Student debt is a real problem for many college graduates. Over 70% of students will graduate with loans in 2015, according to the Wall Street Journal, and the average debt per borrower is an astounding $35,000. What are some of the best ways to pay down that student debt as quickly as possible?
If you’ve been reading my blog you’d know that I think Roth savings are a great opportunity for many, many investors. If you plan to max out your contributions this year you can effective save more by saving in a Roth, whether an IRA or 401(k). Recently I’ve run across a common calculator available on the internet. When a user puts in their details it is supposed to help you compare saving in a Roth 401(k) or traditional 401(k). However, the default assumption is that when you decide how much to contribute you will reduce the amount you will be saving in a Roth by the amount of taxes you would have to pay. That seems like something a rational investor would do, right?
Suppose that you’re a middle-aged professional with a 30 year retirement time horizon. Your portfolio is 100% invested in U.S. equities–it consists of 100 shares of the S&P 500, worth $187K at current market prices. Assuming that the fundamentals remain unchanged, which outcome would leave you wealthier at retirement: (1) for the S&P 500 to soar 200% in a glorious bubble-like melt-up, or (2) for the S&P 500 to plunge 66% in a brutal Depression-like crash?