Author Topic: Case Study - late start on retirement and student loan debt looming  (Read 6785 times)

Rasputin

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Life Situation: 42 year old man. Married. No kids.

Gross Salary/Wages: $74,000

Individual amounts of each Pre-tax deductions: Just started a Roth IRA with $4,700. Contribute $500 per month to it. Most of the money is in VTIVX, some in VFIFX and some in VFINX. I plan to buy VTSAX when I get the minimum $10,000 and have half in that and half between the two target date funds. I just started a federal government job which provides a pension and a TSP. I currently contribute 3% to the TSP but will up that to the 5% as that is the maximum company match. I intend to invest that in a C fund, but am open to suggestions. $340 per month in health insurance.

Current expenses: See liabilities

Assets: Amount & description - car

Liabilities: $80,000 in student loans. Currently in deferment as I’m in grad school which I set aside about $500 per month toward tuition. I pay $200 per month on the student loans. $2,700 in credit card debt which is interest free for the next 18 months. I pay $200 per month toward that debt. Car payment is $350 per month. $75 miscellaneous per month. $100 groceries. $75 per month toward utilities. Rent is $420.

Specific Question(s): I have lots of questions. Mainly I’m looking at the best way to maximize my retirement investments to retire in 20 years at age 62. I’d like to negotiate this student load debt the best I can (I should be able to qualify for the plan to absolve remaining debt in 10 years as I work in healthcare). My wife and I would like to buy a house in the near future. We currently have $3,000 set aside and are adding to that as we can.
I’ll ask more questions as they arise. I am grateful to any and all help.


dandarc

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #1 on: November 27, 2018, 07:26:50 PM »
Something to keep in mind -

VTSAX now has a $3K minimum.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #2 on: November 27, 2018, 07:38:49 PM »
Something to keep in mind -

VTSAX now has a $3K minimum.

Really? Any idea why they’d lower it? They already had an investor fund with $3k minimum.

MDM

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #3 on: November 27, 2018, 09:08:58 PM »
Mainly I’m looking at the best way to maximize my retirement investments to retire in 20 years at age 62.
Consider Investment Order.  Does that seem applicable/relevant to you?

ysette9

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #4 on: November 27, 2018, 10:31:50 PM »
We need to know the interest rates on the debt you have to help figure out what you should do. The investment order list is a great place to start.

Any reason why you would split your investments between VTSAX and target date funds? The idea of a target date is that is is a one-stop shop and not that it be one of many funds, as it is already a fund-of-funds. I’d personally vote for being as simple as possible on the investment front.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #5 on: November 28, 2018, 03:14:03 AM »
We need to know the interest rates on the debt you have to help figure out what you should do. The investment order list is a great place to start.

Any reason why you would split your investments between VTSAX and target date funds? The idea of a target date is that is is a one-stop shop and not that it be one of many funds, as it is already a fund-of-funds. I’d personally vote for being as simple as possible on the investment front.

As I mentioned, the credit card is 0%. Student loans are 3.99%. My car loan is 3.9%.

terran

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #6 on: November 28, 2018, 05:32:26 AM »
Something to keep in mind -

VTSAX now has a $3K minimum.

Really? Any idea why they’d lower it? They already had an investor fund with $3k minimum.

There's a bit of a fee battle going on between Vanguard, Fidelity, and Schwab right now, so that's probably why. Competition is good for consumers!

Mainly I’m looking at the best way to maximize my retirement investments to retire in 20 years at age 62.
Consider Investment Order.  Does that seem applicable/relevant to you?

One thing to keep in mind about the investment order is that it's very good, but general advice, which makes the assumption that you can access better investments in an IRA than your 401(k). In your case the TSP has very good investment options, so skipping the IRA until/unless you can max out your TSP (18.5k in 2018 / $19k in 2019) would be a perfectly good option as well.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #7 on: November 28, 2018, 06:07:37 AM »
Something to keep in mind -

VTSAX now has a $3K minimum.

Really? Any idea why they’d lower it? They already had an investor fund with $3k minimum.

There's a bit of a fee battle going on between Vanguard, Fidelity, and Schwab right now, so that's probably why. Competition is good for consumers!

