Author Topic: IRA/Roth IRA Strategy with Student Debt?  (Read 2074 times)

wickemt

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IRA/Roth IRA Strategy with Student Debt?
« on: October 08, 2013, 07:40:45 AM »
Hello fellow mustachians;

I'm a recently minted attorney working in government. So is my wife. We recently got married and are both carrying significant student loan debt (Me approximately $150k, her approximately $275k). Not too worried about it given the student loan forgiveness programs available for public service, however, to keep payments low and eventually qualify we need to file our taxes Married Filing Separately.

I am learning that this boxes us out of many traditional tax advantaged savings vehicles. Specifically, I cannot deduct any contributions to a traditional IRA, and I don't believe I can make any contributions to a Roth IRA.

I am eligible for, and participate in, a 457(b) plan at work that has some fantastic low-cost Vanguard funds (Total Stock Market Index, Wellington, PrimeCap, Capital Opportunity, etc). I currently contribute 10% of pre-tax income there and intend to raise that to 15% at year's end. However, I also like to directly invest in dividend blue-chips such as oil majors, consumer staples, tobacco, and utility companies. Current monthly income is approximately $3500 net, after deductions (including the 457).

My question is this: Is there ANY tax-advantaged vehicle left for us to use, given that we are constrained in our filing status? I can't think of any but I must be overlooking something. If not, am I better off just socking the extra cash I'd otherwise be putting into individual equities into the 457?

Thanks in advance for your assistance.


mlipps

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Re: IRA/Roth IRA Strategy with Student Debt?
« Reply #1 on: October 08, 2013, 08:59:51 AM »
I believe you can still do a backdoor Roth if your filing status if MFS. http://www.bogleheads.org/wiki/Backdoor_Roth_IRA

Mazzinator

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Re: IRA/Roth IRA Strategy with Student Debt?
« Reply #2 on: October 08, 2013, 11:48:21 AM »
I think your payment amount for IBR are based on your AGI, so i would think you'd want to max out your pretax (401k type) first. Unless, i'm not understanding your question.

matchewed

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Re: IRA/Roth IRA Strategy with Student Debt?
« Reply #3 on: October 08, 2013, 11:54:34 AM »
Just like the more common 401k you should be aiming to max your 457(b) before moving onto other investment opportunities unless you are saving for specific goals outside of FIRE or traditional retirement. A case could be made that the moment you start thinking of leaving the loan forgiveness program (if you do so) that you should start squashing that student loan debt. But as long as you stay on the loan forgiveness program you should max out your tax deferred (401k/457(b)) investment vehicles.

wickemt

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Re: IRA/Roth IRA Strategy with Student Debt?
« Reply #4 on: October 18, 2013, 10:49:01 AM »
Got it. Max the 457 and see what is left over, while simultaneously lowering student loan payments. Can do.