Hi, Fellow Mustachians,
Somewhat recent convert here. Graduated from law school last May with $108,000 in loans. That's WITH a 2/3 scholarship, so it could have been a lot worse. Still: crazy!
My loans went into repayment in Nov '12, and in January of this year I went into ass-kicking mode. As things stand now:
-Loan 1: VANQUISHED. $13,500 @ 8.25% interest, paid off in full. LATER, HOMES.
-Loan 2: PARTIALLY VANQUISHED. Was $29,000, now $19,000. Interest of 7.65%. This is the highest interest-loan and the one we are focusing on with everything we've got. Currently getting paid down at around $3,000 per month.
-Loans 3 and 4: DON'T THINK WE'VE FORGOTTEN ABOUT YOU, YOU'RE JUST NOT OUR MAIN TARGET YET. Combined total of $64,000, both at 6.55%. I've been snowballing Loans 1 and 2, so these have been getting just enough to keep ahead of the monthly interest.
I started this journey paying off $900/month on the loans, and several ratchets later am up to $3,400 per month. I also just got engaged (hooray!). My Fiancee (a financial ninja who got me into this whole concept in the first place) wants to chip in another $1,200/month. I think I can probably up my own contribution some more, so we're contemplating a total monthly payment of $4,800 between the two of us, or $57,600/year.
We're working really hard on the "reducing liabilities" side of the equation, but I can't help but feel that maybe I should be adding more to assets (especially retirement assets, given 3 years of law school where I put away nothing).
Together, we're putting away a total of $28,500 per year in our workplace retirement plans (maxing them out). Neither of us contributes to an IRA. Our current retirement savings are about $143,000 combined. We're both in our late 20s.
FIRST WORLD PROBLEM AHEAD: Our incomes disqualify us from the following: Student loan interest deduction, Roth IRA contributions, traditional IRA contribution deduction.
Here's the question: Would it be worth paying down loans slightly less aggressively, in order to set more aside for retirement? The only option that I would have is to put $5,500 into a non-deductible, traditional IRA. This money would grow tax-deferred. I would pay taxes on the gains when it comes out.
As far as I can tell, this stacks up to: Better to payoff debt at 7.65% interest, or put some more funds towards retirement assets (where they might earn 8% over the long haul, maybe, but will at least be growing tax-deferred)?
Curious to hear what mustachians think.
Thanks!
Lentils