Investing for retirement

[south]

6 hours ago, Lexapro said:

 The market is due for a correction and from the reading I've done, it's pretty risky to expect a 7% return...

I graduated with 90k in debt. I am due to pay it off completely next month

Let me be the first to say WELL DONE.  While you may not have a lot of cash or material crap, your financial future is on a rocket ride due to your hard work and foresight.  Bravo!

The first thing however...I don't disagree with it at all, but you have to keep time horizons in mind.  To someone who invests consistently and isn't about to retire, a market correction is merely an opportunity.  Sure you lose whatever % in value the day it happens, and that's terrifying.  Then you keep with your plan, maybe buy a little more when it bottoms out and make it up and a lot more ground when it rebounds.  It's not market timing (a fool's game), it's just dollar-cost averaging plus what's obviously happening that day.  

Of course this is for someone who - again - has 10-15 years to go before they need the money. 

I been investing since I was a kid in the service making $100 a month, and I been through the corrections since the 1980's. My philosophy overall is that the stock market - index funds, managed mutual funds, whatever - is how rich people in this country make themselves richer, and I don't think that will change.  So I'm going to take my tiny little pile and do what they do with it.  You know?  

Good talk, I love this stuff.

[Boatswain2PA]

JMPAC - I'm sorry, I wish there was an easy way out of your predicament, but there isn't.  In your shoes, you and your SO have to chase the money, and ya gotta limit your spending.  Gotta do EM or another high paying specialty, and one where you can pick up extra shifts.  Work a part time job in addition to your full time.  Set a goal of making >$150K a year and then do it. Not sure what SO is doing, but they also need to chase the high paying jobs.

Limit your spending.  Set a budget and promise to each other you will stick to it.  Everydollar.com has an online budgeting tool you and your SO can share.  Sell your newer cars (if you have them) and buy old hyundai's.  Brown bag it for lunch.  DON'T go out to eat.  Buy clothes at the DAV.  Rent the too-small apartment.  Live like you're making $60K a year, and remember that MANY people in the US do exactly that.  

Save up a small emergency savings.  A couple grand should work because if an emergency comes up you could simply cut back or stop your debt payments for a bit until you deal with the emergency.

Then hit your debt in the face.  Put a chart on your fridge that shows your debt, how much you've paid off, and how much you have to go.  Get the kids involved in marking on the chart when you make payments.

Regarding retirement saving at this time - I wouldn't worry about it, however if you DO decide to put some money toward retirement at this time I suggest you first fund an HSA (pretax & tax free growth).  If you're not eligible for an HSA, then a ROTH (post tax but tax free growth).  

Regarding SOFI - I don't think there is anything wrong with refinancing to a lower FIXED rate as long as there aren't large fees with the transfer.  As others have said though, caveat emptor.  Also, remember, refinancing doesn't fix the PROBLEM that you OWE a LOT of money.  The only fix for that is throwing large sums of money at it.  

It seems impossible, but you and SO are capable of making large amounts of money.  If you two make $250K a year, pay $70K in taxes, live on $60K....you may be able to throw $120K a year at your debt.  I would guess you would be out of debt in just a few years at that level.  THEN you cut back on your work and, at the same time, you feel like you are a millionaire.

[south]

One more thing, inspired by Boats' post above. 

Consider doing like an audit or accounting of everything you spend, for one month, every single nickel. 

Don't do anything different, get your normal Starbucks ice cream "coffee" drinks and your nights on the town, etc, etc.  Just - jot down or otherwise track EVERY PENNY you spend or that goes out and I mean all of it, and where it goes.  Do it for like 30 days and - this is important - don't review it until done. 

Talking like - bought a pepsi and a donut - $1.75 - ate at cracker barrel - $12 bucks including tip - etc.

(modern version is that you could go through your expenses with a fine tooth comb, using your bank's website.  Should take about an hour or so, but it's less revealing as things can get forgotten or lumped together). 

When you do review it, you will likely be shocked.  I spend how much on this?  We spent how much on that?  (you probably know someone who goes to Starbucks every day.) 

I did this as part of a group, almost like a dare, when I was 18 or 19 in the 80's and we were all making $100/month as dirtbag enlisted in technical training (this thread is like memory lane over here).  I remember being AMAZED at how much I was spending on my daily vending machine junk food and soda runs, and we had guys do stuff like quit smoking or quit going to the club on base (where the drinking age was 18) due to the expense.  