Mainly I’m looking at the best way to maximize my retirement investments to retire in 20 years at age 62.
Consider Investment Order.  Does that seem applicable/relevant to you?

One thing to keep in mind about the investment order is that it's very good, but general advice, which makes the assumption that you can access better investments in an IRA than your 401(k). In your case the TSP has very good investment options, so skipping the IRA until/unless you can max out your TSP (18.5k in 2018 / $19k in 2019) would be a perfectly good option as well.

I was told by an investment guy to only do the TSP up to company match, which is 5%. With bills and what not that plus maxing the IRA is probably all I can spare for future me anyhow. What is this investment order youbspeak of?

terran

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #8 on: November 28, 2018, 06:22:04 AM »
Something to keep in mind -

VTSAX now has a $3K minimum.

Really? Any idea why they’d lower it? They already had an investor fund with $3k minimum.

There's a bit of a fee battle going on between Vanguard, Fidelity, and Schwab right now, so that's probably why. Competition is good for consumers!

Mainly I’m looking at the best way to maximize my retirement investments to retire in 20 years at age 62.
Consider Investment Order.  Does that seem applicable/relevant to you?

One thing to keep in mind about the investment order is that it's very good, but general advice, which makes the assumption that you can access better investments in an IRA than your 401(k). In your case the TSP has very good investment options, so skipping the IRA until/unless you can max out your TSP (18.5k in 2018 / $19k in 2019) would be a perfectly good option as well.

I was told by an investment guy to only do the TSP up to company match, which is 5%. With bills and what not that plus maxing the IRA is probably all I can spare for future me anyhow. What is this investment order youbspeak of?

The reason an "investment guy" usually recommends an IRA over a 401(k) is either because they get something out of it (if you open it with them) or because they're following the default advice that assumes the 401(k) may not have very good investments (which is often the case).

See the link MDM's quoted reply for the link to the investment order advice, which as I said is very good, but by necessity is general so assumes the IRA is better than the 401(k), but since you have the TSP that's not quite true. IRA at Vanguard vs TSP is a coin flip though -- you're good either way, so do what's easier or what you want to do.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #9 on: November 28, 2018, 06:42:43 AM »
Something to keep in mind -

VTSAX now has a $3K minimum.

Really? Any idea why they’d lower it? They already had an investor fund with $3k minimum.

There's a bit of a fee battle going on between Vanguard, Fidelity, and Schwab right now, so that's probably why. Competition is good for consumers!

Mainly I’m looking at the best way to maximize my retirement investments to retire in 20 years at age 62.
Consider Investment Order.  Does that seem applicable/relevant to you?

One thing to keep in mind about the investment order is that it's very good, but general advice, which makes the assumption that you can access better investments in an IRA than your 401(k). In your case the TSP has very good investment options, so skipping the IRA until/unless you can max out your TSP (18.5k in 2018 / $19k in 2019) would be a perfectly good option as well.

I was told by an investment guy to only do the TSP up to company match, which is 5%. With bills and what not that plus maxing the IRA is probably all I can spare for future me anyhow. What is this investment order youbspeak of?

The reason an "investment guy" usually recommends an IRA over a 401(k) is either because they get something out of it (if you open it with them) or because they're following the default advice that assumes the 401(k) may not have very good investments (which is often the case).

See the link MDM's quoted reply for the link to the investment order advice, which as I said is very good, but by necessity is general so assumes the IRA is better than the 401(k), but since you have the TSP that's not quite true. IRA at Vanguard vs TSP is a coin flip though -- you're good either way, so do what's easier or what you want to do.

Investment guy was a casual acquaintance. He had no monetary gain. Didn’t even try to get me to hire him.
I do have a question. If I deposit like $250 or so per pay into my tdameritrade account for my iRA, am I better off immediately buying more shares of say the target fund, or wait til I’ve accumulated more cash in the account and making less frequent orders asthere is a fee each time?

marion10

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #10 on: November 28, 2018, 06:53:21 AM »
TSP has an extremely low expense ratio. If you stay with the Feds- you will be eligible for a pension- consider that in your planning. Are any of your loans forgivable under the Public service provisions?

