Author Topic: Potentially dumb question - withdrawing from investments when retiring before 60  (Read 480 times)

allanxtacy

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Hi all!  Long time lurker, first time poster.  I haven't dedicated the time to tracking down all my numbers to post a case study, so I am going to post a quick question hoping this is enough info:

31 years old, single
$125,000 annual income
$68,000 401(k) currently
$44,000 in student debt (monthly payment is $550)
No other debt
No other assets aside from 3-month cash cushion

I am at the point where I have to choose what I am doing with my excess money and based on the investment order sticky, the advice is to continue maxing out my tax-advantaged accounts.  My concern is putting too much money into these accounts, retiring at say, 45, and wondering what I am going to do for income between 45 and 60. 

Can anyone point me to a post/article that explains this concept?  Should I be considering opening a traditional Vanguard account before fully paying off the student debt or exploring the IRA world?  I am happy to provide additional details.  Thank you very much!


Apple_Tango

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What is your student loan interest rate? If it is 5% or above, paying off that loan will be a guaranteed 5% (or above) return on investment. I like those odds. If it is less than 5% I would still pay it off, I just used that number as an example.  I would keep going with the 401k payments you're doing now, but  dump all excess income  into your student loan payments. Once those are squashed, I would open up an IRA and Max it out, and then  max out the 401k.
« Last Edit: December 07, 2017, 09:19:07 AM by Apple_Tango »

Apple_Tango

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https://forum.mrmoneymustache.com/investor-alley/investment-order/

I agree with most all of this investment order.

allanxtacy

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Thank you for your responses!  I read the sticky about withdrawing from retirement accounts before 59.5 but for some reason didn't believe it would apply to my case.  Makes a lot of sense now that I read it a little slower.

My student loans are all consolidated with Earnest at 5.31%, so the suggestion by Apple_Tango to put excess cash into that until it is paid off looks like the best route for the time being until that's all gone. 

Much appreciated input from the forum, as expected!  Looking forward to participating more as time goes on :)