Where should I put my money?

[musicrocks0304]

Hello all,

I posted a thread about a week back pertaining to the repayment of my student loans. After giving it some thought, I'm wondering if I should use alternate investment vehicles to try and make a decent ROI, or if I should be investing in my future (401K). Or perhaps I could even go with a ROTH401K or a ROTH IRA. Here are a few details...

• My car payment is $368/month and it's at 0% interest.
• My student loans are at approx. 17,000 with an average interest rate of 6.1%
• I already have my "3 months backup" fund set in place.
• I'm 22 years old.
• My first priority is to pay off the student loans
• I currently have no investments, no money in a ROTH IRA, ROTH401K, or 401K.
• Assuming my fiance gets a job after school, together we should be making approx. 80K

Please let me know what you think! All responses are welcome!

[bjl584]

If your employer offers a retirement plan that has a match, then I would invest in that at least up to the match.

[thomsoad]

"•My first priority is to pay off the student loans"

You answered your own question my friend. If you are really serious then pump every dime you can muster into paying it off. If you are intense and can pay it off in a year then forgo the match. Longer then a year... get the match.

[AshleyB]

I would also suggest contributing to a 401K up to the company match before paying off the student loan. You could also open a RothIRA. You are so young that you could really make a big difference in your retirement planning.

Yes, work on paying off the student loans, but I wouldn't do it at the expense of starting to save for retirement.

[littleroc02us]

How does 1.5 million sound in 40 years @ 8% and that's just from your Roth IRA? If you get married and your wife does the same then double that figure. Pay off the student loans, how long will that take? I would pay them off asap. Investing in Roth's can wait. Your 22, so even if your 28 when you start investing in Roths then you will be 68 when you have 1.5 mill. Also, I would do a 401k now with your employer. Lastly, you may want to get rid of that car payment, what's the use of throwing money at a depreciating asset? Bust this debt out quickly and you'll have even more investment growth.

[musicrocks0304]

My company actually does not match my 401K.... Does that change things?

As for getting the 1.5 million, what are you calculations?

[littleroc02us]

My company actually does not match my 401K.... Does that change things?

As for getting the 1.5 million, what are you calculations?

Nope, it doesn't change a thing, just take care of the debt and then concentrate on the
Roth's when your done. The trick is to sacrifice and bust out the debts quickly, because if you take your time you will sink in quick sand.

As for the calculation, easy just max out a Roth IRA with market returns of 8% for 40 years and the exact amount is $1,507,527.81, it could be better or worse depending on the market.

[jpg7n16]

My company actually does not match my 401K.... Does that change things?

The no company match, coupled with your own admitted desire to be rid of the student loans, seems pretty clear that you should pay off the student loans before you begin investing. Unless your employer begins matching, or you change jobs to an employer who does, or your fiance's employer matches.

Once you guys are married, she should take the employer match (if available) - no more, no less. And then you both combine incomes to get out of the student loan debt.


Though, once your SLs are paid off, I stand behind my statement in the other thread that you should begin investing before paying extra on the 0% car loan. Your investment options could range from stocks if you want the risk and may earn 7-11%, to I-bonds (inflation protected bonds) - that could yield 2-4% guaranteed with no risk.

The fact that the car is a depreciating asset is irrelevant to the discussion about the loan on the car. Changes in the value of the asset (car) have no impact on the costs of the liability (loan).

[Drac]

Pay off the student loan as soon as you can, but at the same time I will recommend to also put some money on a Roth IRA. The reason for that is that the student loan interest you have is 6.1%, and the market is likely to provide a higher rate of return on the long term.