Good afternoon everyone,
First off, I hope you are all having a safe and happy holidays. Now... on to the post...
Recently married (Nov 17, 2012) and my wife and I are doing all the fun post-marriage stuff: joint bank accounts, credit cards, car insurance, etc. She's 32, I'm 33. Now that we're no longer putting away money for the wedding, we have some extra income and we're in the process of determining how we best proceed with her debt and retirement strategies.
My wife has 117k in student loans with an interest rate of 3.38%. Her payments are around $577 per month. She's been paying an extra $200 a month since March ($777 total) to help chip away at the loan. Now she'll have more income at her disposal (an additional $400/month beyond the $200) to either pay down the student loan or invest for retirement. I feel 3.38% is a great rate and therefore we shouldn't put the extra money towards paying down the loan. This is based on the assumption that we could achieve a higher rate of return through investments.
Wife's Current Retirement Status: She is a little behind the ball on retirement savings. She never had an employee sponsored retirement program. At one point she was investing with a lousy brokerage firm where the broker had her 100% in bonds and was making more on commissions that she was in returns. I had her liquidate the accounts January 2011 and we setup a Roth IRA with Vanguard. To keep things simple for her, she's using a Vanguard Target Date fund.
The only other debt we have is my mortgage which we're in the process of refinancing.
Future expenses: In Dec 2013, her car lease expires and we plan on buying (vs leasing) her a newer vehicle. It wouldn't be bad to have some extra money to put towards a down payment.
So here's my strategy. I'd bump down the student loan payments to $750 per month. That leaves us $427/month to either invest for retirement or save up for a down payment. I'd put $327 a month into retirement and put $100 a month towards a car down payment.
Please let me know your thought and suggestions. Thanks!