As part of an employment switch, my new employer fronted $325k to buy out my old employer's non-compete clause.
The $325k was to be repayed without interest, through certain paycheck deferrals. Once a quarter, an escalating amount of money will be repayed. Now, 2 years in, the bulk of the repayment is to take place. At my ~32% tax bracket, this would amount to ~32% taxes on ~215k remaining, without realizing any of that income.
Soooo, I was thinking what if I payed off the amount owed via a personal loan. I am able to get a bank loan for the amount of the outstanding debt at 3.8%. My idea is that I can then use the income that would have been deferred to invest in an index fund, which would probably yield me ~7-8% of the next three years. That would seem to be better than just deferring income?
Current: 215k outstanding debt, no interest, income not realized (goes back to employer)
Proposed: 215k debt payed off with personal loan at 3.8%, realized income invested in index hopefully returning 7-8%.
Provided my estimation of the return on investing is true, I think the math works out? Any holes people see in this strategy would be appreciated.