Hi Michael,

Thank you for getting back to me. Appreciate the advice.

Chris

Hi Chris, if the Roth withdrawal doesn’t hit your AGI (and it shouldn’t), then it shouldn’t impact your REPAYE/SAVE payment calculation.

Great information on the relationship between retirement savings and student loan debt.

I am 63 years old and my Roth IRA account is over 10 years old. I’m thinking of withdrawing about $20k from the account but am unsure what the implications might be when my student loan payment is recalculated. I’m currently under the REPAYE program which is going to be converted to Biden’s SAVE program. I’m told that it won’t hit my AGI but I’m still not sure there won’t be student loan consequences. Can you clarify the situation?

Thank you,
Chris

First, thanks for the kind words.

Second, this is a great question.

Like you, I’m making IDR payments on the path to forgiveness after a couple of decades, and the tax bomb is a real concern. That said, I think the taxb bomb will eventually get permanently eliminated. It has already been temporarily eliminated and it doesn’t make sense from a public policy standpoint.

However, it is certainly possible that I eventually get stuck with a big tax bomb bill. My backup plan is designed to hope for the best, but prepare for the worst.

I have benefitted and enjoyed reading your material on this site. I am interested in reading more of your thoughts regarding strategies and understanding the dilemma of 20 years with not paying interest on an Income-Driven Plan while optimizing contributions to reduce AGI.

It appears that this will be a tax bomb waiting to go off.

What short and long-term strategies would you consider?

Thank you,

Benjamin