Tuesday, January 2, 2018

Student Loans Versus My 457 Retirement Plan

Inspired by the New Year and a recent retirement milestone, I decided it would be fun to document my shrinking student loan balance as my retirement balance soars.

Over the holidays I noticed that my 457 Retirement Account had finally reached $50,000!  I shared in this very space how I created this account nine years ago so I wanted to update on the progress. Over the years I saved as much as I could in the account but it was only recently that I was able to really increase my contribution.  I now contribute 4% pre-tax and 8% post-tax of my paycheck to this account.  At the beginning of 2017 I only had $32,000, up from $25,000 in the beginning of 2016. 

If I contribute another 12% of my salary in 2018 (and see modest investment returns) I should have a retirement account that exceeds my student loan debt ($61,576.87) by the end of 2018. That's my goal anyway.

According to the amortization schedule it should take me until May 2023 to only owe $50,000 in student loans, so I'm hoping that the retirement balance climbs faster than the debt is scheduled to fall.

This is why when I see people advocate focus on paying off student loan debt before saving for retirement I cringe.  I have seen my account and my husband's account gain so much more steadily than the 4% interest rate (actually my husband's student loans are 2%) we pay.  And yes, being in debt sucks, but so does getting older without a plan for retirement.

Stay tuned as we try for both.  Bring it on, 2018!

1 comment:

Nd.chic said...

Awesome to hear from you. I totally agree about saving as you pay down debt.