What's cool about this, is that it's painless and when done, maybe you'll feel like changing something, maybe you won't, but your $200 /month to Starbucks may stick in your brain.   Anyway, I never forgot that feeling, and I've done it several times since.

(i don't hate Starbucks it's just an easy target)

[Guest UVAPAC]

Lots of good posts and information in here.  From new investors to guys who have been in the profession for 20 years, to those that are retired!

 

I will say after being a PA-C for 4 years I figured out one thing... while money is nice... your free time in life is more precious.  I currently work a 40 hour/wk full time job, and have 2 per diem jobs in addition to this.  

I often find myself at the per-diem jobs wondering to myself "is this really worth it?"  In an extra shift I can make anywhere between $600-800, but after you pay taxes/etc, you walk away with a couple hundred bucks.  Personally I would rather be at home with my wife and my dog (and soon to be first child!)

 

Gotta find a good balance.  My rationale was to work hard while I am young, and put in the hours... but life goes by fast!

[beattie228]

I've known a small number of people who have used SoFi and seem to have had a good experience. The biggest downside to refinancing is you lose any protections afforded to you by having federal loans (loan forgiveness, opportunity to decrease or even stop minimum payments if something unexpected happens). Making sure the interest rate is FIXED is crucial. There are a lot of horror stories online about the ol' bait and switch.

 

The first and "easiest" way of coming up with more money for loans is to pick up a PRN job or OT at your first job if your employer allows it (and you're not salary/exempt). For some, this isn't possible. I don't have children, but I can imagine you'd want to spend as much time with the little human you've created. The second and perhaps less "easy" route is exactly as described above... budget constriction. Day to day, the average American pisses away money left and right. Lattes served in a paper cup that get cold before you have a chance to drink it, super high cable bills for channels you don't even have time to watch, lunches out instead of packing leftovers. 

 

There was a quote that I read awhile back when I first started diving into personal finance books and blogs. I don't remember it exactly, but the gist of it was it's easy to ignore a $5 cup of coffee here and there. Stratify that number into how much is spent in a decade can really change your spending habit. I.e. $5 cup of coffee X 2-3 per week X 52 weeks X 10 years = $7800! Imagine having $7,800 in your savings account simply by brewing the coffee at home. This way of thinking has drastically changed my view on American consumerism.

[majetito]

1)Save $1000 quick for a beginners emergency fund.

2)Get out of debt (credit cards, school loans, cars, etc)

3) Save 6mo of income for emergency

4) Invest in mutual funds/ROTH IRA/ 401k/403B and put away 15% for kid's college

5) Pay off the mortgage

6) Enjoy life and GIVE GENEROUSLY.

[GetMeOuttaThisMess]

JMPAC - I'm sorry, I wish there was an easy way out of your predicament, but there isn't.  In your shoes, you and your SO have to chase the money, and ya gotta limit your spending.  Gotta do EM or another high paying specialty, and one where you can pick up extra shifts.  Work a part time job in addition to your full time.  Set a goal of making >$150K a year and then do it. Not sure what SO is doing, but they also need to chase the high paying jobs.

 

Limit your spending.  Set a budget and promise to each other you will stick to it.  Everydollar.com has an online budgeting tool you and your SO can share.  Sell your newer cars (if you have them) and buy old hyundai's.  Brown bag it for lunch.  DON'T go out to eat.  Buy clothes at the DAV.  Rent the too-small apartment.  Live like you're making $60K a year, and remember that MANY people in the US do exactly that.  

 

Save up a small emergency savings.  A couple grand should work because if an emergency comes up you could simply cut back or stop your debt payments for a bit until you deal with the emergency.

 

Then hit your debt in the face.  Put a chart on your fridge that shows your debt, how much you've paid off, and how much you have to go.  Get the kids involved in marking on the chart when you make payments.

 

Regarding retirement saving at this time - I wouldn't worry about it, however if you DO decide to put some money toward retirement at this time I suggest you first fund an HSA (pretax & tax free growth).  If you're not eligible for an HSA, then a ROTH (post tax but tax free growth).  

 

Regarding SOFI - I don't think there is anything wrong with refinancing to a lower FIXED rate as long as there aren't large fees with the transfer.  As others have said though, caveat emptor.  Also, remember, refinancing doesn't fix the PROBLEM that you OWE a LOT of money.  The only fix for that is throwing large sums of money at it.  

