Help me determine best course of action- Student Loan vs Backdoor Roth

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GaRPH
Posts: 2
Joined: Mon Sep 03, 2018 5:35 pm

Help me determine best course of action- Student Loan vs Backdoor Roth

Post by GaRPH » Mon Sep 03, 2018 6:04 pm

Hey all, a little background information:

His Student Loans: 130,000 @4% 7 year loan (260,000 starting amount) -3,000 monthly payment
Her Student Loans: 170,000@5.125 20 year loan (200,000 starting amount)- 1,200 monthly payment
Salaries Combined: ~270,000
His 401k- 58,000( started contributing in 2015) 4% match from employer
Her 401k 60,000 (started contributing in 2015) 4% match from employer
HSA 7000
Cars 1/2: Both paid off
House: owe 220,000 @3.875 15yr mortgage (1800 a month)
Savings/Checking:20,000
Monthly expenses with mortgage and student loans: 9-11,000ish
Children: 1(18 months old)
Credit Card Debt: none
Roth/tIRA: none

We are both 30 years old and entered the workforce after pharmacy school(2015). We just reached the point in the tax year that we have both maxed our 401k's. My loans will be paid off in 18 months with some assistance from my parents giving us an additional 3000 a month starting in 2021.

Having said all that, I am at a loss as to what should be the next area of focus for us. We are in a position to either accelerate repayment on her loans or contribute 5500x2 towards our backdoor Roth's.I know its generally recommend to max tax advantaged accounts first and that's what we have done for the past 2 years. Get rid of student loan debt or save more for retirement?

Thanks!

PFInterest
Posts: 2082
Joined: Sun Jan 08, 2017 12:25 pm

Re: Help me determine best course of action- Student Loan vs Backdoor Roth

Post by PFInterest » Mon Sep 03, 2018 7:37 pm

Backdoor rIRA X2 first.

Nate79
Posts: 3324
Joined: Thu Aug 11, 2016 6:24 pm
Location: Portland, OR

Re: Help me determine best course of action- Student Loan vs Backdoor Roth

Post by Nate79 » Mon Sep 03, 2018 7:55 pm

With an income of $270k how is $11k even playing a part of the discussion - its peanuts for your income? Sounds like you can be debt free in a couple of years and still save a lot for retirement if everything goes well.

GaRPH
Posts: 2
Joined: Mon Sep 03, 2018 5:35 pm

Re: Help me determine best course of action- Student Loan vs Backdoor Roth

Post by GaRPH » Wed Sep 12, 2018 6:07 pm

Nate79 wrote:
Mon Sep 03, 2018 7:55 pm
With an income of $270k how is $11k even playing a part of the discussion - its peanuts for your income? Sounds like you can be debt free in a couple of years and still save a lot for retirement if everything goes well.
Well, we do have our fair share of expenses many of which I am working to lower/eliminate. Our take-home is roughly 13,000 a month and our expenses run anywhere from 9-11,000. So it would take us 2-4 months of savings to do each Roth. We already put some extra money this year towards her loans(~7500). Next year we will try to do backdoor's at the very first of the year and then use the left over money to pay down her loans.

I did my backdoor and will do the wife's by the end of the month. Now for another question, with interest rates on the student loans at 4% and 5.375% respectively, after maxing both 401k's, Roths, HSA, is this the point to pay down debt or to invest more in a taxable account through Vanguard?
Thanks!

TwstdSista
Posts: 984
Joined: Thu Nov 16, 2017 4:03 am

Re: Help me determine best course of action- Student Loan vs Backdoor Roth

Post by TwstdSista » Wed Sep 12, 2018 6:12 pm

Backdoor Roths, then student loans. Personally, I wouldn't invest in taxable until the loan debt is gone.

Erwin007
Posts: 244
Joined: Tue Aug 19, 2008 8:29 am
Location: Intermountain West

Re: Help me determine best course of action- Student Loan vs Backdoor Roth

Post by Erwin007 » Wed Sep 12, 2018 9:39 pm

Another vote for backdoor Roths. Can’t ever get that space back.

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