This is where the plan is failing. He needs to make enough to support both of them by himself or the plan falls apart. I’m also assuming no kids. That would add another level of complexity (both in terms of living expense and in terms of the ability to just leave to another country).
Also if the plan is being implemented properly she would be making far more than her required loan payments every month. She should be sending in extra to whittle away at the principal.
This makes no sense. Why go in with the plan to run up debt for a degree you’re never going to use? Even if you’re planning to never pay that debt, you still wasted all those years in school you could have been working.
They never had a plan. She had her school debt long before they married. She makes a good salary AFAIK but her monthly payments are in the $2-3k range if I remember correctly. And his biz barely broke even, with little left to take home and contribute to the family expenses, so I don’t think she had much room (or financial discipline) to make extra principal payments. No kids, so bolting to Japan isn’t an issue in that regard.
I agree that it makes no sense. But no amount of pleading with him not to do it could change his mind.
How unemployable is this guy? Presumably he has an undergrad degree of some sort. Is it really impossible for him get some sort of 70K a year job? I’m not saying that it would be trivial to do so, but I’m curious about how hard he has tried and how motivated he is.
If he can do that, then wife’s salary goes entirely towards debt and everything falls into place.
Maybe the wife has the type of loans where extra money paid doesn’t go to the principal? That is a crazy thing I had never heard of until this whole student loan forgiveness debate happened this year.
But anyway this guy seems awful and wants a way to beat the system rather than a way to succeed within the system so us finding solutions for his problem online aren’t going to do anything.
If I was going to make a bet that big with my credit rating, I’d probably pay for legal advice on what the ramifications are of leaving behind a debt in another country with no intention of repaying it. Without actually knowing anything, I could see this being either very low risk (your lenders in your new country of residence will have no way of getting a line of sight on your old debts) or it could be a catastrophic choice (when you try to get a mortgage in 5 years your credit report comes back with giant red block letters saying DO NOT LOAN). I don’t know what the answer is but I wouldn’t just make an assumption.
Well where does it go, then? It has to go somewhere? Do they just send it back to you immediately.
I have heard of loans with penalties for early repayment. You would have to plan with that in mind and depending on the details, I could see that throwing a huge wrench into the plan.
Somewhere around 2007 I was paying back a student loan for culinary school, and I discovered overpayments went to the NEXT payment. I had to manually indicate I wanted to pay down principal and not pay future payments.
I read in some student loan schemes the lender gets to decide how early payments are treated and they can put it first to fees or future interest rather than principal. I have no firsthand experience with this but the rules are different than they are for paying extra on a mortgage
I believe she’s paying $2-3k a month in repayments as it is, with the balance barely budging. I think he said her rate was an ungodly 6%. Don’t know how much more room there is in the household budget for an extra principal payment, even if she’s allowed to.
Company merger is happening and they are closing our 401ks in 2 weeks. Is there any reason I should roll my existing 401k into an IRA over just moving it to the new 401k plan?
I think the only reason would be if the investment products at the new 401(k) plan are terrible. You should have access to all the information about their fund lineup, if they have low cost index and/or target date funds then I would just roll over to the new plan. If the new plan only has high cost actively managed products then you might want to take your existing balance and move it to a personal account where you can buy your own low cost retail products.
Thanks. They didn’t provide it yet so I asked to get them prior to the deadline.
Feel free to IM me if you want to have a 1-1 chat about it. I run my company’s pension plans and sit on the US pension committee for my company so I think about this stuff 365 days a year
A better question is if there’s any reason to leave it as a 401k when you could turn it into an IRA. Your 401k will lock you into plans with limited funds and likely higher fees. Your IRA can be moved to whatever custodian you prefer then moved again and again if you’re not happy. You can invest in nearly anything. You can later convert it into a Roth if you have a year with low taxes. The best part of moving jobs for me has always been liberating my 401k balances with absurd fees into my near zero fee IRA.
Some 401k plans do have fantastic deals, like an ultra low cost target date fund lineup with fees even lower than retail index funds. But as you say many plans have awful funds. Its worth looking closely at the find lineup.
By far the most important thing about 401k programs is to enroll to get the highest employer match that you can. But decisions about the rollover of prior plan benefits shouldn’t impact that.
One potential downside of this line is that doing backdoor roths in subsequent years will be harder because he will get pro-rata ruled by this (presumably large) IRA.
Something I’ve now heard several times in discussing job hopping is people who get lowballed then the HR drone says “actually its better to bring you in at the middle of the range so we can give you bigger raises later.” Who falls for this nonsense?
People who were actually happy with the pay in the middle of the range and literally nobody else. Most people are legit trash at negotiating.