Help me decide...

[droh82]

Sup guys,

I'm in need of some help from veteran mustachians figuring out if it would be better for me to invest into a taxable account or pay off my student loan.

I currently max my 401k and roth IRA. I have about $1000 dollars a month left over after expenses that I want to put to work for me.

My student loan situation is as follows:

UNSUBSIDIZED CONSOLIDATION LOAN   Interest:  4.375%     Balance: $3,960.76       Monthly pay:  $54.61
SUBSIDIZED CONSOLIDATION LOAN        Interest:  4.375%      Balance: $4,342.53       Monthly pay:  $59.88

Minimum monthly is $114.49.

I still have about 30+ years to invest so I'm definitely in it for the long run and looking for the best mathematical/financial option.

[MDM]

You have $1000/month that you can
- invest in a guaranteed 4.375% account (paying off your loans early)
- invest in something else, e.g., stock funds that could increase 30%, or decrease 30%, or...?
- split among different investments

If the Roth IRA is completely separate from your employer (i.e., you opened your own investment account and are investing it yourself), then my $0.02 says "pay off the student loan".

If all your investments are through your employer, then I'd suggest opening your own Vanguard (or Fidelity or Schwab or ...) account (so you develop experience and comfort doing so), then putting $500 toward the loans and $500 into your iinvestment account.

In another few years you can put on your hindsight glasses and know for sure what you should have done....

[wtjbatman]

Since you're already maxing out your 401k and a Roth IRA, I'd say spend the next 9 months paying off your student loans, then start investing in taxable. With that long of a time horizon, there's no harm in paying off those student loans and getting a guaranteed "return" of 4.375%.

[droh82]

Thanks guys.. I was actually leaning towards paying off student loans as well.

MDM: Yes my Roth IRA is separate from my employer; Opened it up myself at Vanguard.  Employers 401K is from ING Direct.