Retirement Investing while Paying Off Student Loans


Why would I save for retirement when I am paying off my student loan debt?  This doesn’t make any sense!  Oh yes it does!!!!  While you might think it is better to pay off all of your debt before saving for retirement, think again.  Not only do you need to save regularly for retirement but you also need to keep your life moving forward in spite of your student loan debt.  Here’s how it’s done.  Every year, you have the opportunity to invest $5000 into a Roth IRA.  You might think that this is not a lot of money, but add it up over 40 years and you see the magic.  Bottom line, the most important aspect of this type of savings is that it is protected from bankruptcy. If you are self-employed and go bankruptcy 6 times during your life, ALL OF YOUR RETIREMENT SAVINGS ARE PROTECTED.    This means you can take lots of risks during your lifetime and even have good and bad years of income and file bankruptcy and then end up with a nice protected amount of retirement savings.  This is how smart entrepreneurs protect their family while trying to make a go of their business ideas, many of which fail, but if just one is successful even at the end of it all – it’s all worth it and you have retirement savings as well.

Pay off Students and Buy a House

What’s the number one way to pay off your student loans and buy a house?  Get on an income based payment plan for your student loans.  Whether you’ve got $15,000 or $300,000 in student loans, the income based plan counts as full payments that are not deferments.  Why is this important?  Because all student loans end and are discharged in their entirety twenty five years (25) after first repayment plus deferments.  What is this so important?  Think about it this way….if you were sued by your student loan servicer and a judgment was obtained, the servicer can garnish your wages for at least 15% of net income and sometimes even more.  Plus all of your tax refunds are seized until the loan is paid off.  Compare this to an income based program where you may pay 5% to 15% of your income voluntarily, without a judgment, garnishment or seizure of your tax refund.  Not only is your credit rating great but so are possibilities to move forward with your life, such as buying a house, starting a family and building wealth through home equity, retirement planning and paying off long term debt.

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