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He cashed out a retirement plan to partly pay down his debt! He is less stressed about this! Some people have more money than sense. Student loans are relative

by dfxm12 14y ago

He cashed out a retirement plan to partly pay down his debt! He is less stressed about this! Some people have more money than sense. Student loans are relatively low interest & you can take your time paying them off. The future value of the money is that retirement plan is going to be so much more than any interest that would have accumulated on the loan. Debt isn't necessarily bad!

debacle 14y ago
As someone with a drastically negative net worth, I can honestly say that in this economy having debt around your neck is much more stressful than I am really comfortable with, even considering the low interest rates on student loans.
- dfxm12 14y ago
  My point is: is it stressful just because you feel it is stressful, or did you actually put a plan/budget together and feel stressed out after looking at the results of that? Think about this, would you rather be stressed about this now, when you have a lifetime of earnings & potential ahead of you, or later, when you realize you can't retire when you want to because your retirement fund is low? N.B.: I don't know your specific situation, but I'm speaking in general terms/about the article.
  - debacle 14y ago
    Logically, it makes more sense to pay off the loans on schedule, and put additional payments into a vehicle that will provide returns that will outpace the interest rates on the loans. However, personally, I would rather have no debt.
codegeek 14y ago
"Debt isn't necessarily bad!" Yes but only if people know how to manage it. Problem is that most people (at least in US statistically) do not know how to do that.
genwin 14y ago
The retirement plan was almost certainly making less risk-free interest than the interest he'd effectively make (risk-free, hence apples-to-apples comparable) by paying off the student loan. When the difference in interest is great enough it's financially prudent to cash out the retirement plan to pay off the student loan.

by dfxm12 14y ago

debacle 14y ago

As someone with a drastically negative net worth, I can honestly say that in this economy having debt around your neck is much more stressful than I am really comfortable with, even considering the low interest rates on student loans.

dfxm12 14y ago
My point is: is it stressful just because you feel it is stressful, or did you actually put a plan/budget together and feel stressed out after looking at the results of that? Think about this, would you rather be stressed about this now, when you have a lifetime of earnings & potential ahead of you, or later, when you realize you can't retire when you want to because your retirement fund is low? N.B.: I don't know your specific situation, but I'm speaking in general terms/about the article.
- debacle 14y ago
  Logically, it makes more sense to pay off the loans on schedule, and put additional payments into a vehicle that will provide returns that will outpace the interest rates on the loans. However, personally, I would rather have no debt.

codegeek 14y ago

"Debt isn't necessarily bad!" Yes but only if people know how to manage it. Problem is that most people (at least in US statistically) do not know how to do that.

genwin 14y ago

The retirement plan was almost certainly making less risk-free interest than the interest he'd effectively make (risk-free, hence apples-to-apples comparable) by paying off the student loan. When the difference in interest is great enough it's financially prudent to cash out the retirement plan to pay off the student loan.