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #11 on: November 28, 2018, 07:11:25 AM »
TSP has an extremely low expense ratio. If you stay with the Feds- you will be eligible for a pension- consider that in your planning. Are any of your loans forgivable under the Public service provisions?

I have considered the pension. I figure between the pension, TSP, and IRA, hopefully I’ll have a decent retirement. All my loans are eligible. How often should I purchase funds?

Peachtea

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #12 on: November 28, 2018, 07:22:06 AM »
Open enrollment for healthcare ends Dec 10. Do some research on lowering your heath insurance costs, using the compare plans option function on OPMs website. It sounds like you have BCBS Basic plan. BCBS has a new plan available this year called FEP Blue focus that is much cheaper. You could also look at GEHA Basic which is less than BCBS basic but more than Blue Focus. (GEHA comes with routine dental so you might choose to skip dental insurance.) I really liked GEHA when I had it and my grandparents have used it for like 30 years no problem. It might be too late for you to do enough research on the benefits of a high deductible/HSA plan and do the number crunching to see if your comfortable with one. But if you do there is a thread on here with peoples experience with different federal HSA eligible plans like GEHA’s HDHP or MHBP’s HDHP. I liked MHBP too but I think this year GEHA’s HDHP is a better value.

Your loan interest rate is low enough that people will tell you to just pay the minimum and invest your extra income instead. Is your interest rate fixed or variable? If you want help on loan forgiveness you need to provide more info. For example, you say your loans are in deferment but your paying $200/month. Are these private student loans where you still make payments on interest during deferment or are you randomly making payments on government loans while in deferment? If they are private student loans, they are not eligible for public service loan forgiveness. If they are government loans and you are working full time for gov, you need to get going on setting them up for forgiveness ASAP. Every month you work full time and have your gov loans in deferment is a month you lose towards forgiveness. Payments you make in deferment or forbearance don’t count towards your 10 years (120 qualified payments while working full time (part time doesn’t count) at gov or nonprofit).

If you have gov SL and work full time, first use the studentaid.ed.gov repayment estimator to estimate your different payment options. Compare the monthly amount on the standard 10 year plan with your income based payment plan options (IBR, PAYE, or REPAYE). Ignore the graduated or extended options. If your standard plan is lower than the income based ones, then forget loan forgiveness and start paying your regular rate for them to be guaranteed gone in 10 years. If the standard plan is only slightly more than income based, consider doing standard plan to avoid the hassle and hoops of loan forgiveness. If income based saves you a bunch of money, proceed below. (Make sure you type in different income amounts projecting what you’ll earn 3, 5, 7 etc years from now to look at the real difference between standard and income based. Don’t rely on their slow curve of raises and note they project out 20 years not 10 b/c income based plans without public service go for 20 not 10 years.)

Next check what type of loans you have. Not all of gov loans are eligible for loan forgiveness. If you have loans not eligible for forgiveness you can consolidate them into one that is eligible. This takes months and those months don’t count towards your 10 years forgiveness. You also need to be careful about consolidation. If you previously worked full time for a nonprofit or gov entity and made payments on your loans (exact payments on amount owed, not payments during deferment or forbearance), those months towards your 10 years are lost after the consolidation - the consolidation starts the clock over. So if you have some loans that are eligible and some that aren’t and you made qualified payments towards the eligible ones already, then you want to make sure you only consolidate the ineligible loans.

If your loans are all eligible for forgiveness and you work full time, then you want to get out of deferment ASAP and get on an income based payment plan. PAYE if your eligible otherwise IBR or REPAYE. Only income based payment plans are eligible for forgiveness. Download the the letter they send each year saying your on an income based plan and keep it somewhere safe. FedLoan electronic mailbox only keeps things for a year. Every year fill out the employment certification form and download the letter they send certifying your employer/number of qualified payments each year as well.

If you do an income based plan for loan forgiveness, then you should do traditional not Roth IRA/401k contributions because it’s lowers your AGI and thus lowers your loan payments which are based on your AGI. Also, your investment guy might not be familiar with the TSP. TSP is the best 401k system in terms of fees; it’s incredibly low fee just like vanguard. And the c fund is the equivalent to a S&P 500 mutual fund. Most people give the advice of contributing to match 401k and then filling up iras before going back to 401k because of high 401k fees or poor investment options. That’s not true for the TSP. You should consider a full case study or spend some time reading a bunch of others to figure out where you can cut costs to have more to contribute to your TSP.

