Personal Finance in Your Twenties and Thirties
Take control of your financial future. Kiplinger editors took your questions about student loans, investing, saving for retirement and more.
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As fellow twenty- and thirtysomethings, the Starting Out Kiplinger team regularly offers advice on how to cope with the many personal-finance issues facing our generation today: mounting debts, both personal and national, and seemingly unending un- and underemployment, to name a couple of biggies. Yet while young people face many of the same issues, we recognize that everyone has their own money challenges. So, we’ve rounded up a few of our financial experts to offer personalized financial advice.
Join Kim Lankford, Elizabeth Ody, Jane Clark and Stacy Rapacon on Thursday, July 26 from Noon to 1pm ET as they tackle your questions about student loans, saving for retirement, investing, health care and more. Submit your questions early by clicking "make a comment."
Whether you just landed your first full-time job or are starting to save for a down-payment on your first home, you’re sure to learn a lot. We hope to see you there! -
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Lucas, are you still self-employed? If you are, then your SEP contributions can lower your taxable income, which can be very valuable. But you need to be self-employed in order to contribute. If you are self-employed, I'd recommend investing some money in a SEP to benefit from the pre-tax contributions, but also contributing some money to a Roth, which can be tax-free in retirement. -
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Lucas, I just saw your follow-up message about your freelance work in addition to your full-time job. Yes, you can contribute both to a SEP for your freelance income, and can contribute to a 401(k) or retirement plan at work, too, as well as to a Roth IRA. I did a column with more information about SEPs for freelance income -- I'll try to track down the link.
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Seth, you could get a HELOC, but that rate would be variable, and the likelihood is that rates will go up in the next few years. Also, the federal loan program has flexible repayment terms, so if you get into financial diffiiculty at some point, you can defer the loan or adjust the payments based on your income. For those reasons I'd stick with the federal loans.
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have any of you heard any news re: discharging student loan debt in bankruptcy in NY or the east? I just saw an article about an attorney winning a battle in Cali to discharge student debt - www.prweb.com any thoughts of whether this might be a new trend [which would certainly help many ppl living with huge debt and are underwater, who are considering bankruptcy]. thanks again.
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Hi Alphaman. Is your friend the barber self-employed? If so, then I'd recommend a similar strategy as for Lucas -- if he's in a high tax bracket now, then it can help to invest some money in the SEP, which can lower his taxable income. But it can also help to invest some money in a Roth IRA, too -- he'll be able to withdraw his contributions at any time without taxes or penalties, and can withdraw the earnings tax-free after age 59 1/2.
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Kim, is this the column on Sep IRAs you were referring to? Retirement Accounts for the Self-Employed.
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There is proposed legislation that would allow students to discharge private student loans in bankruptcy (that is, treat student loans the same as credit card debt), but it's still being debated. It is, actually, possible under certain circumstances to discharge federal student loans in bankruptcy, but your situation has to be so dire that there is no possibility you could ever repay the debt. As far as I know, there is no trend toward relaxing that stringent criterion.
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I am maxing out the contribution of my employer in a Roth 401K. Right now 100% of that money is going into a stock managed by the company designed to mature with my retirement date. They also offer other stocks that I can put it in (international, bonds, small and large company). Should I adjust the percentage of my contribution to different ones or leave it all in the company managed one?
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I have 5 student loans that have all defaulted. Each is around $6,000 plus the accumulated interest of about $600 each. I'm worried that my current monthly payments of $300 may be too low in the long run. I can afford to pay more but I'm not sure if I should. I'm only 25 years old so should I pay more now if I have more to pay or should I save that money in the bank and continue paying the minimum monthly payment?
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Hi Jsilotti - In general those funds are designed to cover all of your bases. So if that company is a good manager you shouldn't need to do too much fiddling. But f
eel free to shoot over the name of the company you're using if you'd like us to take a look at its fund in particular. -
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Yes, that is the SEP column! Thanks so much for tracking it down. It also talks about another savings option for self-employed people -- a solo 401(k) -- which has higher contribution limits if you have just a little self-employed income, but you do need to be careful about the limits if you have both a solo 401(k) and contribute to an employer's 401(k), too. If you're already maxing out an employer's 401(k), then you may want to contribute self-employed money to a SEP. Here's a Tax Tips column from last year with more information about the limits and rules: www.kiplinger.com
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Hi again Jsilotti - Upon reading your note again I'm actually a bit puzzled. I had assumed you were talking about a target-date retirement mutual fund, but it sounds like this is something else entirely. Can you tell me anything more about this vehicle managed by your company?
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Since we've received several questions about Roth IRAs, here are a some articles you all might find helpful: The Basics of Roth IRAs, How to Save for Retirement and Higher Education Costs at the Same Time and Should I Save in a Roth IRA or a Traditional IRA?
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While Elizabeth is looking into that, @jsilotti, here's a recent Starting Out column by Susannah Snider on target-date funds: www.kiplinger.com Hope it helps! -
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Sorry, that link seems broken! Here it is again: www.kiplinger.com
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