 

It seems impossible, but you and SO are capable of making large amounts of money.  If you two make $250K a year, pay $70K in taxes, live on $60K....you may be able to throw $120K a year at your debt.  I would guess you would be out of debt in just a few years at that level.  THEN you cut back on your work and, at the same time, you feel like you are a millionaire.

In an emergency situation, you can withdraw Roth IRA contributions without the early 10% penalty before 59 1/2 IF the funds have been deposited for 5 or more years.  It's the first in, first out philosophy of withdrawal.  It would be reported on iRS form 5498 to avoid the tax penalty.

 

[JMPAC]

Thanks for all the great advice! I will def do the detailed spending tracking plan. Luckily, we are not big spenders, don’t go for any big ticket items, have very cheap rent and aren’t into Starbucks, haha. We did buy a newer, safer car when we had a baby because we only had beaters that were near death and one was a high roll over risk.

I do work in EM and I work all nights so am making ~130k. I doubt I could pick up more shifts than I currently do because night shift is already kind of killing me. Unfortunately, my SO is a physical therapist and their doctorate programs cost a lot with much less of a return on investment.

You guys have definitely talked me out of Sofi, for now. Maybe at some point I can try it with a smaller loan to see how it goes, but in the meantime will just try to stay on top of Navient and watch out for any shenanigans.

I think there are surely things we can save more money on. I’m already getting a lot of ideas from reading this discussion and feeling a tiny bit more optimistic.

[Guest UVAPAC]

My fidelity monthly news letter had a whole sections on HSA's.  Figure with all the questions people had in regards to them I would post a link:

 

https://www.fidelity.com/viewpoints/personal-finance/hsa-healthy-habits?ccsource=email_weekly

[BruceBanner]

1.  At least $10k in emergency savings. We use this for home repairs, vet bills, car repairs, other unforeseen expenses. Always try to keep it at $10k.

2. Get your debt sorted out. In most cases, it is best to work towards having only a mortgage. With student loans,  some people will actually save money in the long run doing PSLF. For others it is best to pay them off hard and fast. ReFis arent usually worth it. NO consumer debt, ever. Credit cards paid off monthly. Pay off your vehicles and drive them until the wheels fall off. Never finance anything but your home, maybe a car if you have no other choice.

3. Set an end goal of saving (investing) 50% or more of your gross income. How you do this will vary, but obviously never leave money on the table like 401k/403b employer matches. You will likely end up maxing out your 401k/403b, and then filling up a ROTH and then a taxable investment account. HSAs can work too.

4. Invest in low cost index funds. If you are young, do like 90% stocks and 10% bonds. I like Vanguard's Total Market Index and Total Bond Index. These are self-cleansing funds, and will always reflect the overall market trajectory. Just dont bail when things go south. Stay the course.

5. And last but certainly not least, live like you make $50k a year!! Or, set a spending budget each month and never exceed this. I set aside 10% for hobbies, and my wife and I have a limit on discretionary spending. If I want something really expensive like a new gun, I just have to save.

 

The single biggest reason why most people cant save enough to retire early is lifestyle inflation, which results in paltry savings. They make more, they spend more.

[MCHAD]

I may have missed it if someone else already mentioned it, but another huge reason NOT to refinance federally backed student loans into private loans is because of what happens if you die.  If you die or become permanently disabled federally backed student loans are forgiven, with private loans, this isn’t so...

[Boatswain2PA]

4 hours ago, BruceBanner said:

1.  At least $10k in emergency savings......

2. .... it is best to work towards having only a mortgage....

3. Set an end goal of saving (investing) 50% or more of your gross income....

4. .....If you are young, do like 90% stocks and 10% bonds....

5. And last but certainly not least, live like you make $50k a year!! ....

A few comments/minor disagreements:

1:  YES

2:  It is best to work towards not having a mortgage at all.  It's great!!  (although we are taking out another one tomorrow, will have it paid off in 2 years).

3.  50% savings rate is near impossible, unless you are talking about after-tax money.

4.  If you are young there is no need to be in bonds at all.  The rate of return is terrible, and many are not nearly as safe as our culture makes them out to be.  I wouldn't suggest ANYONE have bonds from several cities/states cause you're gonna lose money.
5.  Until you are debt free with multiple income streams...then you can truly enjoy life!

[BruceBanner]

12 hours ago, Boatswain2PA said:

A few comments/minor disagreements:

1:  YES

2:  It is best to work towards not having a mortgage at all.  It's great!!  (although we are taking out another one tomorrow, will have it paid off in 2 years).