The investment order MDM hyperlinked is the suggested order and rationale on where to stick your investments (which vehicles like Ira, 401k, etc., not which broker companies or fund to select). Make sure your read the rationale below the order because it gives exceptions.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #13 on: November 28, 2018, 07:44:28 AM »
My loans are direct loans. I only make payments to lower the balance. I can’t afford full payments and pay for grad school as well.

MDM

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #14 on: November 28, 2018, 08:09:08 AM »
Consider Investment Order.  Does that seem applicable/relevant to you?
One thing to keep in mind about the investment order is that it's very good, but general advice, which makes the assumption that you can access better investments in an IRA than your 401(k). In your case the TSP has very good investment options, so skipping the IRA until/unless you can max out your TSP (18.5k in 2018 / $19k in 2019) would be a perfectly good option as well.
What is this investment order you speak of?
Underlined words in posts often are links one can follow for more information.  E.g., Investment Order.

The reason for asking whether it seemed applicable is, as terran notes, because it is general advice.  While it tries to be appropriate for most, there may be situations it doesn't cover.

It does happen to cover the situation in which a 401k (or TSP, etc.) has better investment options than an IRA:
Quote
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA deduction, swap #4 and #5)

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #15 on: November 28, 2018, 08:26:33 AM »
Consider Investment Order.  Does that seem applicable/relevant to you?
One thing to keep in mind about the investment order is that it's very good, but general advice, which makes the assumption that you can access better investments in an IRA than your 401(k). In your case the TSP has very good investment options, so skipping the IRA until/unless you can max out your TSP (18.5k in 2018 / $19k in 2019) would be a perfectly good option as well.
What is this investment order you speak of?
Underlined words in posts often are links one can follow for more information.  E.g., Investment Order.

The reason for asking whether it seemed applicable is, as terran notes, because it is general advice.  While it tries to be appropriate for most, there may be situations it doesn't cover.

It does happen to cover the situation in which a 401k (or TSP, etc.) has better investment options than an IRA:
Quote
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA deduction, swap #4 and #5)

Thank you, I did figure that out about the link. It looks good. I just worry about missing out on money if I put less into my IRA and more into an emergency fund. Compound interest and all. Is it reasonable to build the emergency fund while still contributing to the IRA?
How come no one has answered my question as to how often to buy more funds? Am I missing something I’m asking that? I’m new afterall.

dandarc

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #16 on: November 28, 2018, 08:34:10 AM »
How come no one has answered my question as to how often to buy more funds? Am I missing something I’m asking that? I’m new afterall.
The timing of small purchases does not matter in the grand scheme. Your portfolio will be worth hundreds of thousands of dollars, if not millions in 20 years - whether you put in $250 today or wait until you've got to $1,000 isn't that big of a deal (assuming it won't take years to accumulate that $1,000). Put the money in immediately is great. Put it in only once per month or quarter is OK too.

Don't let perfect get in the way of good.

Arbitrage

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #17 on: November 28, 2018, 08:38:34 AM »
Given that you have all Vanguard funds in your IRA, why do you have your IRA held at TD Ameritrade, paying fees?  Just move your IRA to Vanguard, where you won't pay any transaction fees.  Then it's a moot point on whether or not to wait to invest - just do it immediately. 

Another plug for the TSP here - in addition to the extremely low fees, you get access to the G fund, which is a unique investment.  Unlike bond funds, which have a risk of loss due to defaults or rises in interest rates, the G fund pays a bond fund-like rate, with no risk of capital loss.  If you have any fixed income in your investments, that's where to put it.  I would if I could. 

