[Editor's Note: I often get “thank you” emails from doctors and other professionals that have really been helped by what I've written on the website and in my book. This guest post grew out of one of those emails. It was written by the spouse of a physician and a regular reader about their financial journey through the training years. I thought readers might find it inspirational and motivating. I'm going to preserve anonymity as much as possible, but if the author chooses, she may answer any follow-up questions in the comments section. Enjoy!]
My husband is three shifts away from completing his residency in Emergency Medicine. It’s been quite a financial journey! I’m the family CFO, looking to share the beginning of our journey with those just starting theirs, and learn more from those who have climbed successfully out of the pit of student loan debt and on to financial freedom.
Medical School Sticker Shock
I remember feeling nervous at the sight of so many zeros. Seven and a half years ago, my husband (then boyfriend) and I were looking at the financial aid package offered by one of the medical schools he was accepted to. It was all loans. At a private medical school. We quickly realized he would finish with close to $300,000 in medical school debt if we took the maximum loans allowed. We wanted to stay together while he started medical school and I started graduate school. That left two cities, both with similar medical school costs. After chatting about military service and delaying medical school a year to re-apply to cheaper schools, we decided to take out the loans, start school right away, and then we would be able to pay off the entire debt the first year after residency with the salary he earned as an attending. (A bit of wishful thinking now, looking back, but I would make that choice again today). As a Ph.D. student in the sciences, my tuition would be covered by the school and I would receive a small stipend that we would live off of. We decided to commit to frugality and try to finish with less than $250,000 in debt.
Budgeting in Medical School
At the start of medical school, we had a monthly spending plan that we tracked in Excel, then YouNeedABudget. [This firm is local to me, BTW, and I once had dinner with their CFO. Great product. -Ed] I credit this plan with keeping us frugal and preventing us from building up more debt. The money we saved in each category could roll over to the next month, and provided a bit of guilt-free spending money in the midst of all the debt. I was also determined to save for retirement. I contributed $60 a month to a Roth IRA until I found out the graduate student stipend was not earned income and we were ineligible to contribute to an IRA. Undeterred, I contributed the money to a general investment account. I learned by accident the importance of tax advantaged retirement accounts when I did the taxes that year and saw the mutual fund related taxes.
Our Net Worth
You can see the effect of the 2008 great recession on those investments on the Net Worth graph. And the effect of getting married in 2009 when I added the medical student loans to the net worth. It was worth it.
It was hard to watch the Net Worth drop every six months at the disbursement date. It was equally confusing trying to keep track of the 26 (or 34, I still can’t tell) Grad Plus, Stafford Subsidized/Unsubsidized, and Direct/HEAL loans at 3-5 different loan companies that kept selling the loans to different companies during the collapse of the economy. The goal of not crossing the ‘quarter of a million dollar mark’ kept me committed to tracking the net worth. In 2011, my husband finished medical school. My notes say we took out $221,000 to pay for medical school, plus $19,000 from Undergrad with interest rates ranging from 1.88- 8.5%. At $240,000 total, I was pleased that we didn’t cross that mental threshold of $250,000. But it was still a lot of zeros.
Loan Repayment Options
We were researching loan repayment options and settled on the IBR plan, consolidating the loans to a single subsidized loan and a single unsubsidized loan. The Accrued interest was capitalized to principal and we now had $271,000 of loans to repay at a 6.25% interest rate, crossing the quarter of a million dollar mark despite our best efforts.
Should we pay off student loans or invest?
With a simple interest rate of 6.25% on the loans, we were in the grey area of financial advice to aggressively pay off loans greater than 8% interest, or slowly pay off loans less than 6% and invest the difference. We decided to invest. I took the general investment account and maxed out a Roth IRA for him – then learned that one spouse with earned income could contribute to an IRA for each spouse – so I maxed out a Roth IRA for myself that first half year of residency, too! As I began my postodoctoral fellowship and life as a scientist, we decided to continue living off of his residency salary, and save my salary for retirement maxing out Roth IRAs for each of us as well as contribute to a 403(b) for him and a 401(k) for myself. We’ve nearly maxed out each of the retirement accounts since his second year, now saving about 35% of our gross income for retirement.
I do think contributing to the general investment account, Roth IRAs, and 401(k)/403(b) during the training years helped us learn quite a bit with small sums of money. I also find that we don’t fear investing like many of the other residents who are about to have a significant pay bump, and don’t quite know how to handle it. But it does mean that the student loans have accrued interest faster than we’ve been paying it off during the residency and are now sitting at close to $300,000 (Ouch!). However, our investments during the training years experienced an outstanding bull market, and it’s been nice to see the net worth start increasing – and gain momentum.
