Leaving a small balance in student loans – to help credit score?

You’re in a great situation.  The most hassle-free way is to pay them off completely early.  However, if you do want to milk the situation for credit score reasons, you can do that as well.  Like iamlindoro noted, you need to be making regular payments to get credit score clout.  So, if you currently have a really low balance,  the regular payments should also become really low, especially if you’d be essentially dividing the balance by the number of months until 2021.  Thus, your credit report would still show you making regular payments on your loans that are very easy to manage financially.  Realize you’d still be paying a slight amount of interest for this benefit.  So you’d have to calculate the benefit to your credit score vs. the inconvenience of still worrying about them + the interest and see which is the best move.  Call your lender to make sure beforehand that the payment plan you would owe each month would be a small fraction since you are ahead of schedule and NOT the original payment plan amount that would likely zap your loans shortly (in which case, just pay them off and move on).

Traditional vs. Roth and the Saver’s Credit

I’ve been doing some tax planning, and it seems like, due to the fact that my wife and I were each only employed part of the year, our adjusted gross income is right in the range where if we make all our 2012 IRA contributions Traditional then we get the 50% Saver’s Credit, but if we make them all as Roth we only get the 10% Saver’s Credit (in other words, we’d get a $2000* credit vs a $400 credit). More specifically, maxing our Roth IRAs would make our AGI ~$43k while maxing our traditional IRAs would make our AGI ~$33k and the cutoff between the 50% and 20% saver’s credit is $34,500.

First of all, am I understanding this right, or is there some catch where I’m calculating 1040 line 32 wrong (and I can’t deduct the whole amount of the traditional contributions)?

Second, generally Roth IRAs are supposed to be “better” when you expect to be in a higher tax bracket in retirement (and I do, especially given my crazy low AGI this year). Does the increased Saver’s Credit change that in this case?

*We wouldn’t get a $2k credit, we’d get a ~$1500 credit because it’s the lesser of the credit and our tax liability… but you know what I mean.