As for an emergency fund, one option is to fund your Roth IRA and use that as your emergency fund, since you can withdraw your contributions at any time.  Roth IRA space is lost forever once tax day arrives, and is tax-advantaged, so if you don't end up needing the emergency fund, you'll be better off down the road.

terran

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #18 on: November 28, 2018, 09:22:45 AM »
Given that you have all Vanguard funds in your IRA, why do you have your IRA held at TD Ameritrade, paying fees?  Just move your IRA to Vanguard, where you won't pay any transaction fees.  Then it's a moot point on whether or not to wait to invest - just do it immediately. 

Yes, nice catch. Rasputin, can you explain what the TD Ameritrade connection is? Is that where you've opened your IRA in which you're investing in Vanguard funds? Or is that a taxable account that you intend sell and move the money to a Vanguard IRA when you have more space?

Generally speaking, investing whatever money you have as soon as you have it (lump sum investing) outperforms slowly investing money over time (dollar cost averaging) 67% of the time. Some people still dollar cost average because it makes them feel better if the market happens to go down, but mathematically speaking it's better to invest as soon as you can (because on average the market usually goes up). This assumes you aren't paying fees to invest though. If you're investing in Vanguard funds at TD Ameritrade you're paying a trading fee each time you invest which would indicate it would be better to wait an invest only once in awhile .But even better would be to move the IRA to Vanguard so you don't have to pay to every time you invest.   

onlykelsey

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #19 on: November 28, 2018, 09:25:56 AM »
Something to keep in mind -

VTSAX now has a $3K minimum.

Really? Any idea why they’d lower it? They already had an investor fund with $3k minimum.
Competition by schwab, I suspect.  They eliminated the "investor" class for 30+ index funds.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #20 on: November 28, 2018, 12:26:46 PM »
Given that you have all Vanguard funds in your IRA, why do you have your IRA held at TD Ameritrade, paying fees?  Just move your IRA to Vanguard, where you won't pay any transaction fees.  Then it's a moot point on whether or not to wait to invest - just do it immediately. 

Another plug for the TSP here - in addition to the extremely low fees, you get access to the G fund, which is a unique investment.  Unlike bond funds, which have a risk of loss due to defaults or rises in interest rates, the G fund pays a bond fund-like rate, with no risk of capital loss.  If you have any fixed income in your investments, that's where to put it.  I would if I could. 

As for an emergency fund, one option is to fund your Roth IRA and use that as your emergency fund, since you can withdraw your contributions at any time.  Roth IRA space is lost forever once tax day arrives, and is tax-advantaged, so if you don't end up needing the emergency fund, you'll be better off down the road.

My IRA was originally with scottrade. TD bought them. How do I switch it to Vanguard?

secondcor521

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #21 on: November 28, 2018, 12:41:50 PM »
My IRA was originally with scottrade. TD bought them. How do I switch it to Vanguard?

Call Vanguard and they'll walk you through the process.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #22 on: November 28, 2018, 12:45:27 PM »
My IRA was originally with scottrade. TD bought them. How do I switch it to Vanguard?

Call Vanguard and they'll walk you through the process.

Will do. Thanks!

Peachtea

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #23 on: November 28, 2018, 05:42:45 PM »
My loans are direct loans. I only make payments to lower the balance. I can’t afford full payments and pay for grad school as well.

My back of envelope maths for married filing jointly, 74k gross, and 5% 401k contribution puts you at an est. $185/month PAYE or REPAYE payments, which is less than what you’re paying now. Seems silly to not pay the lower amount and get credit for forgiveness. Or is 74k only your income, not your joint income?

If you’ve looked at the income based payments and decided you can’t pay them now, then put that $200/month in your 401k not your SL. Don’t pay money you don’t have to; you’re throwing money away right now if you plan on doing 10 year loan forgiveness.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #24 on: November 28, 2018, 07:16:54 PM »
My loans are direct loans. I only make payments to lower the balance. I can’t afford full payments and pay for grad school as well.

My back of envelope maths for married filing jointly, 74k gross, and 5% 401k contribution puts you at an est. $185/month PAYE or REPAYE payments, which is less than what you’re paying now. Seems silly to not pay the lower amount and get credit for forgiveness. Or is 74k only your income, not your joint income?

If you’ve looked at the income based payments and decided you can’t pay them now, then put that $200/month in your 401k not your SL. Don’t pay money you don’t have to; you’re throwing money away right now if you plan on doing 10 year loan forgiveness.
Which option does one choose to get the payment that low? I'd opt for that to get the 120 months going.

