2007-03-07 09:30:09 · 6 answers · asked by huntington660 1 in Business & Finance ➔ Personal Finance
No, avg return on the stocks in your 401k is 8% annually. Plus you get the tax break on your 401k and the interest on your student loans.
2007-03-07 09:34:15 · answer #1 · answered by Anonymous · 0⤊ 0⤋
That depends on your income (I won't ask), your current level of savings, your anticipated near-term expenditures, and how much you can write off your student loan expenses from next year's taxes.
If you have no savings, put your extra funds towards building up three months' cushion, then start looking at retirement.
If you're making your student loan payments every month, and you have a retirement account with an employer match, take what is beyond your student loan funds and put it toward the employer match, up to the max allowed, then think about student loans.
Assuming your student loans are compounded daily, that comes out to about $320 a month, which is quite a chunk of change. If you make only the monthly payments, in your first year you will pay down about $1000 in principal and more than $2,800 in interest; you can write off this interest (how much depends on some things, check with a tax advisor). However, taking 30 years to pay off the loan will mean paying more than $50K in interest!
If you make a payment-and-half of $480 (whew!) a month, you'll reduce principal by just under $2,800 and pay off nearly $3,000 in interest, but the loan will be paid off in 15 years and you'll pay only about $30K in interest.
This means by making payments and a half, you're "saving" about $2,000 a year, or about 3% annually (that number will change depending on how you discount it).
On the other hand, if you have an investment that pays better than 4.25%, put your extra funds in there. You can always use the proceeds from the investment towards your student loans, too (using the spread to pay down the principal).
2007-03-07 17:53:53 · answer #2 · answered by Veritatum17 6 · 0⤊ 0⤋
You got a high interest rate. I would refi the student loan into a better rate first. Contribute to the 401 and make payments on the new loan (double and triple on principal only do this by separate check saying for principal only.)
For 65K you better have your masters or doctorate.
2007-03-07 17:39:17 · answer #3 · answered by Anonymous · 0⤊ 1⤋
30 years is a long time to stay out of a 401K plan. I would have to say no. Just how many years do you plan to work before retiring?
2007-03-07 17:39:13 · answer #4 · answered by Anonymous · 0⤊ 0⤋
jcmt hit on the head in the first post...give him the points.
2007-03-10 00:12:16 · answer #5 · answered by digdowndeepnseattle 6 · 0⤊ 0⤋
no, start saving in your 401 ASAP
2007-03-07 17:38:42 · answer #6 · answered by nemraC 6 · 0⤊ 0⤋