3.  50% savings rate is near impossible, unless you are talking about after-tax money.

4.  If you are young there is no need to be in bonds at all.  The rate of return is terrible, and many are not nearly as safe as our culture makes them out to be.  I wouldn't suggest ANYONE have bonds from several cities/states cause you're gonna lose money.
5.  Until you are debt free with multiple income streams...then you can truly enjoy life!

Oh for sure, the end-end goal is always zero debt, but for most of us the mortgage will be the last to go.

I beg to differ!! With kids, probably not, but a pair of TINKS? (two incomes no kids) Say they make $150k between the 2 of them; living off $75K is completely realistic if overhead is low and debt is whittled down.

Interesting thought on bonds, I always though they were a deflation hedge.

[TWR]

between student loans paydown or savings is and excellent question.  I would payoff any high interest loane to zero as rapidly and then maximize any savings offered by government or job.  Also, think about how much you spend monthly on things you don't REALLY need or want.  I am nt saying be a hermit but we can ALL cut back on "stuff".  Our profession affords a pretty damn good living approaching and above 6 figures.  We don't have to try to spend it all every year.  coach vs first class still gets you to where you are going!!

[Boatswain2PA]

1 hour ago, BruceBanner said:

....With kids, probably not, but a pair of TINKS? (two incomes no kids) Say they make $150k between the 2 of them; living off $75K is completely realistic if overhead is low and debt is whittled down.

Interesting thought on bonds, I always though they were a deflation hedge.

Even using those numbers savings 50% of gross income is near impossible unless you're putting $53K into a SEP-IRA before taxation, then paying only $25K in taxes, leaving you with $75K takehome, and saving $22K of that separately.

With a 401K you can only put $18K in pretax savings, taking your income down to $132K.  With no kids you would pay about $40K in taxes  (depending on your state), leaving you with $92K.  With a $75K savings goal, minus the 18K in pretax savings, you would have to save $57K from that $92K.  That's only living on $35K a year.  

Doable I guess, but very difficult.  

Some bonds are a hedge against deflation, but if you're sitting on a lot of money (in cash/stocks) I wouldn't worry about deflation.  Seems deflation would be a bigger concern for those of us sitting on a lot of real estate. 

[Walkoffshot]

Would like to add on the student loan discussion with my experience/situation...

After months of pondering this "Do I pay off loans, invest, or buy a home?", I/we decided to work towards paying off loans. I have been in practice for almost 3 years now. I really just started focusing on my loans in the last year. My wife and I started with a budget, set aside an emergency fund, and put our savings/income into an personal investment account to build until we were able to pay a lump sum on the loans. Since December we have paid off $50k (private loan) and hopefully have my gov't loan (another $50k) paid off by summer of next year.

We are very fortunate to have two decent incomes... which certainly helps. We rent an apartment in a metro city (ain't cheap) but I also believe that given our situation renting is > than buying a house. After trying to find a home in our area, without having a massive commute, we calculated that the interest on a mortgage payment is close to the same as our rent payment. Seems silly. Then take into consideration a down payment, property tax etc, home repairs/updates and we would be in this never ending battle of allocating money for home loan, student loan, investments, maybe travel, maybe kids... pretty overwhelming to me. Once we have our loans paid that extra $1500 month can go a long way. Post loans we could turn that 30 year mortgage into a 15 year  mortgage (which means lower rate and pay off sooner), or max out retirement accounts, or go on a nice trip twice a year, or have a kid (i know, terrible investment), or maybe all of the above.

Point is, there is no "best" way to do it because everyone's situation is different. If you have the opportunity to pay off the loans, pay them off. Seriously... once you get past the whole throwing away 50k bit, it feels great. Even if investment returns are slightly higher than your loan rate... I still think the "return" on paying off loans and having the freedom is worth the extra ~1% you may get on your investment. Just my opinion.

[SERENITY NOW]

On October 20, 2017 at 0:33 PM, Boatswain2PA said:

Another thing that all of us should consider is asset protection in case of catastrophic medical liability.  It varies from state to state, but you should know what you COULD lose if you are sued beyond your malpractice limits, and see if there are reasonable things you could do to protect yourself from those losses.  For example, while most states protect your retirement accounts, some states don't include IRAs as retirement accounts (only ROTH and 401K/403Bs).  Also your primary home is usually protected (a good reason to have a paid off home), but some states limit this by home value or property acreage.  