Peachtea

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #25 on: November 29, 2018, 07:14:38 AM »
My loans are direct loans. I only make payments to lower the balance. I can’t afford full payments and pay for grad school as well.

My back of envelope maths for married filing jointly, 74k gross, and 5% 401k contribution puts you at an est. $185/month PAYE or REPAYE payments, which is less than what you’re paying now. Seems silly to not pay the lower amount and get credit for forgiveness. Or is 74k only your income, not your joint income?

If you’ve looked at the income based payments and decided you can’t pay them now, then put that $200/month in your 401k not your SL. Don’t pay money you don’t have to; you’re throwing money away right now if you plan on doing 10 year loan forgiveness.
Which option does one choose to get the payment that low? I'd opt for that to get the 120 months going.

Either Pay As You Earn (PAYE) if your loans are from post 2007 or or REPAYE if your loans are pre-2007. Both plans are capped at 10% of your discretionary income: AGI - 150% poverty line for your family size (24,000 for 2 in continental US) x .10 and then divide by 12. That’s why contributing more to your TSP traditional rather Roth would further lower your payments.

You apply for income based plans here: https://studentloans.gov/myDirectLoan/ibrInstructions.action
If your income is much different than last year than you’ll have to do it manually where you’ll print the form and submit paystubs to prove your income. This is especially beneficial if your income is lower this year. Otherwise they pull the info from your tax returns. If you know your servicer you can upload the forms to them otherwise you mail them in. Once you indicate you plan on doing PSLF they transfer you to FedLoan servicer if your not already with them.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #26 on: November 29, 2018, 08:00:13 AM »
My loans are direct loans. I only make payments to lower the balance. I can’t afford full payments and pay for grad school as well.

My back of envelope maths for married filing jointly, 74k gross, and 5% 401k contribution puts you at an est. $185/month PAYE or REPAYE payments, which is less than what you’re paying now. Seems silly to not pay the lower amount and get credit for forgiveness. Or is 74k only your income, not your joint income?

If you’ve looked at the income based payments and decided you can’t pay them now, then put that $200/month in your 401k not your SL. Don’t pay money you don’t have to; you’re throwing money away right now if you plan on doing 10 year loan forgiveness.
Which option does one choose to get the payment that low? I'd opt for that to get the 120 months going.

Either Pay As You Earn (PAYE) if your loans are from post 2007 or or REPAYE if your loans are pre-2007. Both plans are capped at 10% of your discretionary income: AGI - 150% poverty line for your family size (24,000 for 2 in continental US) x .10 and then divide by 12. That’s why contributing more to your TSP traditional rather Roth would further lower your payments.

You apply for income based plans here: https://studentloans.gov/myDirectLoan/ibrInstructions.action
If your income is much different than last year than you’ll have to do it manually where you’ll print the form and submit paystubs to prove your income. This is especially beneficial if your income is lower this year. Otherwise they pull the info from your tax returns. If you know your servicer you can upload the forms to them otherwise you mail them in. Once you indicate you plan on doing PSLF they transfer you to FedLoan servicer if your not already with them.

Can I PM you questions I have?

Peachtea

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #27 on: November 29, 2018, 05:17:34 PM »
Yeah, no problem. I’m happy to answer any questions I can.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #28 on: December 03, 2018, 09:23:58 AM »
What is a reasonable amount I can expect to have in 20 years of investing in my iRA?

ysette9

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #29 on: December 03, 2018, 10:14:29 AM »
What is a reasonable amount I can expect to have in 20 years of investing in my iRA?
https://www.investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator

(Or any compound interest calculator out there)

You need to know how much you are starting with and how much you intend to contribute each year. If you have a good percentage of your investments in a broad stock market index fund it is reasonable to use 6 or 7% as your interest rate for the calculations.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #30 on: December 03, 2018, 08:10:12 PM »
What is a reasonable amount I can expect to have in 20 years of investing in my iRA?
https://www.investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator

(Or any compound interest calculator out there)

You need to know how much you are starting with and how much you intend to contribute each year. If you have a good percentage of your investments in a broad stock market index fund it is reasonable to use 6 or 7% as your interest rate for the calculations.

