I'm wondering if it is more efficient to put 3k towards my fiancée's student loans or have her put that money in a traditional IRA. All of my retirement accounts (401k, tIRA, and HSA) are already on track to be maxed out for 2017. My fiancée works part-time and is about one year into a two year grad school program. All of her income is going towards tuition. She is still taking out about 8k in student loans each year at 5.6%. We are about to get married and will file jointly for 2017.
I have accumulated a few extra thousand in my checking account and my normal move is to dump it in my Vanguard taxable account. This time I thought it would be a good idea to put it towards her 5.6% student loan balance of about 8k--in my mind the guaranteed 5.6% is a roughly comparable investment to what we'd get buying some more VTI in a taxable account.
But then I thought what about investing it in a newly opened tIRA for her? This would be some great tax savings (15% federal, 4.6% state). Or I could even wait until she is on my insurance and then increase contributions into our HSA (since the contribution limit will increase from 3,400-personal to 6,750-self plus one) for the rest of 2017; maxing out the new limit would take about an extra 3k. That would reduce taxes by a further 7.65%! Surely all of these tax savings makes it more efficient than just reducing the 5.6% student debt? Once she graduates and has a job we can then pay off the debt very rapidly after maxing both our suites of retirement accounts.
There is some peace of mind in throwing everything at the loan first, but with this much in tax savings to be had, is it better to hang on the debt for a year or so longer and put some in the tax-advantaged accounts?
Thanks in advance for all advice