 

@Boatswain2PA I've been concerned about this as well.  I carry an umbrella policy for the catastrophic liability for every day life, but realized that I don't carry anything like that when it comes to medical malpractice, and with some malpractice lawsuits going up to several million, I've always wondered if they could go after our assets.  

Has anybody heard of people taking out personal malpractice insurance that goes over and above what our groups policy would insure us for?  Like a personal medical malpractice umbrella policy?  I've never heard of anyone doing this, and would be curious if anybody else has heard of it being done.  I'd be interested in signing up for that!

[mgriffiths]

10 hours ago, Walkoffshot said:

...or have a kid (i know, terrible investment)...

Depends on your perspective, this could also be considered the greatest of investments - even financially.

[mgriffiths]

Another thought regarding malpractice insurance is to put things in your spouse's or children's names.  It may not actually protect anything, but every lawyer I've ever talked to about it has still recommended it.

Of course, you have to trust that spouse fully, or could end being even worse.

[Walkoffshot]

1 hour ago, mgriffiths said:

Depends on your perspective, this could also be considered the greatest of investments - even financially.

I know.. I was really just kidding.

[CAAdmission]

Always invest in people's bad habits/vices. I'm saving up to buy a nudie bar, and as soon as weed is legal I'm becoming a farmer.

[Boatswain2PA]

16 hours ago, SERENITY NOW said:

 

@Boatswain2PA I've been concerned about this as well.  I carry an umbrella policy for the catastrophic liability for every day life, but realized that I don't carry anything like that when it comes to medical malpractice, and with some malpractice lawsuits going up to several million, I've always wondered if they could go after our assets.  

Has anybody heard of people taking out personal malpractice insurance that goes over and above what our groups policy would insure us for?  Like a personal medical malpractice umbrella policy?  I've never heard of anyone doing this, and would be curious if anybody else has heard of it being done.  I'd be interested in signing up for that!

They absolutely can, and WILL, go after our assets if they are awarded a judgment that exceeds our malpractice.  That is why it's important for you to know what what kind of assets are protected if you have to declare bankruptcy.

Scenario:  You are hit with $10M verdict, and only have $1M in coverage.  What happens with other $9M?  They come after your bank accounts, cars, boats, diamonds, etc.  You declare bankruptcy on the rest and then start over.

States vary, but generally your primary home is protected from bankruptcy (up to specific limits of value and land-size).  That's why it's a GREAT idea for us to pay our homes OFF!  Most states also protect 401K plans & such, but some don't cover IRAs.  

Regarding an umbrella for malpractice - I just had a discussion with a physician who is being sued because of an incompetent NP (physician never saw the patient), this physician said they are getting such a policy...but other than that I have never heard of such a thing.  

A caution regarding insurance in general - from my readings on the subject, you really CAN find yourself in a situation where you are "over-insured".   For example, if instead of carrying the typical $1M/$3M malpractice policy, you decide to carry a total of $10M/$30M.  That could open you up to exposure simply by having that $10M target on your chest (instead of the measly $1M target we all carry).  Your insurance company is a lot more willing to settle on a case they could lose $10M on than a case they could "only" lose $1M on.  Think about a shark going for the fat guy for lunch instead of the skinny surfer.....

I'm certainly not an expert on this, but I'm knowledgeable about the bankruptcy protections in my state, and have taken steps to build a firewall between my medical liabilities and my personal wealth.  

@mgriffiths suggested putting things in your spouses/kids names.  I'm sure that is good advice sometimes, but I'm not educated enough to be sure.  It's all about the fire-walls that you build, and those fire-walls are very state specific.

Bottom line - if you don't have assets to protect (ie: you owe more than you are worth) then I wouldn't worry about it.  But as you start building ACTUAL wealth, it certainly is something you NEED to get good legal advice from!

[Cideous]

1.)  Most states do *NOT* protect the full value of your house.  Only a few protect ALL of your house value, like Texas and Florida which is why OJ moved to Florida and bought the biggest house he could.  Also why during the Enron fiasco, the owner of Enron owned a HUGE property in Texas and no one could touch it.  Nevada I believe goes up to $550k, while California, AZ and NM's are absolute shite.  I think CA covers $25k of your house...in other words nothing.  If you get sued in California (or any state with low property protections of which there are a LOT), and it exceeds your malpractice policy....Kiss your house goodbye.  They will take it no questions asked.