Compounded annually?

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #31 on: December 18, 2018, 01:05:53 PM »
Switched to Vanguard. Should take a few days. What would be the best distribution? Right now most of my money is in a 2045 fund and some in a 2050? I want to maximize my potential.

ysette9

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #32 on: December 18, 2018, 03:59:24 PM »
Target date funds are designed to be one-stop shopping, so go all in or don’t do them at all. In any case the asset allocation of the 2045 and 2050 funds are almost identical so there is no reason to have both.

I think the question to ask is what should your overall asset allocation be? What is your time horizon? What would your reaction be if you logged in and saw your account had dropped by 10%? 20%? 40%? Think really hard about that because the right AA is what will let you sleep at night and not panic and do something stupid when the market goes south (as it will).

ysette9

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #33 on: December 18, 2018, 04:01:46 PM »
What is a reasonable amount I can expect to have in 20 years of investing in my iRA?
https://www.investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator

(Or any compound interest calculator out there)

You need to know how much you are starting with and how much you intend to contribute each year. If you have a good percentage of your investments in a broad stock market index fund it is reasonable to use 6 or 7% as your interest rate for the calculations.

Compounded annually?
Play around with the calculator. As un-intuitive as it sounds, it barely matters whether you compound once a year or daily.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #34 on: December 18, 2018, 05:16:00 PM »
Target date funds are designed to be one-stop shopping, so go all in or don’t do them at all. In any case the asset allocation of the 2045 and 2050 funds are almost identical so there is no reason to have both.

I think the question to ask is what should your overall asset allocation be? What is your time horizon? What would your reaction be if you logged in and saw your account had dropped by 10%? 20%? 40%? Think really hard about that because the right AA is what will let you sleep at night and not panic and do something stupid when the market goes south (as it will).

What’s more important, setting the date for when you actually plan to stop working or a few years after that?

CindyBS

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #35 on: December 18, 2018, 06:49:43 PM »
Life Situation: 42 year old man. Married. No kids.

Gross Salary/Wages: $74,000




Assets: Amount & description - car

Liabilities: $80,000 in student loans. Currently in deferment as I’m in grad school which I set aside about $500 per month toward tuition. I pay $200 per month on the student loans. $2,700 in credit card debt which is interest free for the next 18 months. I pay $200 per month toward that debt. Car payment is $350 per month. $75 miscellaneous per month. $100 groceries. $75 per month toward utilities. Rent is $420.


This is confusing to me.  Two people eat only $100 of groceries per month?  Which is only really possible if you eat out A LOT or produce most of your own food.  Unless you live in a very low cost of living area, $420 for rent seems awfully low - is that your half?

You say you are married, but the way most of your post is written is sounds like you are single - do you have joint finances?  Is the income you list your household income or just you?  You mention 1 car - are you a 1 car household or does your wife own a car?  How old is the car you mention - can it be sold and a cheaper car purchased? 

Also, for expenses you are missing many categories such as clothing, toiletries, medical expenses, gas for said car, insurance, internet, phone, going out to eat, cable?, etc. 

I think one of your first steps should be to get a handle on where all your money is going.  Record every expenditure for at least a month, you may have a lot of places to cut that will greatly speed up savings towards your financial goals.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #36 on: December 18, 2018, 07:28:27 PM »
Life Situation: 42 year old man. Married. No kids.

Gross Salary/Wages: $74,000




Assets: Amount & description - car

Liabilities: $80,000 in student loans. Currently in deferment as I’m in grad school which I set aside about $500 per month toward tuition. I pay $200 per month on the student loans. $2,700 in credit card debt which is interest free for the next 18 months. I pay $200 per month toward that debt. Car payment is $350 per month. $75 miscellaneous per month. $100 groceries. $75 per month toward utilities. Rent is $420.


This is confusing to me.  Two people eat only $100 of groceries per month?  Which is only really possible if you eat out A LOT or produce most of your own food.  Unless you live in a very low cost of living area, $420 for rent seems awfully low - is that your half?

