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Would maxing out retirement accounts lower income based repayment?

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  • Would maxing out retirement accounts lower income based repayment?

    I've been moonlighting quite a bit this year.  My IBR payments are sure to increase by a substantial amount.  Would maxing out my pretaxed retirement accounts lower my monthly student loan payments, or would they also factor what I contributed to my retirement accounts into my calculated monthly payments?

     

    Thanks

  • #2
    Traditional contributions to retirement accounts lower your AGI, which lowers your income based payments. You are exactly correct

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    • #3
      Yes, but this raises another question. If your income is low enough to require being in income-driven repayments (why IBR, not REPAYE or PAYE btw?), then you wouldn't benefit as much from tax-deferred retirement contributions at your bracket as you would from post-tax Roth contributions.

      On the other hand, if your income is high enough to pay the loans just fine and you're not doing PSLF, then you need to quit letting so much interest accrue and refinance the loan to the lowest rate and term you can afford. 6.8% is really lousy assuming you're actually on the hook for it.

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      • #4
        Thank you

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        • #5
          You could send loan servicer pay stub from primary employer, thus effectively hiding your moonlighting income, (would discuss this with CPA though) as it may not be kosher

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          • #6




            You could send loan servicer pay stub from primary employer, thus effectively hiding your moonlighting income, (would discuss this with CPA though) as it may not be kosher
            Click to expand...


            uh, that would definitely not be kosher and sounds like outright fraud.

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