Roth IRA vs Student Loans
My wife and I are trying to figure out the best strategy for paying off her student loans vs. maxing out Roth IRA while I’m in residency. Both of us are new to personal finance, and we’d really appreciate some advice.
I’m about to start a 5-year residency and am very grateful to be debt-free. She earns around $100k/year gross and currently contributes enough to her 401(k) to get her employer match, but she has not been contributing to a Roth IRA so far because she is stressed about her grad school loans. We also currently have an emergency fund of about $10k.
Her student loans are approximately:
~$12k at 8.07%
~$20k at 7.54%
~$17k at 7.54%
~$20k at 7.05%
~$21k at 6.54%
~$21k at 6.54%
I also recently received a gift of around $20k from a relative as a graduation/marriage gift. My first thought was to use $12k of it to wipe out the 8.07% loan, then use the rest to bring our emergency fund closer to $15k.
After that, my current thoughts are:
- Continue her 401(k) match
- Begin maxing both of our Roth IRAs each year to take advantage of this lower-tax portion of our lives
- Throw everything else at the remaining loans, focusing on highest interest first
Given that the remaining loans would still be in the 6.5–7.5% range, would you prioritize the guaranteed return of paying down the loans more aggressively, or would you still try to max both Roth IRAs during residency and then put everything else toward loans? Does it matter? Just wanting to make sure I'm on the right track
Any thoughts are much appreciated