Is It Wise to Withdraw from Your 401(k) to Pay Off Student Loans Early in Your Career?
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- čas přidán 8. 09. 2024
- If you are early in your career, you may have both a 401(k) and student loans. Does it ever make sense to take money out of your 401(k) to pay off those student loans?
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No. It’s not worth it considering that you’d be taxed, owe a 10% penalty, and would lose out on compounding. Invest up to the company match and then throw everything else you can if the interest is greater than six percent or pay the minimum payment if it’s less than that.
you won't if it's a loan. then you pay yourself back with interest
@@poke_champA 401(k) loan is not a good idea. You lose out on the compounding, and if you don’t pay it back on time, you’ll pay taxes and a 10% penalty. Plus, if you lose your job, that money will be due immediately to avoid taxes and a penalty.
I'm guessing "Stebe Jerbs" is a South Park reference to the episode where time travellers coming back, and the locals panic and claim that they're going to be "takin' 'er jerbs!"
With that in mind: there's an option you can do with some companies, where if you pay off student loans, that counts as though you're putting money in your 401k for the purpose of matching funds. So if you pay off (for example) $500 a month, your company will add $500 to your 401k as though it's a matching contribution.
THEY TERK ER STEVE JERRRRBS!
The money will grow more overtime invested than the damage of the interest rate on a student loan. Continuing to get that compounding interest with investing will be much stronger with both balances equal at this current time.
They took our Jerbs!
I may have to do this on mine, i have no money left in the middle of the month with a 575 payment on it, i think for my mental health im just going to wipe it then bump up the 401k back to a high percentage
Why not consider a 401k loan? The loan from the 401k was cheaper than my student loan interest rate in 2012 and I was paying with post tax dollars regardless.
Agreed, and you're paying the interest of the 401k loan back to yourself, unlike the student loan lender.
My inheritance, a whooping 1m has grown only 4.72% in the past 12 months. In this bear environment does investing w/ a brokerge account under a custodian outperform a 401k? should I seek a pro to grow my funds on brokerage or still hold? I have 5 years to retire. Happy to discuss this.
Mine was 8.16%, I used to DCA into ETFs but I reconsidered the strategy since I am still way behind after the massive downturn since Jan last year
@@lisaalbert-od5zv I don’t want to touch it despite dwindling savings and losing both my jobs. I wish to grow it aggressively if I must draw it down, hence my question.
Be careful not to be lured into the market too soon, this current situation has opened my eyes to the importance of a good mentor on CZcams or elsewhere knowing what he/she is doing.
Our fin-consultant is Loren Lena Walker, experienced and advanced and consults for many brokerages hence is independent and can be a fiduciary to you but she only offers advice to accredited investors which includes individuals with an annual income that exceeds 200,000 or a net worth exceeding 1 million, excluding their primary residence
@@MaureenPearce-si4tf I did some findings on her, she seems to know her stuff. educational background and qualifications were impressive. Kudos and thanks for sharing. I left her a note and booked a consultation.
The problem with these youtubers is that the material has been covered a thousand times before so it is now becoming very difficult to produce meaningful new content.
Eh, sorta. I mean, their business model is to give away the basics for free,and then (assuming it works for folks), they ask that they be considered for when they'll need a financial advisor. So from their perspective, getting people up to the point where the content is stale is, in some ways, a success story, as that means that they've succeeded in educating that person.
Although the How MoneyWorks channel [I believe] has made the observation that FinanceTube runs into this problem - the underlying fundamentals of personal finance are actually kinda basic, so yes: there is a limit to what CZcamsrs can say about it. Thus, to maintain and/or grow their audience, they need to branch out into SOMETHING else - reaction videos (most commonly), but in theory they could go more sophisticated and start talking about more advanced stuff....but there's frankly a limited audience for the real nitty-gritty, technical aspects of finance. (And in no small part because the conclusions of those highly-technical discussions are just "this is how we came to those fundamental conclusions that are kinda boring.")
You might have an argument there if people weren't asking the questions. Clearly as long as people keep calling in, there's a market for it.