We’ll be worthless in about one year, and will celebrate with Coke Zero and Cheerios. We won’t have all of the loans paid off that first year like we planned – that may take about three years from now. A bear market could change those predictions, but we’ll continue investing (and appreciate the opportunity to buy stocks on sale) while also looking forward to celebrating when we finally get the student loans paid off.
The Next Chapter
As my husband begins working as an attending next month, I already see most of the money going to pay for taxes, insurance, retirement, and student loans. Thanks in large part to this blog and community, we have plans for which index funds to continue automatically investing in, and know how to contribute to a Backdoor Roth IRA if we need to. We’ve also picked up disability and umbrella insurance (something I didn’t realize he needed before finding this blog – thanks WCI!). We’ve decided at this point to aggressively pay back the student loans, instead of saving for a down payment on a house. We’ll try “borrowing money from the IRS to pay off the student loans.” This could save us $5,000-17,000 in interest depending on if we continue investing or stop investing to pay off the loans. Thanks to WCI and the community here for your inspiration and positive influence on our net worth and financial health!
What financial decisions did you make during med school and residency and what was their impact on your net worth? Comment below!
Congratulations on your financial management!! We are 20 years out of residency and started very similarly to your family. Several of the topics you discussed were instrumental in helping us on a very successful financial path. I’ve added a few points of my own.
1. Plot net worth annually. It really helps you see the forest for the trees.
2. Treat the family finances like running a business. I loved your comment about being the family CFO. Over the years my husband and I have passed this responsibility back and forth. We decide big picture stuff together but one of us, me at present, makes it happen.
3. Start investing early with the caveat of keeping the amount small relative to paying off student loans aggressively. Many of our early mistakes (Worldcom) were great learning experiences for the dollar amounts looking back in time.
4. When you leave residency keep housing costs low and attack student loan debt. We bought a small home in a nice neighborhood for resale in a low price range. Definitely not your typical doctor home. We would have rented but lived in a small town with a limited rental market. And, with multiple kids and pets we were not exactly who a landlord was looking for. We paid over twice as much monthly on our loans than on our housing costs. Even now that we are in a much “nicer” home, we have very fond memories of those 3-4 years.
5. You will make mistakes along the way but don’t beat yourself up. Learn from each one and try not to make the same one twice!
Congratulation again! Best of luck in your future!
Great post! We did a lot of things to make sure we would be financially sound during residency, many of which were outlined in the post from a few weeks ago, “Financial Survival as a Resident”. I think the best decision was that my husband did not apply to any residency programs where the cost of living was high, and we highly ranked programs (and matched) where the health insurance premiums were covered by the program (makes a huge difference in the budget!). As a result, I’m able to stay home with our kids and we save 20% a month (besides 10% giving). Unfortunately, there are no moonlighting opportunities here, so we haven’t been able to invest as much as I would like.
Our student loans have crept up over $200k because of interest (my husband is PGY5), but we hope to have our loans paid off within 3-4 years of being finished (2 more years!). Thanks to websites like this, I feel like we can definitely achieve that! Looking forward to hearing what other people have done with help with their net worth during residency.
Wow. I admire the poster’s methodical way of handling her husband going to Medical School and paying off the student loans and learning how to invest. My story is alot more reprehensible. Though we came out clear from it in hindsight if I could do it all over again I would handle it much better.
I met my husband when he was a resident. While we were dating, I never asked my husband about his finances, I had NO CLUE. As a management consultant, I was saving up money jetting around and all expenses paid for, so when I came back I would take him out to expensive restaurants and spend money like it was nothing.
This lackadaisical attitude towards money translated to when we planned to get married. I enthusiastically planned what would be a ~$50K wedding, using whatever was left in my savings and paycheck. I told him I expected expensive designer rings, which somehow he squirreled the money to buy for me. still no clue about his finances.
The day of reckoning came 2 weeks after our wedding. I decided it was time to share our finances. I knew there were student loans lying around but had no clue. After making him tally it up, there was about $100K in student loans. 4 years of dating and reckless consumption and I had NO CLUE he was living beyond his means. I spent the entire day crying, kind of a weak emotional response.
I think the only saving grace was that he only had $100K in student loans (which is surprisingly not that high for medical student loan debt) and I still had some savings left. I took the rest of my life’s savings after grad school and wedding at that point around 25K and put it towards his high interest student loan debt. I then drew up a strict budget, my tool of choice was mint. Every spare dime we just started throwing at the loan debt. In one year we paid it off – at thanksgiving.
