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What to do with raise?

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  • Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018
    Earnest refinancing bonus

    Hi, folks!

    My wife was just recently brought up to the national average and that resulted in a $10,000 raise. Nothing earth-shattering, but we are very grateful. We already had a solid plan in place to pay down debt.  The unfortunate part of the plan had us foregoing the 457 to pay into debt. She is currently paying into the state pension ($6,400/year) and maxing her 403b. As some of you will recall, we have some higher expenses which mostly stemmed around the choice to have a nanny vs. daycare. So the $10,000 is a nice bump to the savings account, but I don’t really think it will bolster our elimination of student loan debt. It is nice to have a little extra cushioning for tighter months, but we were already used to things before we had it. Plus I got a 10% bump since my last big post.

     

    I played around with some investment delay calculators.  If we were to start putting the $10k into her 457 rather than delaying contributions to January 2023, then it could give us an extra $100,000-$105,000 in retirement if we achieve 5.5% returns.

     

    Backstory on our student loans… Private loan from a local bank guaranteed by her incredibly wealthy stepfather. It is basically a line of credit that balloons in Nov 2020. I will pay $100k to the loans and will then refinance the remaining $65,000.  From there, I should be able to completely eliminate them by January 2022.  I know you guys do not like the balloon thing but that is the only way they would do the personal loan at (then) prime rates. I planned to use the remainder of 2022 to save for a substantial down payment on what will hopefully be our forever home.

     

    What do you all suggest?

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #235282 Reply
    Avatar 02Sats 
    Participant
    Status: Physician
    Posts: 22
    Joined: 01/09/2016

    Can you refinance the student loans now?

     

    #235287 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    They’re currently at 5%. How much lower are rates out there?

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #235291 Reply
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 707
    Joined: 06/18/2018
    Splash Refinancing Bonus

    You’re an MBA, right?

    Maybe talk to “her incredibly wealthy stepfather”, he must know something about managing money, right?

    Certainly with your business training and his incredible wealth you can come up with a plan for what to do with an additional $10k pretax.

    #235292 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4452
    Joined: 01/08/2016

    i dont see what is different from your last post.

    you guys make ~315K.

    you should be aiming for ~60K/yr for retirement. 19K x2, 6K x2 + pension is close enough. seems like to start add another 5K to the 457.

    the rest goes towards the loans.

     

    so what is different?

    #235294 Reply
    Avatar treesrock 
    Participant
    Status: Physician
    Posts: 336
    Joined: 08/14/2017

    If Peds is correct on your salary I see no reason why you can’t be maxing out your governmental 457b each year.  The 10k can at least get you more than halfway there.

    #235296 Reply
    Avatar 8arclay 
    Participant
    Status: Physician
    Posts: 25
    Joined: 01/30/2019

    They’re currently at 5%. How much lower are rates out there?

    Click to expand…

    Ive refinanced my SL twice. First got me from 6.8-7.8% to 4.25%, second time as an attending I got a 5 year variable which is currently at 2.7%. RUn the numbers, might be worth another look

    #235302 Reply
    Liked by childay, The Wiz
    Avatar 02Sats 
    Participant
    Status: Physician
    Posts: 22
    Joined: 01/09/2016

    I would refinance at least to get rid of the balloon payment

    #235308 Reply
    Liked by The Wiz
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    You’re an MBA, right?

    Maybe talk to “her incredibly wealthy stepfather”, he must know something about managing money, right?

    Certainly with your business training and his incredible wealth you can come up with a plan for what to do with an additional $10k pretax.

    Click to expand…

    I have tried to read this a few times without a smartass tone, but I am failing to do so. I think I keep talking myself out of not funding her 457 yet, when I believe deep down that is the correct move I should be making.

     

    i dont see what is different from your last post.

    you guys make ~315K.

    you should be aiming for ~60K/yr for retirement. 19K x2, 6K x2 + pension is close enough. seems like to start add another 5K to the 457.

    the rest goes towards the loans.

     

    so what is different?

    Click to expand…

    The only thing that is different is the $10k raise. I guess I know the answer to my question but I wanted to reach out to the sound minds here to make sure I was making the right move by just sending that $10k to her 457 instead of savings.

     

    Currently we Max 401k & 403b and she contributes to her pension.  In addition to that we save approximately $45,000 a year to have for the balloon payment and float our e-fund as well.  Those things combined puts us at saving 27% of gross. If you add in the $10k contributions, we are saving 30% of our money for retirement while still able to afford a nanny at $3k/month and pay loans down at $2,510/month.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #235309 Reply
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1863
    Joined: 02/11/2019

    If you put it in the 457 it stays 10K.  If you put it towards the loans it is 10K minus taxes.

     

    “Never let your sense of morals prevent you from doing what is right.”

    #235310 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    If you put it in the 457 it stays 10K.  If you put it towards the loans it is 10K minus taxes.

     

    Click to expand…

    Correct. Which is another reason why I am leaning towards funding the 457.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #235313 Reply
    q-school q-school 
    Participant
    Status: Physician
    Posts: 2629
    Joined: 05/07/2017

    are you sure you are staying there?  is it governmental 457?

     

    #235323 Reply
    Avatar wideopenspaces 
    Participant
    Status: Physician
    Posts: 1139
    Joined: 01/12/2016

    I’d throw it in to the 457 since you already have a plan to get rid of the student loans over the next couple years.

    #235324 Reply
    Avatar The Wiz 
    Participant
    Status: Other Professional, Spouse
    Posts: 49
    Joined: 05/01/2018

    are you sure you are staying there?  is it governmental 457?

     

    Click to expand…

    I feel very confident that we will stay here. That’s why we decided to keep the pension rather than going with the Optional Retirement Plan.  This has essentially become the home base for everyone to visit since all of her family is scattered.  Her mom & step-dad house hop with the seasons. Her dad lives on the East Coast and her sister lives on the West Coast. My parents live in a small town that is close but not too close being 2.5 hours away.

     

    Yes, it is governmental.

    VP of Shoreside Operations for an inland marine company. Husband to an A/I Physician.

    #235325 Reply
    Avatar wa2106 
    Participant
    Status: Physician
    Posts: 186
    Joined: 11/29/2017

    I can’t read your post without seeing this:

    Image result for the wiz seinfeld

    Didn’t go back to previous posts but I think tax-advantaged sound like the way to go in your situation.  Vote for 457.  Also look at refinancing – interest rates dropped today if you didn’t hear.

    #235408 Reply

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