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Random health and exercise thoughts - Page 3562

post #53416 of 57256
Sounds like her putting money in the 403b (????) is a better deal... much higher return
post #53417 of 57256
403b is like the educational institution equivalent of a 401k. Or at least I think.
post #53418 of 57256
I use excel to make grocery lists
post #53419 of 57256
Quote:
Originally Posted by Cool The Kid View Post

Sounds like her putting money in the 403b (????) is a better deal... much higher return

Depends on if he can put it towards principal repayment.
post #53420 of 57256
Quote:
Originally Posted by TeeKay View Post

Okay finance brahs...I could use some advice if someone would be so kind.

I owe 26k in undergrad debt at an interest rate of 6.50%
Next year my fiancee will be starting a job with access to a 403b and a starting salary of 51k. If she contributes nothing, the university automatically puts in 5% of her gross income. If she contributes 3% of her pay, the university puts in additional 5% for a total of 10%

My question is does it make more sense to contribute that 3% of her income 51k salary to her 403b, or would that money be better spent helping pay off my loans?


Do tax shields exist on personal debt or is it only corporate debt? I don't actually know what a 403b is, but I assume it's just some investment vehicle.

If you pay down your debt you get a return of 6.5% times 1 minus the tax rate assuming there is a tax shield. If she puts in 3% of her income and gets 5% you get a return of 66.7% multiplied by the return of 403b. You should put the money in the 403b.
post #53421 of 57256
Quote:
Originally Posted by fuji View Post

Do tax shields exist on personal debt or is it only corporate debt? I don't actually know what a 403b is, but I assume it's just some investment vehicle.

If you pay down your debt you get a return of 6.5% times 1 minus the tax rate assuming there is a tax shield. If she puts in 3% of her income and gets 5% you get a return of 66.7% multiplied by the return of 403b. You should put the money in the 403b.

No tax shields on student loans unfortunately. Also you should've had him model it out so he learns.
post #53422 of 57256
Quote:
Originally Posted by Khayembii Communique View Post

Also you should've had him model it out so he learns.

Okay from now on instead of just giving out medical advice I'm going to recommend people go through 8 years of school instead so people learn.
post #53423 of 57256
Quote:
Originally Posted by TeeKay View Post

Okay from now on instead of just giving out medical advice I'm going to recommend people go through 8 years of school instead so people learn.

Takes 20 mins to put an am table together brah
post #53424 of 57256
20 mins and an idea of what the fuck you're doing
post #53425 of 57256
Quote:
Originally Posted by TeeKay View Post

20 mins and an idea of what the fuck you're doing

http://www.vertex42.com/ExcelTemplates/excel-amortization-spreadsheet.html

Anyways, you really should model it out still. Just so you know what effect extra payments will have on your overall debt burden. LMK if you want help.
post #53426 of 57256
What do you need to model it for? Regardless of the level of amortization of his loan he will always only ever have 6.5% returns by paying it down and 66.7*returns on the 403b returns by investing. Regardless of the size of the loan or the size of the contribution the contribution always has higher returns.

Obviously there is some benefit to looking at different amortization rates and how that effects the total amount he pays back, but even if he paid it all back today the 403b has higher returns.
post #53427 of 57256
Quote:
Originally Posted by fuji View Post

What do you need to model it for? Regardless of the level of amortization of his loan he will always only ever have 6.5% returns by paying it down and 66.7*returns on the 403b returns by investing. Regardless of the size of the loan or the size of the contribution the contribution always has higher returns.

Obviously there is some benefit to looking at different amortization rates and how that effects the total amount he pays back, but even if he paid it all back today the 403b has higher returns.

I agree the 403b is a better option but he would save more than 6.5% if he can pay down on the principle because of compounding.
post #53428 of 57256
Quote:
Originally Posted by TeeKay View Post

20 mins and an idea of what the fuck you're doing

Put the money in the 403b and send principle only checks to your student loan provider.
post #53429 of 57256
Quote:
Originally Posted by tesseract View Post

Put the money in the 403b and send principle only checks to your student loan provider.

Good idea if he wants to go past due on scheduled interest payments.
post #53430 of 57256
Quote:
Originally Posted by Khayembii Communique View Post

I agree the 403b is a better option but he would save more than 6.5% if he can pay down on the principle because of compounding.

How? The yearly return will always be 6.5%. If he pays down a grand this year he saves $65 interest. Next year he will save 65*1.065 because he paid down that grand. It's just 6.5% returns every year. The actual rate of return doesn't go up because the amount it's compounding on goes up.
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