Pay off minimal debt vs CD/Savings vs other?

[mresera]

I am a relative beginner at money management but am constantly trying to learn more to save more.

I have two main sources of debt: mortgage and student loans. I have essentially paid off my second mortgage and have the other 80% on my main mortgage with a rate of 5.5%. I also have student loans, one at 5.0% and one in the 3's (I consolidated when interest rates were very low in the late 90's, early 2000's.) My interest on the student loans is not tax deductible. I have no CC debt.

In terms of savings, I maximize my 403(b) each year, and have started investing some money into a growth fund at Schwab. I also have an emergency fund put away.

I don't have any obvious current expenses, but in several years may have needs like new car, family planning, wedding, new home, etc.

I still have a little extra money each month and am wondering what is best. Paying off student loans? If not paying off loans, how can I save with some access to the money. I have a savings account with 3.4% interest. I could put money in a short term CD, but rates are low. Will they be expected to stay low? 6 month CDs give better rates than 1 year long ones now. Which is better? Do I keep the money in a savings account that currently has a slightly higher rate than a CD? Any other better ideas? Thanks for any advice!

[sweeps]

In most cases, I'm an advocate of spreading the wealth around.

1. Put some money in a 401k/403b if you have one.
2. Put some money in a Roth IRA if you can.
3. Put some money in savings and/or CDs for short- and medium-term goals.
4. Put some money in your emergency fund if it's not "full".
5. Put some money toward paying off low-interest loans, student loans and mortgage.

This way you hedge your bets on all fronts. And you feel like you're making progress on everything.

CD vs. savings account? Impossible to say. My feeling is that rates will stay low for 12-18 months and then we'll be seeing some rampant inflation and the Fed will have to aggressively raise rates. But that's just my personal opinion.

[Lindahfx]

I would focus on paying off your student loans... first the 5% one, then the other.

If the savings account has a higher interest rate than CDs.... stick with the savings account.

[mresera]

Thanks for the input. I will work a little harder on the student loans. I think I have been hesitant paying them in hopes that someday I get a tax break or somehow I get loan forgiveness from a job or the government. I guess that is me just dreaming.

I guess my CD question vs savings is also based on what is predicted to happen to bank interest rates. If they are predicted to go down, locking in a CD may not be bad, but if they are predicted to go up or be stable, I would rather not lock a CD. Any ideas? Where would I find this info?

[dardhel]

Decent money market accounts closely mirror cd returns. So if you are afraid to lock in a cd rate you can go with a mm and if rates go up so do your returns. However, the opposite is true aswell.

Another good strategy would be to ladder some cd's. Ie, split your extra money into for instance 6 equal amount and once a month put that split amount into a 6 month cd. That way you have the benefits of cds but you continue to take advantage of changing rates...