If I could do it over again – actually discuss finances while still dating. We were just lucky that I was a relatively high earner and his student loans weren’t that high. Still glad i married him though!
great story, thanks for sharing. your husband is really lucky to have you take charge of his financial life, wishing you guys the best now that your debt is paid off
Love this. I’m a current PGY-3, affianced to another PGY-3, and with two people’s worth of student debt our net worth is currently hovering somewhere down by the earth’s molten core. We’ve made very similar decisions so far as the original writer, however we decided earlier this year to shift our financial efforts away from investing more towards loan repayment, given the indications that the oh-so-amazing-but-likely-never-to-be-realized Public Service Loan Forgiveness program will be unlikely to exist in its current state to significantly help us out. So instead of saving and investing 30%, we are limiting our investing to maxing out two Roth IRA accounts and then putting everything else to paying down the higher interest loans in addition to the IBR payments. We’ll see if that ends up being wise, as mentally it was way more fun to invest in our 403b accounts rather than the debt. I suppose as long as we’re not spending it, we’re doing okay. Keep up the great posting!
I agree; as long as you’re doing one or the other instead of spending it, it’s probably a good decision, assuming you won’t be going for either PAYE (20 years, taxable) or PSLF (10 years, tax-free) forgiveness.
Great post, thanks for sharing. My wife and I are following a similar strategy, though with the added complexity of having children in the mix. In follow up to a recent comment left by a reader, I will say that the one missing piece of information that would literally change the lives/financial situations/career trajectories of thousands is whether or not the PSLF program will exist 10 years from now, either in its current state or in a revised state. I have every intention of going into academic medicine after my residency no matter what happens with PSLF, so I suppose from a career standpoint it doesn’t really matter. Whether to invest in retirement or paying down debt though is a huge question mark. If PSLF will stay the same, investing in retirement accounts with minimal income-based monthly payments to federal loans would be appropriate most appropriate. Call me overly optimistic, but I tend to believe that if PSLF were to be capped or eliminated alltogether, there would be “grandfathering in” offered to those of us who have submitted the proper paperwork and have begun paying in qualifying payment plans while the program is in its current state. In the past, most major changes that have been made to student programs have included some bit of grandfathering to those already participating in the plan. I realize that it is certainly not a given that this will be the case with PSLF, but unfortunately many current residents are being forced to take their best guess at what will happen and base their financial decisions off of this. Not ideal. Either way, I hope I’m right…
Kids do complicate things — I wish you the best of luck. But kids (and enjoying them while you are still young and active) are worth it. Because I had them, there was no way I could have begun retirement savings while in training.
We made the decision to pay off all of our debt as fast as possible (it took two years), and then just stay in that mode. I’m not sure we would be any farther ahead had I started with tax-deferred savings a couple of years earlier, especially since my consolidated student loan interest rate was 7%. (That was thought to be good in those days.)
We then stayed in saving and investment mode, and lived well below our means. (The house we lived in for more than a decade after getting out of training had a price that was about 30-40% of my annual income, for example).
For people coming out today who can’t be done paying off in a couple of years, who have low interest rates on their student loans, and who maybe even have the possibility of loan forgiveness coming up, I think that maxing out on tax-advantaged retirement accounts first and then doing what you can on student loan is probably a good idea.
On the other hand, debt can be soul-crushing. Even had there been a modest financial advantage to dragging it out, I’m not sure I would have done any differently. Paying off that last piece of debt was an ecstatic day I’m not sure I would have wanted to delay by even a month…
Oh, and while my comment was meant to be a response to Anthony, I want to say that this is an inspiring post! Thank you so much for publishing it.
My amounts for student loans are about the same as the original post and I am a PGY3 and will be in training likely until the end of PGY6. My main concern about this post is that although getting the monkey of student loans off your back may feel good, a more savvy approach would be to refinance all of the student loans into one loan that has a much lower interest rate (which I’m sure you would qualify for given your spending/saving habits) to a very low interest rate, say 3-4%. You could then pay off the loans over an extended time, say 5-10 years, and acquire some other assets – peer-to-peer lending, real estate, and even stocks – that will likely yield much much better than your interest rate on the loans. I understand that when you finance out of federal loans you have some exposure, such is no forgiveness in the case of death or disability, but those are unlikely event and you could insure against them – life/disability insurance. The one thing that I am uncertain about is whether you payment on interest is still tax deductible after refinance; I’m guessing it is not though. Someone correct me if I’m wrong.
