Pay more to student loan or 401k

[Green456]

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@Anonymous wrote:
Life isn't perfect. If your student loans are through the federal government I wouldn't pay anything extra on them at any time.

I would increase both savings and your 401k.

You have to think about it if everything went to hell tomorrow. And if everything went to hell tomorrow you can contact the federal government and have a variety of payment options on your student loans.

But if you put a lot of money into your student loans now and all hell breaks loose tomorrow that money won't be in your retirement and it won't be in the savings to help you.

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Another way to think about it. If hell breaks tomorrow, you will loose your 401k but your student debt at 7% interest will be still there.

[CreditInspired]

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@Green456 wrote:

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@Anonymous wrote:
Life isn't perfect. If your student loans are through the federal government I wouldn't pay anything extra on them at any time.

I would increase both savings and your 401k.

You have to think about it if everything went to hell tomorrow. And if everything went to hell tomorrow you can contact the federal government and have a variety of payment options on your student loans.

But if you put a lot of money into your student loans now and all hell breaks loose tomorrow that money won't be in your retirement and it won't be in the savings to help you.

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Another way to think about it. If hell breaks tomorrow, you will loose your 401k but your student debt at 7% interest will be still there.

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Now isn't that the pitiful truth! 

[Anonymous]

Student loan is actually 4%

If I were to put more to retirenment and savings and keep paying minimum on the SL, when I retire in 7 years would you pay off the loan with a lump sum from the 401K or keep making payments on the SL? 

[iced]

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@Green456 wrote:

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@Anonymous wrote:
Life isn't perfect. If your student loans are through the federal government I wouldn't pay anything extra on them at any time.

I would increase both savings and your 401k.

You have to think about it if everything went to hell tomorrow. And if everything went to hell tomorrow you can contact the federal government and have a variety of payment options on your student loans.

But if you put a lot of money into your student loans now and all hell breaks loose tomorrow that money won't be in your retirement and it won't be in the savings to help you.

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Another way to think about it. If hell breaks tomorrow, you will loose your 401k but your student debt at 7% interest will be still there.

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If there was enough hell to entirely wipe out equities/retirement savings (including 401k), I'll wager it was also sufficient to wipe out the systems holding student loan debt.

The key, already mentioned, is to keep enough in guaranteed positions to weather a market downturn, then you can let the riskier assets ride the storm and come out ahead. People only "lose" their 401k savings when they panic and liquidate their positions that dropped. There has never been a downturn that did not result in positions returning to and indeed exceeding where they once were after a few years.

[iced]

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@Anonymous wrote:

Student loan is actually 4%

If I were to put more to retirenment and savings and keep paying minimum on the SL, when I retire in 7 years would you pay off the loan with a lump sum from the 401K or keep making payments on the SL? 

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Depends on your 401k. If you're getting >7% YoY returns on your 401k, keep making payments. If you're not, pay off the SL.

[Anonymous]

When I say hell breaks loose I'm speaking about losing a job or a business shutting down. Things that cause your income to no longer be present.
401k and savings are rarely affected by that.

[Green456]

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@Anonymous wrote:
When I say hell breaks loose I'm speaking about losing a job or a business shutting down. Things that cause your income to no longer be present.
401k and savings are rarely affected by that.

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That’s what 6-12 months emergency found is for. And I agree this should be the priority but your 401k should never be cashed before retirement. 

[Anonymous]

I agree with not Cashing Out 401K until retirement but sometimes things happen. And many times you can do a loan against 401k if necessary.