The time frame we were talking about was closer to graduation, at which point I'd like to see anyone as a resident make so much as to overcome the Roth limit. So, let's say you somehow break all rules cause you are awesome, and start residency as an attending. With the Student Interest Tax break and the Traditional IRA, you can actually get lower returns than "6.84%"and still make more money because you literally will have more money from pre-tax dollars that will compound. Please, don't twist my words again and say "this will happen with 100% certainty," but it will most likely happen because, just with holding onto ETFs alone, it hasn't NOT happened before.,
You realize this is utterly besides the point right? That the fact that you can toss money into a Roth while a resident has no bearing on the fact that you are referring to
not paying your loans
after residency in favor of putting money away into some sort of retirement account, right? So yeah, put money away into a Roth while you can. It is the smart financial decision to make. But that has absolutely no bearing on the argument you made regarding why it is in your best interest to discharge your loans ASAP.
For the time you are in residency, sure, paying towards a Roth (or any other similar investment plan) rather than paying
extra (say, over IBR or PAYE) does make sense. But then you are still left with a ~$400k loan that is has been earning interest the whole time and will continue to do so. So
now that you are an attending, and can no longer pay into a Roth or similar account, what should you do with that extra money you have? Your argument seems to be that you should continue to pay the minimum you can towards your loan and invest the rest because you expect that investment to earn interest faster than your loan will... and that is incorrect.
Since the large majority (I'll give you a number so you don't make some inane point about "majority" somehow being malleable: >50% in the USA) are not bankrupt or in poverty, you're going to have to show me some money magic to demonstrate why future doctors will be bankrupt when current ones aren't. This was the heart of my point which you try to counter below about living in a special time.
This also has no bearing on the argument at all. I never said that doctors will be bankrupt. I brought up bankruptcy to point to the fact that a student loan vs a mortgage is a different kind of debt burden with different sort of
risk associated with it. At the end of your life you will have (almost certainly) had to pay off your student loan + interest entirely. If you pay the minimum towards it every time and use the extra money you don't pay towards it to try and invest in some sort of retirement account then you will have
less total money over your lifetime than if you paid the loan as quickly as you can initially and
then put
even more money towards your retirement accounts. Now, I suppose one could find some clever way to come up with an argument about living long enough that the initial investments made compound enough because you live [xxx] years longer than the date you completely pay off your loan, thus the extra money you put in in lieu of paying the loan would thus become somewhat more in the last decade of your life, but that is a very contrived argument and hardly what you seemed to be arguing (and if you were, still a rather poor argument).
And, of course, all along the way the total amount you end up paying towards your loan will continue to go up so if, for any reason, along the way something
were to happen and render you unable to pay or make your retirement account ROI less, then you are completely screwed and have no means by which to discharge the now significantly larger student loan you've allowed to balloon no matter how dire the situation becomes.
Saying something in an authoritative voice doesn't make it true. Can you provide a credible source for this? It's easy to make statements without proof.
Fine,
here and
here. Obviously not
exactly like the 20's, that's why I said
analogous.
"Despite the stunning contraction of industrial production and trade across the globe, the global economy is still a far cry away from the calamities of the Great Depression.
However, if the economic damage of the current global crisis may have been contained so far, worrisome parallels to the early 1930s remain and preventive policy actions must be kept up"
"This has created a society with more extreme wealth inequality than we have seen at any time since the 1920s"
My point being is that it is not exactly a rosy time for economics and trying to bank on having current investments manage to outpace the interest compounding on a loan the size of a normal mortgage but that has none of the perks or protections that a mortgage has.
It can, but
it's better than acting as the foremost authority on a subject without one shred of evidence. I never claimed to be an expert, so if neither of us are citing sources, let's not pretend to be above one another. Yes, there are no absolutes, but if you are always worried about a statistically-unlikely worst-case scenario, you should do nothing. You and I both knew I was talking on the most-likely scenario, which is backed by statistics (pick whichever non-nebulous and inconvenient measure you wish for that word).
