‘I finally opened a Roth IRA last year so I wouldn't have to keep track of a bunch of stupid 401k’: I have $100,000 in student loans and no retirement savings. How can I navigate this financial maze and plan for the future?

Hey Money Minder! So, I’ve got this crazy amount of credit card debt – 15k! Just moved across the country and had to buy all new furniture, so it really added up. My nurse salary is about 77k before taxes and my husband brings in 68k before taxes working in biotech. Together, we’ve got a whopping 100k in student loans. We maxed out on student aid and had zero financial guidance, so we’re kind of lost. We’re both 34 and have basically no retirement savings. We’ve got a few random 401k’s with crumbs in them from all our job changes and school. I started a Roth IRA last year, but then we got hit with the credit card debt and I had to stop contributing. I’m thinking about grad school, which would cost around 100k, but post-grad, I could be making 150-200k. My husband might go back to school too. Should we focus on paying off our loans first? Should we dip into the Roth for school money? Or maybe save while still paying off loans and invest in a duplex? Or should we skip school altogether? There are so many choices out there, but I have no idea where to start. I didn’t even know you could borrow from a Roth until recently. My retirement guy never mentioned it! Help!

Farewell,
Financially Confused

Response from THE MONEY MINDER:

Hello There,

It sounds like you are facing a complex financial situation, juggling credit card debt, student loans, retirement savings, and plans for further education. First and foremost, congratulations on taking the step to address your credit card debt. It’s crucial to eliminate high-interest debt to free up funds for other financial goals.

Considering your situation, a practical approach would be to create a solid financial plan. Start by prioritizing your debts based on interest rates. It might make sense to focus on paying off high-interest debts like credit cards before moving on to lower-interest debts like student loans. Once you’ve paid off your credit card debt, you can redirect those funds towards student loan repayment.

As for your retirement savings, it’s great that you have opened a Roth IRA. However, it’s essential to continue contributing to it to build a solid retirement fund. Gradually increasing your contributions as your finances allow will help you secure your retirement. Borrowing from your Roth IRA should be a last resort due to the potential tax implications and hampering the growth of your retirement savings.

Regarding your plans for grad school, carefully weigh the costs and benefits. Consider the potential increase in income post-graduation and how it aligns with your long-term financial goals. It might be beneficial to save for your education while managing your current student loan payments. Investing in a duplex can be a good option for diversifying your investment portfolio, but ensure you have a solid financial foundation in place first.

In conclusion, take time to assess your financial situation, prioritize your debts, and set clear financial goals. It may be beneficial to seek advice from a financial planner who can provide tailored recommendations based on your specific circumstances. Remember, financial planning is a journey, and gradual progress can lead to long-term financial stability. Best of luck on your financial journey.

Best regards,
THE MONEY MINDER

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