How AI Legalese Decoder Can Help Simplify Student Loan Debt, Saving for a New Car, and Planning for Retirement Simultaneously
- May 14, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Considerations for Contributing to Retirement Accounts and Saving for a New Car
Should I start contributing to an outside retirement account (I have a 403b through my full-time job and a Roth IRA with 3.4k) once I pay off my student loan debt 19.3k and save about 10k for a down payment on a new car? Or is it possible to do all 3 at the same time?
It’s a common dilemma for many individuals – balancing debt repayment, saving for future goals, and contributing to retirement accounts. The AI Legalese Decoder can help you navigate through complex financial jargon and provide insights on the best course of action based on your specific situation.
I cut down on my monthly savings to try and pay off my loans faster. I have a fully funded emergency fund that is 6 months of my expenses. However, I’ve heard that you should contribute to retirement once you have your debts paid off. I’m just wondering if it would be worth contributing at least 50 dollars every two weeks into my Roth IRA or wait until I can put enough money in to make a real impact.
With the AI Legalese Decoder, you can input your financial details and receive personalized recommendations on how to optimize your contributions to retirement accounts while still meeting your other financial goals. It can help you determine the best strategy for allocating your resources in a way that maximizes your long-term financial success.
For context: I opened the Roth IRA when I still lived with my mom, but I haven’t really contributed much to it since I moved out since I’m trying to tackle my student loans and get a fully fleshed-out emergency fund. I’m 25 and have been an RN for 2 years and just feel like I’m doing something wrong since I always hear people talking about contributing to savings. I’m worried that I’m falling behind.
The AI Legalese Decoder can provide you with a comprehensive analysis of your financial situation, highlighting areas where you may be falling behind and offering actionable steps to help you catch up. By utilizing this tool, you can gain a clearer understanding of your current financial standing and make informed decisions on how to prioritize your savings and investments.
In conclusion, with the help of the AI Legalese Decoder, you can confidently navigate the complexities of financial planning, weigh the pros and cons of contributing to retirement accounts while managing debts and saving for future expenses. Don’t let financial uncertainty hold you back – use this tool to take control of your financial future and make informed decisions that align with your long-term goals.
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I recommend following the prime directive: [https://imgur.com/lSoUQr2](https://imgur.com/lSoUQr2)
If your 403b has an employer match, contribute to it up to the match. Beyond that, it will depend on the interest rate of the debt. If it’s low, it might be worth doing a mix of paying it off and contributing to Roth/403b. If it’s high, probably worth to just pay off as quickly as possible without forgoing the employer match.
As an additional piece of advice, I’d recommend talking to other hospitals hiring nurses, I have a feeling you could be making more, but I’m also not super familiar with the field. And as far as falling behind, I’d say you’re doing pretty great overall. You have enough money to comfortably cover expenses and with a combined 163k (assuming you combine finances) you should definitely be able to buy a house/retire at some point.
Here’s maybe a different way to help you think about it. Rather than thinking about paying down debt or investing, what you are really trying to do is grow your net worth. Net worth is all your assets (investments) minus all your liabilities (debt). So making a contribution to your retirement fund increases your net worth by exactly the same amount as lowering your debt. So you aren’t really falling behind if you choose to pay down debt rather than invest.
The reason we tend to recommend paying down debt is the interest rate on the debt is often costing you more money than you could make by saving or investing. If you have the choice of putting $1000 in a savings account earning 5% interest or paying down debt that has a 7% interest rate, you can compare the two rates and say – since 7% is greater than 5%, you’re better off paying down the debt.
The tricky part is that when we invest in retirement we don’t know for certain what our rate of return will be. Every year the rate can go up or down based on the performance of the market. As a rule of thumb, a 7% return is a good long term rate of return to expect out of investments in the market. So that’s a good basis for comparing the interest rate on your debt to the interest rate on investment.
The final piece is risk tolerance. When you are in debt you are taking on the risk that if something happens (loose your job, get into an accident, etc.) and you can’t make the payment, your house could get foreclosed on, your car gets repossessed – bad stuff. You don’t have that same type of risk with investing. So there’s a part of that decision that’s unique to you and your tolerance for risk. There are some here who will say as long as the interest rate on debt is below 7%, don’t pay it off and invest instead. Personally, I’m more risk averse. If the debt is above 4%, I’m going to pay it off as soon as I can. I sleep better knowing that no matter what happens tomorrow, no one is repossessing my house or taking my cars – and I’ve sacrificed some potential investment returns for that peace of mind.
The final caveat here is employer match. If your employer provides a match to contributions to retirement – you should maximize that match as soon as you can. That is essentially free money going directly to building your net worth. Always take free money!
You may find these links helpful:
– [Student Loans](/r/personalfinance/wiki/studentloans)
– [Student Debt Relief Megathread](/r/personalfinance/comments/wxme1a/student_debt_relief_megathread/)
– [“How to handle $”](/r/personalfinance/wiki/commontopics)
– [Debt](/r/personalfinance/wiki/debt)
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