I am not exactly sure what my plan will be when I get to that point but having a low, low interest rate on that much money is generally hard to come by at this stage in our lives, so it is worthwhile to consider taking advantage of it.
I am pretty sure you cannot realistically find anyplace or anyone who will refinance you for that little. If you know of something, for the love of Pete pass it on. Even with the two private refinancers it doesn’t like like we can get anywhere near 3-4% — more like 5.5-6% best for us. Such a bummer, and barely seems worth it when you add in the additional need for life insurance back up. Argh.
https://www.sofi.com/customers-clients-300/?campaignid=9095&mbsy=3vw27
This is a link from WCI site. I haven’t looked into the details of it but it makes sense to me that interest rates could be this low because this is such a low risk loan. 5-6% is highway robbery IMO.
You can get 3-4% variable, but not fixed. Risk isn’t too bad if you get them paid off in less than 5 years.
4% isn’t a particularly low interest rate. And it isn’t the refinance that makes student loans non-deductible. It’s the income level of an attending physician. I’ve blogged about this issue here:
https://www.whitecoatinvestor.com/student-loans-vs-investing/
and wrote extensively about it in the book. There is some room for balance, but don’t get too comfortable with debt, especially 5%+ debt.
Paying on student loans at, e.g., 6.8% guarantees a 6.8% return PLUS your income tax rate times whatever you pay in interest, if you do this before becoming an attending. I was able to discharge my $150k student loan in the 12 months after residency, only to learn that the large chunk of that which was interest wasn’t tax-deductible (due to my income, as WCI notes). Take tax deductions when you have them. There are tax-advantaged investing opportunities in training, but they will usually contain more conservative options than P2P, real estate, and individual stocks. All meaning that a “more savvy approach” may expose you to more risk without as much compensating potential upside as first appears….
I have paid off all my loans and invested over 7 figures. I think I got more relief and joy from the former. It is much easier to continue living like a resident for an extra 2 years and paying off a bulk of your loans. I think it’s too optimistic to start saving in hopes of better rates while debt is collecting more interest. There is always time to save more later. I think you learn better “spend less” behaviors if you set your goals to pay off 1/2 or 1/3 of your debt each year after residency rather than saving $17-23k in a 401 or 403 and IRAs.
I have to agree strongly that the day I was debt-free (other than my mortgage) was a much bigger day for me than was the day I realized my net worth had crossed into 7 figures. That is part of why I did the 2 year plan to debt retirement. Debt can be soul-crushing.
I think that the alternative approach is mainly called for if you are in a situation (high debt, low income, or both) where it really is impossible, no matter how cheaply you live, to pay off all of your student debt in 2-3 years.
Being in debt is very stressful, but having the years tick by without a retirement account is a not-too-distant second. Knowing that it was only a couple more years until I started made it bearable. If I were going to have to wait 7-10 years? I’m not sure my nerves could have handled that, and I might have taken the slow boat on student loan debt so I could start maxing my 401K.
As WCI said, the main thing is not to spend that money.
I don’t think I’ve ever recommended someone skip retirement saving in order to pay off debt. I recommend they live like a resident so they can do both at once.
Very well said! We did the same path as you with similar results. Carrying around big loans injects risk into your life especially as you start having kids and health issues as you age. Wealth can be built with or without debt. By plotting our net worth years ago as this poster is doing now we saw for ourselves that our path worked better with paying off debt faster.
The truth of the matter is that with the income of most physicians and a reasonable standard of living (by this I mean a nice house but not 2 million dollar house and not buying expensive stupid luxuries like sports cars, etc) and know how to invest (on their own, not with a swindler) are going to become very wealthy over time.
The risk of those student loans are essentially nil if you have some liquidity in your investments. By this I mean if you have $300k in investments and the outstanding balance on your loans is $100k the investments are there for your protection. If you have some crisis, you can sell your investments and pay the loan. From what I have seen on this blog and from colleagues of mine, everyone sees student loans as some monster that needs to be beat as soon as possible. However, if you look at the loans as low cost capital (if you can refinance them to a good interest rate), the monster can hang around for a while as you get rich off the money you would have otherwise thrown at the monster.
How much of a difference it makes depends on the performance of your investment vehicles but it could be substantial.
Sure, if you graduated in 2003 and have loans at 0.9%. But if you graduated since then, it’s quite likely your BEST loan is 6.8%. That’s a monster. Refinancing is an option, but you’ll be doing well to get to 5% fixed or 3-4% variable. Still a halfway decent investment.
