I’m trying to decide the best way to allocate my my leftover income. The options are to contribute to my employer 401k, or pay off my high interest student loans.
Some of my student loans are sitting at about a 13% fixed rate (yeah, I know).
My employer matches 100% of the first 6% up to $10,000.
My understanding is that I can reduce my taxable income by the amount of my contribution to the 401k. If that’s the case, is it correct then to assume I earn a return equal to the tax rate I would have otherwise paid on the income if I didn’t contribute it? In my case, that would be saving income from being taxed at 22% going off of 2019 tax brackets. So that would leave me with a return of 22% + 6% = 28%, which is larger than the 13% accruing on my loans.
Does this analysis make sense, or am I missing something?
Submitted May 27, 2019 at 10:16AM by Special_Agent_Gibbs http://bit.ly/2EAOaYd
