Ask Terry Questions Where to invest, what to pay off first

Where to invest, what to pay off first

By Terry Savage on May 19, 2019 | Financial Planning / Retirement

Hi Terry! Thanks for taking my email. I’m 35 yo. My debt consists of a mortgage of $229k at 4.65% interest (I put about $60k down on the home purchase last year) and a Federal Student loan of $59k at an average interest rate of 4.1% which can change. I am in a student loan forgiveness program for that loan which is eligible to be forgiven after 25 years and I am about 8 years into payments on it. I pay about $230 per mo on it but can also fluctuate depending on my salary for that year. As far as assets I have about $25k in a 403b which I have to roll over into a different plan because I am no longer with the employer that 403b was associated with. I have about $80k in cash savings. I am now a 1099 contract worker and am considering creating an S-Corp. My 2 questions are 1.) should I invest a lot of my savings in my mortgage, my student loan, or my retirement? and 2.) what kind of retirement plan should I consider rolling over into? Thanks! -T

Terry Says

Here’s my tough advice.  Just PAY DOWN the student loan completely!  Get it off the books!  I’m amazed that you qualified for a mortgage with that debt.  There is absolutely no reason to stretch out those payments over 25 years, and no reason to pay all that interest.

Then roll over your 403b plan to Fidelity or Vanguard and invest conservatively.  While you’re at it, open a Roth IRA — separately from the rollover.  And to keep from being confused do one at Vanguard and the other at Fidelity.   Contribute  to that Roth every year, no matter what happens.

Finally, get a good CPA to advise you on the best tax status for your business, re your expected income, your deductions etc.   It sounds like you’re trying to be way too clever at this point.

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