You say you are married, but the way most of your post is written is sounds like you are single - do you have joint finances?  Is the income you list your household income or just you?  You mention 1 car - are you a 1 car household or does your wife own a car?  How old is the car you mention - can it be sold and a cheaper car purchased? 

Also, for expenses you are missing many categories such as clothing, toiletries, medical expenses, gas for said car, insurance, internet, phone, going out to eat, cable?, etc. 

I think one of your first steps should be to get a handle on where all your money is going.  Record every expenditure for at least a month, you may have a lot of places to cut that will greatly speed up savings towards your financial goals.

I was listing my half of the bills.

ysette9

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #37 on: December 18, 2018, 10:44:58 PM »
Target date funds are designed to be one-stop shopping, so go all in or don’t do them at all. In any case the asset allocation of the 2045 and 2050 funds are almost identical so there is no reason to have both.

I think the question to ask is what should your overall asset allocation be? What is your time horizon? What would your reaction be if you logged in and saw your account had dropped by 10%? 20%? 40%? Think really hard about that because the right AA is what will let you sleep at night and not panic and do something stupid when the market goes south (as it will).

What’s more important, setting the date for when you actually plan to stop working or a few years after that?
What is most important is figuring out what combo of stocks and bonds you feel comfortable with, and then finding a target date fund that best suits that mix. So if you decide that a more aggressive portfolio like 80% stocks/20% bonds is your cup of tea then something like a Vanguard 2035 is good. If you want more like 40% bonds then a 2020 fund is a better match.

I will say that you need to realize that you are investing for the long haul so it is really important to have stocks for growth. Maybe you are only comfortable with 50%, and that is fine, but it can’t be 20% or inflation will eat you for lunch. Historically 100% stocks will make you the richest, but it is a wild ride and not for the faint of heart.

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #38 on: December 19, 2018, 06:11:18 AM »
Target date funds are designed to be one-stop shopping, so go all in or don’t do them at all. In any case the asset allocation of the 2045 and 2050 funds are almost identical so there is no reason to have both.

I think the question to ask is what should your overall asset allocation be? What is your time horizon? What would your reaction be if you logged in and saw your account had dropped by 10%? 20%? 40%? Think really hard about that because the right AA is what will let you sleep at night and not panic and do something stupid when the market goes south (as it will).

What’s more important, setting the date for when you actually plan to stop working or a few years after that?
What is most important is figuring out what combo of stocks and bonds you feel comfortable with, and then finding a target date fund that best suits that mix. So if you decide that a more aggressive portfolio like 80% stocks/20% bonds is your cup of tea then something like a Vanguard 2035 is good. If you want more like 40% bonds then a 2020 fund is a better match.

I will say that you need to realize that you are investing for the long haul so it is really important to have stocks for growth. Maybe you are only comfortable with 50%, and that is fine, but it can’t be 20% or inflation will eat you for lunch. Historically 100% stocks will make you the richest, but it is a wild ride and not for the faint of heart.

I have my TSP 80% C fund, 20% S. Maybe I should just pick one of them target date funds and just stick it all in balls deep in the one fund and not overthink it.

ysette9

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Case Study - late start on retirement and student loan debt looming
« Reply #39 on: December 19, 2018, 10:13:19 AM »
I think picking a fund, throwing everything in it, and then going and reading a good book/take a walk is a great plan. The most important ingredients for your success are regularly saving as much as you can and leaving your investments the heck alone. Do that and you should come out golden. :)

Rasputin

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Re: Case Study - late start on retirement and student loan debt looming
« Reply #40 on: December 19, 2018, 10:22:01 AM »
I think picking a fund, throwing everything in it, and then going and reading a good book/take a walk is a great plan. The most important ingredients for your success are regularly saving as much as you can and leaving your investments the heck alone. Do that and you should come out golden. :)
Yeah. I’m doing the 5% contribution on my TSP and $500 per month into my IRA. I’ve already had to give up hookers and cocaine. I still have to figure out how to best deal with that student loan debt. I think after tax season I’ll look into what the other guy was talking about, getting a lower payment.

 

Wow, a phone plan for fifteen bucks!