Saving/Investing for Student Loan Forgiveness Tax Bomb

Hello,

Looking into this for a friend, who will be graduating next May with about $500,000 in debt, expecting to start off making $100,000/ year.

Not sure how familiar everyone is with the forgiveness plans, but basically the forgiven amount is treated as taxable income that year. Because the payments on the plan will most likely not even cover the accrued interest, by the time forgiveness is available in 20 years, the total debt will be somewhere between $650-700k.

The idea is to save/invest monthly over the course of the next 20 years, in order to have enough to pay the 'tax-bomb' that is expected to be around $250k.

Because the target date is 20 years away, I feel straight/mostly stocks are ok for the first 5ish years, but definitely will need to get more conservative as the date approaches. Looking for advice on how to save/invest this money throughout the course of the next 20 years (funds/allocation/how much to save per month/etc.) The monthly payments are based off of previous years income, so anything that will keep yearly income down will help as well.

Was thinking of doing a target retirement fund set for 2040 to keep it easy for them, but not sure if that is the best idea. Will most likely be going with a taxable Vanguard account.

Let me know if any other info will help and I can edit it into the post.

Thanks a bunch!

Submitted July 17, 2017 at 11:26AM by Very_Shagadelic
via http://ift.tt/2urqNg8

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