Quote:
Originally Posted by aditya
Q about paying off loans vs investing.
Have a 120k 10 yr loan at 6% interest (tried to refinance and I'm getting roughly the same rate so that's not an option.)
The question is whether I should be aggressively trying to pay off that loan or max out all my investment accounts (401k, Roth IRA for me and wife = ~$30k per year) and then pay off that loan with remaining amount.
Currently I'm loading 401k upto max employer match (roughly 4k from my end and 2k employer match.) I tried to do the math to figure out what the best decision is, but wasn't able to figure it out.
Fwiw, if I go my current route of aggressively paying off my loan, I'll pay off loan in 1.5 years.
My order would be:
#1 - Max out all employer match opportunities for sure.
#2 - I personally would max out all tax advantaged options (401k pre-tax/roth, Roth/Traditional IRA's, HSA) This assumes you are investing the money in an intelligent way and not letting it sit in cash.
#3 - Pay off the loan as aggressively as possible.
#4 - Taxable account investing.
#2 and #3 are likely pretty close, so if you decide to do #3 before #2, you aren't making a mistake. What type of loan is it? If you can deduct the interest, that favors #2.