2.) Gen liability umbrella policies are great for things like auto-accidents that exceed your basic levels or if someone breaks their neck at a pool party at your house.  They are USELESS for any malpractice claims exceeding your malpractice insurance rates.  I had this exactly conversation with my umbrella ins company in depth (I got it when my kids started driving, shudder!).  All general liability umbrellas exclude malpractice claims.  I did purchase a malpractice supplement through CM&F which does add a little more to my base policy, but more importantly pays a lawyer to represent me, not the company I am working for.

3.)  I fund the crap out of my HSA every chance I get for the reasons stated above.  I also like annuities (they are classified as life insurance) as they are off limits to creditors and so far I have received decent returns. 

4.)  I fund my wife's IRA over mine.  All our cars are in her name.  If we move from Texas where our house is 100% protected to a state it is not, our house will be 100% in her name.

5.)  I keep a fairly decent amount of cash in a safe VERY off the grid.  Unaccounted for just case of ...well anything bad.

 

[Guest UVAPAC]

3 hours ago, ChaseBlakeley said:

Government can't regulate crypto like they think they can, unless they bought the actual cryptocurrency they wanted to regulate and in insanely massive volume to obtain over 50% of market supply. Exchanges are decentralized.

They can certainly see when cryptocurrency goes in and out of your bank account.  They can easily audit anyone who has cryptocurrency exchanges in their bank account.  You would then have a lot of questions to answer very quickly.  

[gbrothers98]

For consideration-

1. Malpractice- very dependent upon the state you practice in. Research the specific laws as to what can be at risk or not in your state IF you are sued. Realize that there is a significant percentage of malpractice suits that never see a dime and many more that are settled. Knowing the scope of malpractice payouts in your state will help:

https://www.beckershospitalreview.com/hospital-physician-relationships/a-state-by-state-breakdown-of-medical-malpractice-suits.html

Also read through this:

https://news-center.aapa.org/wp-content/uploads/sites/2/2017/02/Physician-Assistant-and-Nurse-Practitioner-Malpractice-Trends_2_14_17.pdf

While you cannot negate the likelihood of malpractice, a payment is rare. Perhaps the $ spent on purchasing the extra insurance could be better spent on improving medical knowledge in the areas of diagnosis and treatment where the majority of PA malpractice suits stem from?

2. Pay off the student loan or invest the money?

What can be lost when all the $ is directed to the student loan is the COMPOUNDING opportunity and tax benefits of maximizing the pretax contributions for retirement savings. 

Scenario: Can max out 401k/403b savings at $18500 this year. Average PA graduate walks out with $125k in loans at age 28 (from end of program survey results, PAEA, http://paeaonline.org/wp-content/uploads/2017/07/Student-Report-2017.pdf). Instead of saving that $ pretax, throw the $1542 at the loans....but the $1542 is AFTER TAX, so is run through federal and state taxes first, likely at least 28% or more depending on status. Likely won't be able to muster that amount but if so and done EVERY MONTH, will lower time to payoff to 4 years (125k, at 4% for 10 years, https://www.bankrate.com/calculators/college-planning/loan-calculator.aspx) dropping interest paid from 26k to 10k. BUT, a 28 year old grad has a potential 39 year accumulation period leading to retirement age (67 yrs minus 28). Not participating in the full pretax retirement potential for 4 years results in a $300k difference at age 67 (https://www.bankrate.com/calculators/savings/simple-savings-calculator.aspx, $1542 saved per month at 4% annual return for 39 years vs 35 years). Increase your annual return to 8% and the difference grows to over 1.2 million dollars!! This is also only considering the accumulation phase of your life and not taking into consideration the distribution phase that will likely last for another 30 years, still compounding.......

Compound interest over time always wins. 

Not taken into account in the above argument is the free $ in the form of an employer contribution by not contributing (average is about 3% of gross pay yearly, approximately $3k based upon a $90-100k salary, which can be viewed as a 16% return upon the full $18500 contributed). Instead of $18500 a year compounding, now have $21500 working for you yearly (and you just bumped your total savings from just over 3 million to nearly 5 and 1/2 million!

Also, if on an income contingent repayment plan for student loans, contributing that 18500 will lower your adjusted gross income, thereby potentially lowering your loan payment.

Alternatively....that $1265 monthly student loan payment (125k at 4% for 10 years) could be redirected to a mortgage or after tax savings or some other project you desire sooner when paid off in 4 years rather than 10. That is over 15k in financial flexibility every year in the short term, where most of us live, rather than 40 years in the future.

Best of luck

George Brothers