Financial Planning When You’re Over 50 With Student Loan Debt

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Securing your retirement with student loans still looming over your head and over 50 years old will be rough but not impossible to tackle. Say you have Parent Plus loans; your best option is to consolidate them and keep them separate from other federal loans. By consolidating your Parent Plus loans, you become eligible for income-based repayment plans that can range from 10-20% of your income.

It is imperative that you continue/start to max out your retirement accounts because by doing so reduces your student loan monthly payment. Being over 50 allows you to contribute an additional $6,000 on top of the $19,000 limit for those not over 50. Under ICR, student loan payment is calculated as follows; AGI (Adjusted Gross Income) – 100% of the poverty line times 20%. For example, Martha and her husband Jim combined make $250K and owe $200K in student loans. 

If they decide not to max out retirement accounts, according to ICR their payment would be 20%* (250,000 -16,910)/12 = $3884.83

However, by maxing out their retirement accounts, according to ICR their payment would be 20%*(250,000-50,000-16,910)/12 = $3051.50

Again, if you are over 50, retirement savings take priority over paying off student loans. If you owe less than $50,000, it is best to refinance your loans preferably through a credit union. Another great strategy is to wait until you are 70-72 years old to claim for social security because your benefit will increase by 32%. 

If you are making under $50,000 a year, consider supplementing your income by taking on a second job that fits your passion/interests. For example, if you love driving you can be a Lyft driver,  if you love dogs/cats you can be a low-maintenance part-time pet caretaker on the weekends, or you can be a personal concierge by helping elderly neighbors by buying groceries, picking up dry-cleaning and gardening. 

Read my “The Emergency Fund” post , as a guide for planning for retirement but with a longer time-frame to suit retirement years. Make sure to include a buffer expense for unexpected medical bills and home repairs; in short, you should have at least 2-5 years of living expenses saved. After saving 2-5 years of living expenses and maxing out retirement accounts you can tackle student loans faster by making larger payments. 

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