Student Loan Refi

[spotty_dog]

We maxed out both our Roth's for 2015. That will be the last year we will qualify to contribute to a Roth because half the year was on a resident salary. This year and beyond we will exceed the IRS income limitations for Roth's, so we'll be limited to traditional IRA's which we'll have to fund using post tax dollars.

If you are not covered by an employer plan, you can contribute to a deductible traditional IRA regardless of income. That's pretty valuable tax-wise, and you'd do well to take advantage. You *can* choose instead to make a non-deductible (post-tax) contribution, and then convert the account to Roth. But if you do this, it's a lot of paperwork, and you have to pro-rate the conversion across any other traditional IRAs you already hold (paying taxes on anything you didn't already pay taxes on, effectively.)

[Sheherezade]

Because our credit is stellar, it appears we can get our loans refinanced at a low 2%. No one else here has done that?

We have not paid off our loans and we did refi them to 2% after training. We will pay them off in about five years, the same time we will pay off our house. And our kids will be out of college. It will be a hell of a year for us!


Angie

[Auspicious]

Because our credit is stellar, it appears we can get our loans refinanced at a low 2%. No one else here has done that?

We did, but it was in 2006 or so.

[Deebs]

We did at 3% in '07. I just didn't know rates that low were an option anymore. We will take the maximum amount of time to repay.


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[spaz]

We maxed out both our Roth's for 2015. That will be the last year we will qualify to contribute to a Roth because half the year was on a resident salary. This year and beyond we will exceed the IRS income limitations for Roth's, so we'll be limited to traditional IRA's which we'll have to fund using post tax dollars.

Not true!!! We each contribute to a regular IRA using post tax dollars and then the next week we roll it over into our ROTH IRA. It is a loophole. kind of stupid that you have to do it that way, but that is what we do.

[spaz]

Angie, wow!!! I hope you have some huge celebration planned!!!!

We have not paid off our loans and we did refi them to 2% after training. We will pay them off in about five years, the same time we will pay off our house. And our kids will be out of college. It will be a hell of a year for us!


Angie

[MDPhDWife]

Student Loan Refi

If you are not covered by an employer plan, you can contribute to a deductible traditional IRA regardless of income. That's pretty valuable tax-wise, and you'd do well to take advantage. You *can* choose instead to make a non-deductible (post-tax) contribution, and then convert the account to Roth. But if you do this, it's a lot of paperwork, and you have to pro-rate the conversion across any other traditional IRAs you already hold (paying taxes on anything you didn't already pay taxes on, effectively.)

Not true!!! We each contribute to a regular IRA using post tax dollars and then the next week we roll it over into our ROTH IRA. It is a loophole. kind of stupid that you have to do it that way, but that is what we do.

Ok, just so I understand this clearly... I would not be be able to do both of your methods? I have to choose between either contributing to a traditional IRA and because I used post tax dollars it will be tax deductible. OR contributing to a traditional IRA (once again with post tax dollars), but then roll it over into a ROTH. This is also known as a Backdoor ROTH right?

And either of these methods I'm limited to $5500 for DH and $5500 for me per year?

Thanks guys, you're all a wealth of knowledge and I've been sticking my head in the sand for far too long on retirement so I'm crash coursing it now.

[spaz]

Well, I guess I thought you were like us and we cannot deduct a traditional IRA. In fact, all of our deductions are limited now... We can't deduct all of our itemized expenses anymore. We make too much to get a tax deduction for a regular IRA.

Other than that it looks correct.

[spaz]

Also, it was some paperwork when we coverted all of our regular IRA's into a ROTH. But now, there is none. We have a regular IRA fund in Fidelity( there is on cent in it and nothing else) and after a week, we just transfer it to our ROTH IRA. Our tax accountant keeps track of how much we have contributed... So I'm not sure what all the paperwork she is talking about is to transfer it to a ROTH. Once you set it up, it is pretty painless.

[spotty_dog]

Ok, just so I understand this clearly... I would not be be able to do both of your methods? I have to choose between either contributing to a traditional IRA and because I used post tax dollars it will be tax deductible. OR contributing to a traditional IRA (once again with post tax dollars), but then roll it over into a ROTH. This is also known as a Backdoor ROTH right?

And either of these methods I'm limited to $5500 for DH and $5500 for me per year?

Thanks guys, you're all a wealth of knowledge and I've been sticking my head in the sand for far too long on retirement so I'm crash coursing it now.

Sorry, post-tax and pre-tax are a little harder for me to wrap my head around lately since we're independent. If you do NOT have an employer plan, you can put money into a traditional IRA and *deduct* that amount from your income -- NOT pay tax on it. If you DO have an employer plan, and you are high income, you can put money into a traditional IRA but you *cannot* deduct it from your income -- that is money you pay tax on before it goes in. https://www.irs.gov/Retirement-Plans...duction-Limits

You cannot contribute directly to Roth if you are high-income. (For now, there is a backdoor option, but there is no guarantee it will remain.) You cannot contribute both to deductible and non-deductible IRAs (either Roth or traditional), so yes, you are limited to just $5500 each, this year.

[MENTION=4241]spaz[/MENTION], the correct procedure to "move the money into the Roth" is called a conversion. This is the backdoor Roth. If you do a Roth conversion while also holding other, deductible IRAs, ones where you haven't yet paid tax on that contribution or growth, then there is a requirement to prorate the conversion across all your IRAs. This means that you may have to pay tax NOW on money in those accounts, including growth. So while a normal non-deductible contribution doesn't do anything to your tax burden, in some cases a Roth conversion will increase your taxable income -- something many of us would rather not see when we're already feeling a tax sting! In our family we have opted not to take the backdoor Roth option for DH, who has a few traditional IRA accounts dating back several decades. I do a Roth contribution and conversion each year for myself.

[spaz]

Ah, ok.... our tax advisor had us turn all of our IRA's, including those from 30 years ago into ROTHs.... We spent a couple of years paying off the taxes ( I think we had 2 or 3 years to do that, but now when we retire, we will not have to pay taxes on any of it.)

[SoonerTexan]

[MENTION=1310]MDPhDWife[/MENTION] where did you look??? We have about 90k in student loans and about 3/4 of it is sitting accruing interest at 6.8%! Is there any reason not to refinance during training. Do we lose forbearance and IBR options if we do? 6.8 is so high


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[MrsSz]

[MENTION=1310]MDPhDWife[/MENTION] where did you look??? We have about 90k in student loans and about 3/4 of it is sitting accruing interest at 6.8%! Is there any reason not to refinance during training. Do we lose forbearance and IBR options if we do? 6.8 is so high


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Not necessarily forbearance and kind of IBR. DH prequalified for 3.4, I think. As soon as he has a match letter (considered for this purpose a contract) we will start the process. While he is in training the payment is $100 per month. Includes fellowship if applicable. There is still loan forgiveness if ,God forbid, something happens. Biggest thing for us is that the interest does not capitalize like it does for the fed loans he has (also between 5.8 & 6.9)


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[rufflesanddots]

Not necessarily forbearance and kind of IBR. DH prequalified for 3.4, I think. As soon as he has a match letter (considered for this purpose a contract) we will start the process. While he is in training the payment is $100 per month. Includes fellowship if applicable. There is still loan forgiveness if ,God forbid, something happens. Biggest thing for us is that the interest does not capitalize like it does for the fed loans he has (also between 5.8 & 6.9)


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I need to file this away for review in a few years.

[SoonerTexan]

[MENTION=3883]MrsSz[/MENTION]
Where did you look?


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