At the website link you gave, the super low interest rates are on the front page. Inside, they quote 2.66 to 5.0% variable rate and 3.62 to 7% fixed. Call me a hopeless skeptic, but I would bet that if you have a severely negative net worth and little or nothing in the way of assets, such as someone has when first coming out of residency, you will be paying on the high end of those rates and not the low end.
I really don’t know how lenders view the risk of student loan consolidation, but I have a hard time believing that they would price it as the same as they would a mortgage loan, which is what one is talking about in the 3-4% range.
I would love to be wrong for the sake of my younger colleagues who could use the break.
They won’t give me the exact data of how many people get the lowest rates, but I’m assured it is a significant portion. But your skepticism is certainly warranted. Many WCI readers have no qualified for the lowest rates.
Years ago, we did agree with you. But when we plotted our net worth and looked at the math paying off the debt was far better for us than how our investments were performing. We really were surprised. The math may be different in your situation. Hence my recommendation to follow the plan of this post and really plot net worth. Be willing to change your theory if it doesn’t come true in reality. Just be flexible and monitor your real results.
Consolidation loans to doctors for their student loans may be low risk, but they are still unsecured loans with no collateral backing them up. At the point of highest risk to the lender(the first few years), the doctor has no assets and a deeply negative net worth.
3-4% is a good rate for a house or car, but those can be repossessed with little effort, whereas going to court to garnish a physician’s future earnings would be costly.
Maybe those lenders are out there, but I wouldnt be surprised if they were quite hard to find.
I agree that becoming debt free would likely be one of the most momentous and celebratory occasions in life (I unfortunately don’t know this joy yet). I also however strongly believe that I’d rather have the debt hanging over my head knowing that I’m doing the best thing for my long term financial plan, rather than pay off debt sooner at the expense of either potential debt forgiveness or contributing a bit more to retirement/savings accounts. I do not in any way feel inclined to pay off my debts sooner just so I can be debt free, but rather I plan on doing whatever will allow for the greatest financial gains in the long term. Unfortunately with student loan interest rates around 7%, there aren’t too many ways I could invest money to get a better return than simply paying off my debt (my residency program does not match 401k contributions). Again, the wildcard being PSLF.
As a lowly premed, I don’t have anything helpful to say, but I just wanted to say happy anniversary, Dr.WhiteCoatInvestor. I hope it was a great one!
– Kate
It sure is more fun to read all the nice comments on a thread like this one instead of all the mean things people say to me on the whole life threads.
In reference to above about refinancing student loans. I assure you I had a negative networth, no assets besides my car, and was actually still in my last few months of residency when I refinanced through DRB. Ended up with 2.99% variable. You won’t know till you try, but definitely worth looking into.
Thanks for all the comments about refinancing student loans. I looked into it – so far one company says they require the debt to income ratio to be less than 40%, another said they don’t reveal their underwriting criteria (though searches on-line suggest it’s around 45% as well). With a student loan burden about equal to our annual income, it looks like the best approach may be to pay off the student loans as aggressively as we can, and then refinance when we have a better debt to income ratio in about a year. Has anyone else been able to refinance with a debt to income ratio greater than 40-45%? I’ll keep going forward with the applications, but I’d certainly be interested in hearing others experience on this.
Unless I’m misunderstanding, does the debt to income ratio refer to the monthly obligations/monthly income, or the total debt/annual income? They said on the phone that with $40,000 of debt we needed a $100,000 annual income to be eligible for refinancing. But if it’s the former we might actually qualify.
I wouldn’t be surprised to see different organizations use different ratios. But in general, DTI ratios involve the cost of servicing the debt to income, doesn’t matter whether it is looked at on a monthly or annual basis.
I’m sure that you will qualify for this loan. Debt ratios are always the ratio of debt service to income not total debt to income. If banks/financial institutions required 40% total debt to income ratios, that would require a person to make $1 million dollars to qualify for a $400,000 assuming no other debt. These companies are in the business to make loans. People who are concerned about their finances (and read personal finance blogs) are typically worlds ahead of the average consumer in terms of loan eligibility and physicians (even physicians in training) have at least average income that will qualify people. If the interest rate benefit you, there is essentially no harm in applying. You can at least then can make a very precise comparison between where you currently are (most likely with very high interest rate federal loans) and where you would be with a refinanced loan. Of course, factor in the cost (money or otherwise) of losing the federal backing of your loans which will protect you against disability and your family against death.
