Student loan/investing advice

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gadoc
Posts: 27
Joined: Thu Aug 06, 2015 3:45 pm

Student loan/investing advice

Post by gadoc » Fri Oct 06, 2017 11:56 am

Hello everyone I have a question regarding my finances and was hoping I could get some help.

Over the last few years I have really tried to get my financial act together. about 3 years ago I have about 350,000 of student/car loans. i am down to 38K in loans left. I have about 220k in retirement accounts and 30K in a taxable account ( vanguard total stock market index) My asset allocation is essential 100% equity all vanguard total stock market index. I'm 31 so i'm trying to be somewhat aggressive. I just recently made a large payment ( 40 K for loans ) and only have about 10K in cash left. I dont have much of a dedicated emergency fund but I have about 30K in a Roth IRA and if a true emergency came up I could hopefully cash flow the rest.

1. Regarding the loans, would you liquidate the taxable account and jut go ahead and pay off the rest of the loans and start saving from scratch? If i didn't liquidate the taxable account I could probably have the student loans paid off by the end of December. Seems like a wash either way but it sure would be nice to have no more loans other than our current mortgage of 300k.

2. What should I do after the loans are paid off? I have 2 small kids under 3. My plan is to build up my cash savings to about 100K and then place all extra assets into my taxable account. I already max out 403,457. I'm currently putting about 2g a year into the 529 just for a state deduction. i may increase the contributions to this. I Will do backdoor Roth after loans are paid off as well. We plan on buying a house in the next 2 yrs that should be about 650K. I dont want to spend much more than that.

chicagoan23
Posts: 228
Joined: Thu Jan 29, 2015 4:34 pm

Re: Student loan/investing advice

Post by chicagoan23 » Fri Oct 06, 2017 12:29 pm

What is the rate on the student loans? If it is anything less than, say 4%, I'd leave things as they are and just pay the minimums. If it is higher than 4% think of refinancing to SoFi.

I wouldn't liquidate a taxable account to pay off student loan debt, unless you were already planning on selling anyway (i.e., you think the market is overheated, etc.) AND you would not lose too much to capital gain taxes and transaction fees on liquidation.

gadoc
Posts: 27
Joined: Thu Aug 06, 2015 3:45 pm

Re: Student loan/investing advice

Post by gadoc » Fri Oct 06, 2017 12:32 pm

rate is 3.7 variable.

TheAncientOne
Posts: 77
Joined: Wed Jul 19, 2017 8:53 pm

Re: Student loan/investing advice

Post by TheAncientOne » Fri Oct 06, 2017 12:51 pm

You're doing fine. If I were in your shoes, I keep your money market and taxable Vanguard fund where they already are, and continue to pay down that loan with the monthly surplus you generate. It shouldn't take very long for that to happen given the rate at which you've paid off loans the last couple of years.

tmz1m
Posts: 43
Joined: Wed Feb 18, 2015 12:54 pm

Re: Student loan/investing advice

Post by tmz1m » Fri Oct 06, 2017 2:20 pm

I'd pay them off by the end of the week. Four years ago I was in a very similar situation and am down to $80K left in student loans. The loans are at 2.9% fixed but I've been paying very aggressively because I will just sleep better when they're gone. If all goes according to plan, my annual bonus should knock out the last $80K by the end of the year.

TSR
Posts: 612
Joined: Thu Apr 19, 2012 9:08 am

Re: Student loan/investing advice

Post by TSR » Fri Oct 06, 2017 3:03 pm

Hold onto your cash. With the kids, a large emergency fund is good. You're doing great right now. The interest benefit of paying everything off now vs. paying it off in a few months is essentially nothing. It'll feel good, but then you'll feel like you're in debt to yourself and need to build up cash savings.

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