I apologize for the long novel ahead of you
Ok, so I'm not brand new to investing by any means, and I know the standard advice is : max out your 401k /Ira to your match then put as much as you can afford into a Roth, and pay your minimum student loans blah blah blah
Here is my situation. Between my wife and I, we have ~120k in student loans costing us 20,100 a year. Our rent is 20, 400 a year and daycare also costs 19,200 a year. Suffice to say that we're not in a position where we can just throw a extra grand at student loans a month. We have $0 in credit card debt, we use them as a savings account basically (we spend to our budget with cash rewards cards that maximize the cash back based on gas, groceries etc.) and won't spend a dollar that we don't have in checking on our credit cards.
OK so now for my question. Would it not make sense to leverage savings in my Roth/Ira to pay off the student loans? We're 32 and 34 years old. The reason I ask is technically your retirement does not pay interest, yes it compounds but the economy is about to tank so the values will drop soon anyway. Once the loans are gone we could contribute more back into a weaker market and basically be back to where we are now in 4 to 5 years.
Student loans get $15 a day in interest, way more than we would consistently earn from our savings accounts. I guess I'm just trying to figure out both sides here. All the advice assumes a 6 percent return which does not factor in that when the price of funds goes up, you can buy less with the same contribution. Also, we'd still be contributing to the funds just leveraging the current balance to pay off the student loans. I figure that the penalties and taxes would cost less than the interest paid over the next 20 years or so. Can someone please explain to me if my thinking is just stupid or if I am seeing this correctly?
Submitted November 15, 2018 at 10:10AM by tuukkatiimme40 https://ift.tt/2FjEbcC
