"Todd H." <t[at]toddh.net> wrote
- quote -

Only up to the matching. After that, the 401(k)'s offerings
and fees may make it disadvantageous compared to a regular
taxable account.

See www.joetaxpayer.com for more discussion of this.

"a_riot" <grapau[at]gmail.com> writes:

- quote -


You're wise to reconsider your strategy. In your situation, I'd
absolutely drain that ING account down and get rid of those student
loans. You're getting no tax benefit, and you're going 2-3.5%
backwards on that money right now.

You have more than enough in the relatively low yielding ING account
to do this.

- quote -

Good. I'd keep those. For me, I'd increase your contribution rate
unless you're actively saving liquid funds for a future business
venture, purchasing investment property, or have some other reason to
be more liquid. the tax benefit of 401k contributions is such that if
retirement savings is important to you, you really should be
maximizing the benefits there.

Then again, you have your aging car to worry about, perhaps start
svaing for that.

- quote -

Cool.

- quote -

Excellent. You should qualify for great incentive financing on a new
car when you need it (or do the fiscally prudent thing and buy a
quality late model used car). Buying cars with cash is nice though,
but if you can finance 10k of the vehicle for 2% annually and pay it
off in 2 or 3 years, why not use their money if you can do better in
the market?

- quote -

Depends on how much said physical asset is appreciating relative your
other options. If it's not making more than 5-8% with little risk you
might consider dumping it and looking into the market.

- quote -

You got it!



--
Todd H.
http://www.toddh.net/

a_riot wrote:
- quote -

I went through this situation after graduating in 1997 from college
with ~60k student loan debt. Others I went to school with were in a
similar situation.

I aggressively paid off all the loans. I did not consolidate and paid
an extra $25 on each of my 4 student loans (while also sending 10% to
401k). Within a year the principal had shrunk significantly, 3 years
later the first was paid off, 7 years later I was student loan free. I
bought my first house 3 years after graduating and upgraded to a bigger
house 3 years after that. Several of my fraterinity brothers have yet
to buy their first house... so it depends on what your priorities are.

So my answer would be- pay down the debt. How quickly you pay it down
would be up to you... whether you send extra money per month or use the
cash to pay it all off- decide what is best for you.

I would make sure you are saving 10% of income for retirement (in 401k/
IRA accounts). I would then work to eliminate debt. Generally
speaking I am against consolidation (usually combines all the debt to
point it cannot be seperated and extends repayment period from 10 to 20
or 30 years).


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

"John A. Weeks III" <john[at]johnweeks.com> writes:

- quote -

Me too. Once you've paid off the student loan, your regular monthly
expenses will be that much lower, so you won't need such a large
emergency fund. Rather than just adding the monthly loan payment
money back into your regular budget, you might start investing that
amount instead.

-Sandra

In article <1167364837.264095.224890[at]79g2000cws.googlegroups.com> ,
"a_riot" <grapau[at]gmail.com> wrote:

- quote -

If I woke up in your situation, that is what I would do. Pay off
the student loans and any consumer debt. Use the ING money. Don't
touch the 401K money. Then save money to buy a car with cash so
you can avoid getting back into the debt trap.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

Maybe someone can give me a hand with some financial planning
decisions. I work in the US but went to school in Canada.

The scenario:

Have ~20k US in a ING type account making 5%.

Have about 14k CDN in student loans:

1) 6700 w/ interest being prime (6%) + 2.5% = 8.5%

2) 5300 w/ interest being prime (6%) + 2.5% = 8.5%

3) 2400 w/ interest being prime (6%) + 1% = 7.0%

Right now I am only paying $231.91 CDN a month to these loans and can't
claim the student loan interest deduction since I am not earning
anything in Canada to deduct it against.

Have ~40k in 401k accounts.

Have a physical asset worth ~10k that I could liquidate but would
rather not as it is appreciating quite well.

Make ~70k a year, ~4.2k net after 6% matching 401k, taxes etc, rent an
apt at ~1000 a month + util and probably have $500-$1000 a month to
save, depending on car expenses, entertainment etc.

Own an old car that runs well and is paid for but requires maintenance.

No dependents.

No CC debt.

Credit score 750


My question is what to do with the money in the ING type account and if
I should liquidate my physical asset to pay off debt. I could use the
savings to pay off my student loan debt, but then have very little left
over for investing/emergencies. I could try and invest the money in the
stock market and try to make more than what I am paying in interest on
the loans, or leave it as is making 5%. As I see it, I am losing money
every day because the interest on the loans is more than I make with
the interest in the savings account so maybe I would be better paying
off the loans.

The other thing is that the loans are in CDN dollars so how the US-CDN
exchange rate changes can change things as well. If I could have seen
that the US dollar would drop 25% against the CDN dollar since late
2002 I would have paid as much off as possible back then but foresight
is 20/200. Is there a better way to allocate my resources/debt? I
would like to have something for emergencies, but would also like to
see my money earn better than 5% and of course getting my loans paid
off in cash thereby saving future interest would be good as well as
there is no penalty for early payment. Any financial experts have any
advice?
Thanks very much!