Joined: 22 Aug 2013
Location: Hudson Valley
retirement savings to pay off parent plus loan?
I have over $350k in various 401k and deferred retirement plans with parent plus loans of $83k at an average of 7.6%. Should I pay off the student loans with retirement money and repay my current 401k with what the loan amount would have been?
I am almost 66, working full time, collecting a standard pension and will be collecting social security in 3 months.
If I choose the regular student loan payment of $1000/month, I could take it our of my SS of $2400/month and pay over $40k in interest. Or I could pay off the loan from the 401ks and take the $1000 from SS to reimburse my 401k.
Tue Oct 07, 2014 12:49 pm
Wino Senior Member
Cash: $ 113.80
Joined: 03 Aug 2012
I would not touch my retirement savings for the parent plus loan. You are still working full time. If you withdraw the money, it will be taxed at your current rate. If you use the standard 4% withdrawal rate, you'll be pulling just under $1200 per month from that account when you quit working, which is almost assuredly a lower tax rate than you would pay on it now.
Other than taxes, there's really not much difference between the two options. Were I you, I'd use my present income to pay off the loan as quickly as I could afford to do it.