Originally Posted by Rain Man:
Can you deduct the loan interest costs on your taxes?
Assuming you can't get your loan interest down, your loan payments are the equivalent of a guaranteed 7% return. If you can deduct the payment, then they're kind of a guaranteed 10% return.
Paying into an IRA has the same tax benefit, so if the loan interest is deductible then you have to beat a 7%return, recognizing that it's a guaranteed return. That's probably a breakeven proposition to do over a period of years, and I'd rather eliminate debt. If the loan interest is not deductible, then you just need to beat roughly a 4% guaranteed return on the IRA (7% - tax deduction), which is easy to do in the long term.
Did I do the math right there? Someone double check.
The Deduction didn’t go away in the new tax bill but I’d have to look up what the phaseout rules are. He may make too much money. [Reply]
Originally Posted by Buehler445:
I don’t think it changed.
Psychologically, I just hate having that over my head. I work my ass off and it’s just a mental drain to think I’m set up to pay that shit until I’m 46.
I just wanna get out from under it. I’ll deal with retirement later. It may not be the best way to go about it but it just wears on me [Reply]
Originally Posted by O.city:
Psychologically, I just hate having that over my head. I work my ass off and it’s just a mental drain to think I’m set up to pay that shit until I’m 46.
I just wanna get out from under it. I’ll deal with retirement later. It may not be the best way to go about it but it just wears on me
That was my philosophy on various debts. I just wanted them off the books as fast as possible. At my phase in life, I'm no longer paying any debt and instead I'm on the receiving end. There's a huge mental benefit to that. [Reply]
Originally Posted by Rain Man:
That was my philosophy on various debts. I just wanted them off the books as fast as possible. At my phase in life, I'm no longer paying any debt and instead I'm on the receiving end. There's a huge mental benefit to that.
Right there with ya.
I know I may miss out on some retirement or some investing, but for my mental stability, I just have to get this done ASAP. It wears on me daily. [Reply]
Originally Posted by O.city:
Well guys, could use a little help or advice here.
The wife and I are doing well, bought some land getting ready to build a home. I max out an ira for both of us each year. But I’m not sure if I should be doing more or putting as much as I can towards my student loans. I started with 300k at about 7 % 4 years ago and I’ve taken down 50k or so of it total but the interest is killer. I’m getting ready to join the national guard as a dentist and get some help there with the loans so I think that plus what I pay, I can get the student loans done in about 3.5 years.
So, question is would you max out and get out from under those first or try and put more into a brokerage account?
To echo a lot of what's been said, it's all about weighing the opportunity cost of investing vs the fixed cost of 7% interest. You can improve that through deductions, so say paying that down is effectively a 10% return for doing so.
In the coming 12-18 months I foresee market returns exceeding 10%, so it would be economically smarter to be investing over that period, and revisit your strategy afterwards.
Obviously, the emotional aspect of paying off debt is difficult to quantify. But from a numbers perspective it makes more sense to invest right now.
But ultimately, it's whatever helps you sleep at night. [Reply]
My issue is just the length of the payout. I feel like I can still be putting into retirement but I’m just feeling like maxing the debt repayment works better mentally for me.
Getting those done in that short of time will free up so much capitol I feel the gains I can make then will make up for it [Reply]
Originally Posted by O.city:
Thanks for the advise guys
My issue is just the length of the payout. I feel like I can still be putting into retirement but I’m just feeling like maxing the debt repayment works better mentally for me.
Getting those done in that short of time will free up so much capitol I feel the gains I can make then will make up for it
With your cash flow, you're in an enviable position. I see a lot of doctors and others with high cash flow and high debt not strategizing at all, thinking their cash flow will take care off all their problems.
Originally Posted by Cornstock:
With your cash flow, you're in an enviable position. I see a lot of doctors and others with high cash flow and high debt not strategizing at all, thinking their cash flow will take care off all their problems.
You're asking the right questions.
Yeah, I’m trying.
My thought process is also that as my practice continues to grow I can hopefully make up for lost investing and retirement.
But we shall see
Mainly I’m just trying to stick to the plan we set a few years ago when I graduated. Now with this national guard thing opening up its opened a new door to shortening the replay considerably. Of course getting deployed and having to leave my practice would be devastating but it’s a risk I’m looking to take [Reply]
My thought process is also that as my practice continues to grow I can hopefully make up for lost investing and retirement.
But we shall see
Mainly I’m just trying to stick to the plan we set a few years ago when I graduated. Now with this national guard thing opening up its opened a new door to shortening the replay considerably. Of course getting deployed and having to leave my practice would be devastating but it’s a risk I’m looking to take
As long as you're not completely foregoing investing at this point you will be in a good position. Compound interest is incredibly powerful, and it is almost impossible to match it's power in only a few years preceeding retirement.
Especially when there are so many variables in those last few years of employment-we can't know what the market situation is at that point, and the prudent approach is to shift to a more conservative portfolio to mitigate the possibility of loss of principle.
I am amazed almost daily by incredibly highly educated individuals who have too much hubris to consider all the factors involved. [Reply]
Originally Posted by DaFace:
Most of personal finance is about constantly taking steps in the right direction. Consult the chart linked in the OP, and do your best, but don't stress TOO much if some of those steps seem a long way off.
Yeah I’m going in the right direction, I just need to finish off my last bit of student loan debt this summer before I can add more. I really think I should avoid fiddling around with an open investing account and put all of my resources towards my compound interest accounts like the Roth IRA. [Reply]
Originally Posted by RunKC:
Yeah I’m going in the right direction, I just need to finish off my last bit of student loan debt this summer before I can add more. I really think I should avoid fiddling around with an open investing account and put all of my resources towards my compound interest accounts like the Roth IRA.
Yeah, that's typically recommended. Get some boring, safe retirement accounts going before you start playing with anything that's intended to bring in income. [Reply]
Originally Posted by Cornstock:
In the coming 12-18 months I foresee market returns exceeding 10%, so it would be economically smarter to be investing over that period, and revisit your strategy afterwards.
Sure, but be careful with that kind of thinking. You may THINK they'll exceed 10%, but it's never out of the question you could lose money instead. It's worth tempering your expectations either direction rather than just assuming that it'll go the way you believe it will. [Reply]