Message Font: Serif | Sans-Serif
No. of Recommendations: 0
Hello all.

Someone on the credit card / consumer debt board suggested I post here, as this is probably the better place to ask.

Here's the deal.

I got a promotion and raise this year, effective next year (I'm in academia--we are a little weird with stuff like that). My raise is about $3,000 and I'm wondering what to do with it. My promotion increase is 1750 and my raise is about 1200. (Right--I'm in the Liberal Arts. How could you tell?

I need to increase my living budget by a bit, so not all of the money will get put away. At the minimum, I will put away the total 3% raise, absorbing the tax bit from the other raise I got.

Here's the scenario:

I am 35, single, and own my own home--well, the bathtub and ceiling fans, if you count my equity. :) I have no car payment.

I put in 10% pre-tax into my 403b which is matched by my employer. I get no more matching, although I can put more money in.

I have an anemic Roth (I mean, anemic) which I haven't been funding at all. The Roth itself is doing fine--about 10% annually--but I have only about 300 dollars in there.

I have 42K in student loans which are currently in deferrment (0%) and on which I'm paying $500 a month. This is my snowball. I have a 30 year pay-off plan, which I have no intention of sticking to. My goal is to have it paid off in 4 or 5 years. (oh, how I dream of the day I send my last check to Sallie Mae!) These can not be consolidated, they already have been and are normally at 7.75%. I have never, and probably never will, reach the point where I can't deduct the interest on my tax return.

I have an efund, short-term emergency fund, and long-term emergency fund, so I feel comfortable NOT putting my raises towards that. By the time I actually get my raise, my credit card debt will be so close to zero, it won't factor into the picture.

Here's my question: is it better for me to put the money away pre-tax, despite not getting matched or put the after-tax money in the Roth or stick it all to the student loans?

A TIAA-CREF person says to fund the Roth because the long-term tax advantages out weigh the pre-tax benefits. What do you guys think? I am egotistical enough to want to say "ahh, yes, I put away 13% of my gross" at parties, but I also have bag-lady syndrome and want to avoid that at all costs :) If Roth is the way to go, then I'm there. (Or, if student loans are the way to go, then I'm really there!)

Thanks much in advance.

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.