Start Roth IRA OR Payoff Student Loan.

[frito833]

Hello everyone. This is my first post and have been a long time visitor. Thanks to this website, I've learned about the importance of savings and LBYM. Here's my question. I will have 8k saved in my ING savings before April 15th. 3k is set aside for my emergency fund to cover 3 months of living expenses.

I also have a student loan balance at $3,300 w/ 3.75% interest which is my only debt. I don't know if I should just pay off the student loan and be debt free, max the ROTH for 2008, or just continue saving money into my ING savings account which pays 2.5%.

My job is related to real estate and layoffs are happening every month. My gut feeling is to fully fund the ROTH IRA because stocks are on sale. If I do get laid off, I'm single and can tolerate risk by cutting my expenses to nothing by moving in with the parents while looking for another job.


Any advice is appreciated.

[maat55]

I would payoff the SL. Not fully funding the Roth for this year is not the end of the world for you. Being debtfree will feel realy good and you can work really hard to fund the roth before April 15th.

[frito833]

Ok. I just did an electronic payment to my SL for the full amount. I will officially be debt free this Wednesday.

[maat55]

Ok. I just did an electronic payment to my SL for the full amount. I will officially be debt free this Wednesday.

Excellent. Now that you are debtfree, try to stay that way as much as possible. Good luck to ya.

[kork13]

Also keep in mind that you can still contribute to your roth up until 15 April. Is that 3k EF a part of the 8k you will have saved, or separate? In either case, I would take at least some of that remaining 8k (congrats on finishing up the SL, btw) and put it into your roth as part of your 2008 contribution. Even if it's only $1000-$2000, it's still something, and you'll have all of 2009 and into 2010 to save together the money to contribute for 2009. Not critical, but just wanted to point it out as an option.

[littletoobigformybritches]

LOL, I think you already knew what you wanted to do...it only took one poster to nudge you in that direction and you went flying! Congrats to you on being debt free...I envy you!

[jIM_Ohio]

I would have contributed 5k to Roth for 2008 and another 5k for 2009, then paid off a 3.75% debt later.

[poundwise]

We weren't talking about large sums here anyway. I would have paid the SL and put the rest in the Roth.

Now, I'd get busy and see what else you can contribute before April 15th.

[LivingAlmostLarge]

I'd have maxed out the Roth IRA for 2008 and 2009 then paid off the loan later as well.

[frito833]

I checked my budget and will have around 4k by April 1st to put into the IRA if I just pay rent/food/util/gas. I will eBay some junk lying around or do some odd jobs for the remaining 1k. Thanks for all the encouragement and advice.