But hey, you are saying these nebulous terms are convenient, but your rebuttal seems equally so. How about we see who is made of more smoke? You can pick any rubric: in what way is this time unique or the worst for doctors financially? You can feel free to ignore that 2008 article, and others like it that show doctor salaries are recession proof, and pick some other rubric. And please, don't be facetious and be like, "Worst negative ROI for doctors ever." You're free, however, to use whatever
credible resource you want, just like the
Medscape post-obamacare survey US News used
http://www.usnews.com/news/blogs/da...re-changes-doctor-pay-still-confusing-unequal
I never argued that physicians won't be doing better than most people in society nor that our incomes are not going to be higher and much more guaranteed than just about anyone else. They are. And we will indeed, for the most part, be just fine
no matter what. Even with ridiculously stupid loans like the ones I've got and the worse ones you are likely to get,
we will still be fine. But that is a far cry from arguing we will be living
lavishly and that this means we can basically ignore our loans and keep them hanging around as long as possible in favor of other investments.
Try and remember what your argument actually was: that keeping your student loan around longer in favor of putting more money away into some sort of retirement investment is a better financial decision. That is simply not the case at all and what I am trying to argue. Everything else I referred to was not to try and say we will be out in the cold and have no incomes or otherwise be bankrupt or poor. You entirely missed my point, and I am sorry if I did not communicate it well. My point was that those other investments you are referring to in lieu of paying loans are
very much subject to those other economic factors. So when
other people's jobs and money tank, even when ours
doesn't, we will end up getting
even less on our investments.
Okay, so you are one of those "the world will go down, and eventually I will be right" arguable truisms. It neither helps nor hurts your point. It's a pointless statement that gets us nowhere in the discussion. I'm actually familiar with the book (via podcasts/interviews) and I don't think you understand what the point of it was if you think it summarizes to, "it is inevitable that every economy will fail." While I empathize some can come to that nihilistic conclusion from the book, the author's point (again from podcasts/interviews) was these events can be predicted (and even prevented). But even that is pointless, because everyone already knew 2008 was going to happen, so I'm not sure what telling someone to read a book does.
No that is not the point of the book nor the point I was trying to make. The point was that all major world economies will be
eclipsed by a new and up and coming one. Basically the idea promulgated by Kennedy was that a giant world economy will have a huge inertia behind it. At a certain point the infrastructure and technological sophistication that the world leader has brought to bear will be eclipsed by the very technologies it has opened to door to that made it prosperous in the first place. From there, economies that have lagged behind will have a higher stepping stone to then eclipse the previous "great world power." Which is why, for example, the Middle East has
better cell phone coverage than the US and why most of the developed has better and faster internet connectivity than the US. And why the Chinese economy will eclipse the US economy.
Now that doesn't mean that the US economy will necessarily crash and burn. I think that will happen because the US population is aggravatingly stupid, willfully ignorant, and run by crooked politicians in the pockets of lobbyists with provincial and very self serving goals in mind. But that is a different discussion. My point is that
when (not
if, which is what Kennedy's book was really about) the US economy is eclipsed then the investments and opportunities you are currently gauging your argument about where to allocate funds is based on will have
even less ROI and thus be even more handicapped in terms of being a better investment than paying down your loans rapidly.
I'm glad I kept this site handy. Let's see... ah, here we go:
http://www.logicallyfallacious.com/index.php/logical-fallacies/97-faulty-comparison
But hey, I'll gladly address this if you don't contradict yourself via a double standard when talking about mortgages.
Dropping fallacies can make you feel like you've made a good argument, except when it is not at all clear how the fallacy applies. By my estimation your correctly pointed out logical fallacy does not apply to my comment. Your argument is that these huge student debts with the worst terms of any debt burden that someone can take on is not
that bad because people wouldn't enter a venture that is financial suicide. I gave an example of people who
do enter into something that
is financial suicide to counter that. So, no logical fallacy applies here mate.
