Why is it either-or? Do both. Contribute to retirement and pay more than the maximum on your loans if they are variable rate loans and the rate may go up.

This part is a no-brainer: of course you should max out tax-efficient investments before paying down your loans.

After that is maxed out, it is a personal choice whether you pay down loans or invest. Personally, I would pay down loans at 3.5 percent interest rather than invest in the stock market, but I would invest in the stock market rather than pay down loans at 2 percent fixed. It is a question of your risk aversion and view of the market (which is not cheap by any measure at the moment).

Your student loans are free money.

Max out your 401ks - it's only 17,500 each anyway. The remaining funds can go towards loans. Although I'd still advocate for stocks over your cheap ass loans.

You can only contribute $17200 each anyway. It's a drop in the bucket for you. Max it out each year even if it slows your debt repayment ever so slightly.

That "high" price you pay for a stock today will be a bargain of a price for that stock in 30 years..

Anonymous wrote:

Anonymous wrote:How long will it take you to pay off the loans? I would probably start contributing 5% each if it's going to take more than two yeas to pay off the student loans.

About 100K of the loans are fixed at 2% interest. We weren't planning on paying those off any faster than the scheduled payment plan, so maybe ten years or so for those? The other 90K we planned on paying off this year.

Does it make sense to do that - hold on to that 100K of debt and start contributing to 401K and considering other investments?

Yes, at 2% it makes sense. (Heck, if you haven't refinanced into a longer term, I probably would. I would drag out paying back a loan at 2% for as long as possible).

Anonymous wrote:OP - your answer is easy if you look at it this way.

Pay off student loans now, and become a Walmart greeter when you're 70 because you have nothing saved for retirement ...or....slow roll the loan pay-off, curb your spending, contribute to 401K and retire comfortably at 67.

Ha. Thanks.

The question is really do we pay the loans down now and not do our 401K, and then start 401K in 2 or 3 years with very little debt? We should be able to pay down almost 100K this year in our loans. Are you saying save that 100K for retirement (invest it one way or another) and pay the minimums on the student loans? Does it change your advice if 100K of those loans are variable rate that could go up quite a bit in interest rate?

OP - your answer is easy if you look at it this way.

Pay off student loans now, and become a Walmart greeter when you're 70 because you have nothing saved for retirement ...or....slow roll the loan pay-off, curb your spending, contribute to 401K and retire comfortably at 67.

Anonymous wrote:401 matching is sometimes worth less because the vesting takes years

All the more reason to start contributing now

401 matching is sometimes worth less because the vesting takes years

Contribute. You are in a high tax bracket. Even if you don't get the employer max, because the contributions to a 401K are pre-tax, you have immediately earned whatever you would have paid in taxes on that money. All compounding will be on top of what amount, so you'll have compounding on the money you would have paid in taxes. At what I am guessing your income is, you should both be contributing the maximum you can each year to lower your taxes. You're already late to start saving for retirement but if you contribute the maximum each year you should be fine.

And, don't play it too "safe" on investments. There is nothing safe about having money in a money market account or something else that has almost no chance to earn much. I'm assuming you have 20 to 30 years before you need that retirement money. Put it in something that will grow. I got a late start on retirement also and I did 75 percent stocks, 25 percent bonds. I weathered 2007/2008 well. My net worth went down. I kept contributing, The market recovered and it went back up plus I had all the stocks I had bought at bargain basement prices while the market was low. Don't forget that stock funds generally pay dividends on top of any increase in value and that generates additional compounding and investment.

Contribute. If you have a high HHI, you're going to need more money in retirement than your max contribution so you shouldn't waste any opportunity to make pre-tax contributions.

Also, I assume your plan isn't to contribute the max in your first payment. You're going to spread it out over each paycheck, right? So even if the market goes down for part of the year, that means some of your payments will come at an excellent time: when the market is at a low.

That and I think you're wrong about the market correction and I think we are both guessing almost at random.

Finally, if you really are CERTAIN the market will collapse, still invest the money and just put it in very safe assets. Then at least you'll get it into your account and reduce your tax payment.

YES!!!! when the market is down that means that everything is on sale. don't know about you but I only buy when things go on sale.

buy low, sell high - right?

also, having no money in retirement is a scary proposition. I would fund my retirement before anything else. at 35 you are not THAT young. I started saving when I was 25.

Anonymous wrote:How long will it take you to pay off the loans? I would probably start contributing 5% each if it's going to take more than two yeas to pay off the student loans.

About 100K of the loans are fixed at 2% interest. We weren't planning on paying those off any faster than the scheduled payment plan, so maybe ten years or so for those? The other 90K we planned on paying off this year.

Does it make sense to do that - hold on to that 100K of debt and start contributing to 401K and considering other investments?

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We have nothing saved for retirement and are 35. We have a high HHI but have been using it to pay down enormous student loans. We've made some good progress and are now thinking we should start putting some money towards retirement. Not sure if that makes sense though given how high the market is right now. We both think that there may be a significant drop this year. Should we just wait another year to start? Any advice appreciated. Thanks

contribute to the extent you get a employer match. Pay off student loans very aggressively. Once loans are paid off, max out your 401K..

Contribute evenly over the 26 pay periods. This way if the market corrects you are benefiting from the lower prices that will follow. As everyone else suggests, you have a long time to invest and market ups and downs shouldn't matter as long as you are investing regularly.

Neither one of us has an employer match. We still owe 190K in student loans (started with about 430,000). Our highest interest rate is 3.5%, which is why we wondered if we should start contributing to our 401Ks. Should we just focus on paying the loans down until we have a lower balance?

Wow. With those student loans, what the hell do you do for a living?

We're both lawyers who paid 100% for schools in high COL cities.