For most people who have >$150,000 in loans, going from 6.8% + to 3.5% will save a boat load of money! Especially if you plan on a protracted payoff (5-10 years). And as I have mentioned before 3.5% interest is a rate that might make it more financially savvy to hold onto the loans for a few years and invest the money instead. BUT INVEST IT!!! DON’T BUY A NEW BOAT, SUV, ETC!!
I promise I am not in the business of selling loans even though I may sound like it. To me it just makes sense.
My wife and I are PGY-III residents (4yr program). I have been keeping track of net-worth but haven’t graphed it out until last week. Currently due to our large debt and a home we purchased we have NetWorth of -$590k.
Did you include the home equity as a positive in that calculation?
I think that is a great question WCI. Since I’ve been reading posts on your site, I have noticed that everyone acts like all money owed to a bank is negative net worth but do not consider the assets. I hope that the person posting did not take out a $300k loan on a house worth $0. Likewise, while student loan debt is technically unsecured, the money was borrowed to pay for an education that should earn the person a $150K plus salary. Thus, that borrowed money has purchased the borrower a very valuable asset! How many things can you borrow for $100-300K that will yield you a person $100-300K (and up) for the rest of your working life. To those who were able to graduate without debt, all of the power to you. However, to those who did have to borrow, you are most likely getting pretty good deal! I guess it is a matter of perspective but I like to see the positive side of things…
While I agree with you to a certain extent, a house is a bit different from an education. First, you can sell a house and pay off the loan. Good luck selling your education. Second, in order to earn money with your education, you need to work. You don’t need to do that with a stock portfolio and don’t need to do too much of that with real estate investments. It’s much more passive.
What WCI says is exactly right. A doctor only makes money when working — which for most physicians means being physically in an exam room or operating room with a patient. If you aren’t working or can’t work, your “investment” has zero value.
The other thing about it is that the education doesn’t just cost us doctors money — that can be replaced. The other thing it costs us is time. I started saving for retirement at least 10 years later than my peers who got four year degrees in accounting or engineering and then went to work. I have a relative a few years younger than me who retired from his engineering job at age 42. He worked like a fiend, lived like a monk, married a bit later, and savedand invested virtually all of his income starting at age 21. He now works part-time for enjoyment and to stave off boredom. All courtesy of the 7th wonder of the world — compound interest. I on the other hand will have to save 25% of my income and work until 65-70 to be ready for the same level of secure retirement.
Mind you, I don’t have much to complain about when it comes to my income. But with all due respect, the consequences of being $500K in debt in one’s mid-30’s rather than $100k indebt — well those consequences are huge. Again, courtesy of the 7th wonder of the world, compound interest, which can work against you as easily as it works for you.
T
Best quote from Albert Einstein: “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” Follow this advice and teach it to your children.
Greetings everyone! This blog/community has been a definite eye opener! I also recently purchased the book. I have a question that I am hoping someone can provide some input. I am a PGY3 medicine resident. During my second year I took up moonlighting and finally finished paying off all of my consumer (ie credit card) debt I racked up during medical school. Fist year I wasn’t in the position to contribute to a Roth IRA, however I plan to make both 2014 and 2015 contributions this year with my moonlighting money. I plan to invest the money in a Roth in an index fund. I am contributing up to the match that my residency program covers in a 401k, which isn’t much.
I’ve already begun doing the calculations for my potential take home post residency (outpatient + casual/per diem hospitalist). I’ve read recommendations that attending-level physicians should be putting 20% of their income towards retirement. As a single person, how would I do that given that I am capped at 17,500 for 401k and 5,500 for an IRA?
If you have no other tax-advantaged opportunities available to you (which is a big if, since most attendings do), you will need to use a taxable account:
https://www.whitecoatinvestor.com/retirement-accounts/the-taxable-investment-account-2/
Don’t be scared of taxable investing. Max out Roth and 401k first. Taxable investing gives you a lot of flexibility over the years. Use a low cost tax efficient fund or ETF.
Most attendings do have other tax-advantaged space (profit-sharing, e.g.). I’m in a group that, sadly, lacks those options. Consequently, I’ve purchased high-deductible health insurance outside the group’s plan, which is cheaper (once adjusted for the employee and employer contributions, which both come back to me as a partner) and allow me to invest a small amount each year through a HSA. I’ve also utilized a taxable account through Vanguard and established an Solo 401(k) for additional pre-tax contributions from money I make doing some consulting work for a hospice company. Just some additional ideas for you to mull.