graduate and they start gathering interest again. OTOH, my salary will also be a bit more livable at that point, and my payments are perfectly manageable at even my current salary (better than that stipend in Boston, though) so I'm looking at this from a long-term perspective. Engineer Lenk posted:I have a differing opinion on this one. First you see if you can actually live on 33k/year in Boston while paying rent, keeping your savings liquid as a 6-month emergency fund. If you can and you're still putting money aside, then you fund a Roth to the 5k/year limit. Your projected income will jump more than your debt in your first year out of school, if you're getting a PhD in something employable, so you just live like a grad student for another year and knock it all out then. This makes sense to me, though I'm not sure if I can knock out my loans in one year if I'm funding a Roth to the maximum I can handle (which certainly won't be 5K after the first year). I plan to do a post-doctoral fellowship after graduating, so I'll still be rather underpaid for a few more years. So yeah, let's say I have an extra $150/mo after expenses. Should I be saving that money for retirement or saving to pay off my loans? Should I dump a good portion of my savings into a Roth, then plan to use new savings towards my loans? (Again, I won't be gaining interest on 2/3 of the loans until after I graduate in ~6 years) And if I were to plan to use it on the loans, then what is the best way to invest it?
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Mar 12, 2010 16:25
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I will have a fellowship of somewhat more than $30,000 in Massachusetts. This will all be taxable income, and it appears nothing will be withheld. I'm having a difficult time figuring out roughly how much I should be budgeting for taxes annually. I was thinking 15% should be sufficient, but I have no idea how to confirm this... I know nothing about taxes, I just plug the numbers into a tax app and let it do its thing.
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Jun 10, 2010 22:19
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