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Student Loan/Retirement Advice

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  • Student Loan/Retirement Advice

    I need a little advice since I have been feeling a overwhelmed coming up with a reasonable plan on how to save for retirement payoff my student loans, and my husband's student loans. We're definitely financial novices and are having a tough time deciding on a reasonable plan of action.

    Background: We live in Michigan. I'm a geriatrician making $160k yearly (started attending job 3 years ago). Husband is hematologist/oncologist making $325k per year (with guaranteed salary bonus $25k/yr at the end of his 1st and 2nd year, plus other bonuses possible).

    My student loans are currently - just refinanced ~$297k for 4.25% fixed for 15 years
    Husbands loans: he has a small undergrad loan that's about $5300, a private loan that is $55k, and his federal loans are about $353k.
    We can easily pay off the small undergrad loan right now. The private loan and federal loan obviously need to be refinanced.
    Neither of us qualify for PSLF

    With our current monthly income after all expenses are paid (including groceries) we can probably pay off all of our loans in 5 years. However, that means that we likely won't put any money into 403bs,401ks, or any retirement accounts.

    So my question is... Is it best to just go at the loans as hard as we can for 5 years, pay them all off, and after that start maximizing all out of retirement accounts, investing, 529s, backdoor IRAs, etc? Or should we maximize at least his 401k and my 403b every year and then put the rest into student loans (which may extend in the repayment period and increase how much interest we pay)? Or is it best to do some combination in between??? We're both hoping to repay these loans in the least amount of time possible, but I'm also worried about losing out on the first few years of retirement contributions.

    Any advice or opinions would be much appreciated!

  • #2
    That's the most common question is how to best manage your cash flow with all of the competing goals you have.

    It really comes down to figuring out the right balance for you and your husband. Long-term, the financially best option, would be that you'd expect to earn more by investing the extra money above the loan payments you have to make, but in any given year that might not be the case. Outside of that, there is the emotional part of just being done with your loans. It doesn't have to be all or nothing and I find most people like taking a balanced approach of paying loans down faster than they need to, saving for college and retirement.

    Since physicians have a delayed start to saving, I'd recommend starting with making sure you are saving enough for retirement first and then working backwards. It helps to have plan, or at least general idea, of when you'd like to be financially independent and then you can back into what you need to save to get there. If that required retirement saving feels like too much today, it's all about understanding the tradeoffs and being intentional about what works for your situation.

    With the loans, it sounds like you'll definitely pay them back faster than 15 years, so it'd likely make sense to look at refinancing to a 7 or 10 year plan to get a better interest rate. Interest rates in general are so low right now though that the added flexibility from a lower required monthly payment from a longer refinancing term may help you feel better from a month-to-month cash flow perspective.

    Here are a couple other thoughts:

    1) you both want to at least save enough in the retirement accounts to get the match
    2) by saving more toward retirement, you have the dual benefit, of getting the tax deduction and saving for retirement, so it's a missed opportunity to not both max out your employer retirement plans.
    3) in MI, you can contribute $10k to a 529 plan to get the max state tax deduction. It's a smaller tax benefit, but again, I think making progress in each area of the goals you have is helpful.
    4) the federal loans for your husband have 0% interest payments until 12/31, so that can help with a couple extra months of higher cash flow.
    5) the backdoor Roth would be lower on the priority list and i'd focus on tax deductions right now

    At the end of the day though, I wouldn't worry about getting everything perfect, and just try to find the right balance that works for you.
    Andrew Musbach, CFP® | Co-Founder & Financial Advisor at MD Wealth Management, LLC | Podcast Host - The Physician's Guide to Financial Wellness


    • #3
      Max out all of your available retirement counts and then put all the rest towards your loans.


      • #4
        Originally posted by CordMcNally View Post
        Max out all of your available retirement counts and then put all the rest towards your loans.