No it's not, and frankly, and I'm sick of your strawmen. Your mutilation of my meaning is hyperbolic and pointless. You and I both know what I mean, every single time you're being hyperbolic and now you actually calling me this is laughable. And your anecdotal evidence is absurd and extreme:
http://www.logicallyfallacious.com/index.php/logical-fallacies/53-argument-from-hearsay
And your inability to actually stay on point and address the
actual argument you made as I have pointed out above is rather pointless as well. Dropping logical fallacies left and right (which, BTW are
informal logical fallacies and therefore are only fallacies dependent on the context, which of course I will argue you are incorrectly applying). The very fact that you are saying "you and I both know what I mean" makes the point nicely: you are using hyperbolic adjectives to make your argument sound more robust and when someone points out that they are exactly that, your retort is "you know what I really mean."
So, I would say you know physicians with poor financial sense. I know many people who make less than six figures, had CC debt that was close to six figures (so around 20%+ interest) and came out NOT living from paycheck to paycheck. These people experienced the same burden as someone with a lower interest rate but a higher principal. So, I don't know how this anecdotal battle works. How many people do I need to know in order to counter your physicians? Are all people equal?
And the repayment terms (including how much to pay) on CC vs student debt are vastly different. Paying the minimum on a student loan is different than the minimum of a CC debt. And the fact that you can do so and not live paycheck to paycheck doesn't mean you are making a financially wise decision, which is what the original point of all this was. You tried to further bolster that argument by implying that physicians will make enough money that we will all live "lavishly" thus implying that we will most definitely have surplus money to invest as you are proposing. You are also ignoring the fact that this
is a different time right now. The generation of physicians before us never had debt like we do and our debt is only getting worse. Our pay is also getting worse, though of course it is not as apocalyptic as the old guard would have us think (it is apocalyptic relative to them because they were exorbitantly paid). The point being is that you are making an argument based on the current population of physicians that do not and will not have the debt:income ratio
we will. Because we are caught at the point where debt (and debt terms) are getting worse whilst income is
also getting worse. This doesn't mean we will be paupers by any stretch, but it does mean that your initial argument that we are better off investing the money elsewhere than paying our loans is yet again hamstringed.
What exactly is your point, and the point of contradicting yourself? Are you telling people the finances cannot be managed? Or are you saying it's manageable?
So to make it clear what, exactly my point is:
There is no conceivable way that keeping around student debt
longer is a
better financial decision than discharging it as quickly as possible. Simple as that. All the reasons
why are interesting, arguable, and certainly not set in stone. It
could be that you are right. I think there are ample reasons why you won't be and I have laid many of them out. So rather than get bogged down in the weeds, how about getting back to the
actual point?
Remember when you said:
Also, why the frantic desire to pay off student loans? From my understanding, you actually want to keep student loans (not other debt) for as long as possible because the rates are so low, and you can put your money elsewhere and get equal/greater returns.... Compounding interest: a Roth IRA with compounding, tax-free interest is a better investment even against a 7% loan
Your point here is that keeping the loan around longer will be better
and you even made the
specific argument that a Roth IRA will be a better investment against that loan you are keeping around longer. My point has been that
no, keeping that loan around longer is
not a better financial decision and that you will not be able to keep investing in a Roth in order to try and make that a better overall investment than paying down your loan quickly. So when you say:
I'm not saying this is a solution, but six figures "in debt" isn't a big deal when you are making six figures a year.
Sure, it depends on what you mean by "big deal." If you mean that you will be able to
afford your loans and still be able to live comfortably, sure., then I agree with you. But if you mean that it is a better financial decision to make
in the long run to keep that loan around for as long as possible (which is exactly what you argued, as I quoted above) particularly by using a Roth IRA as an example of why, then no, I do not agree with you.
