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Married Filing Separately, Retirement Options? (403b vs IRA)

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  • Married Filing Separately, Retirement Options? (403b vs IRA)

    Hello all,

    First post but long time lurker. I am starting residency tomorrow (!) and have just realized I did not sign up for any retirement plans. Looking at my residency program, they offer tax-deferral 403b with no matching through TIAA or Fidelity. I have also been doing research into Roth IRA but then realized I am not eligible as my wife and I was married in 2020 and will be filing separately as I am will be on the PAYE IDR plan (for possible PSLF down the road).

    My wife and I live together. My understanding is that since my resident income is higher than $10,000, I am not eligible for a Roth IRA or traditional IRA to convert to Roth? If so I suppose my only option is to contribute towards the 403b? Just making sure I am am aware of all my options.

    Thanks to all who read this!
    Last edited by StealthEXE; 06-30-2020, 11:49 AM.

  • #2
    You'll still be able to make nondeductible traditional ira contributions, which can be converted to a Roth ira (backdoor method). There are no income limits on ira conversions.
    Last edited by jhwkr542; 06-30-2020, 01:58 PM.

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    • #3
      Originally posted by StealthEXE View Post
      Hello all,

      First post but long time lurker. I am starting residency tomorrow (!) and have just realized I did not sign up for any retirement plans. Looking at my residency program, they offer 403b through TIAA or Fidelity. I have also been doing research into Roth IRA but then realized I am not eligible as my wife and I was married in 2020 and will be filing separately as I am will be on the PAYE IDR plan (for possible PSLF down the road).

      My wife and I live together. My understanding is that since my resident income is higher than $10,000, I am not eligible for a Roth IRA or traditional IRA to convert to Roth? If so I suppose my only option is to contribute towards the 403b? Just making sure I am am aware of all my options.

      Thanks to all who read this!
      Nope - anybody with at least $6k earned income can contribute to an IRA. The difference is the tax treatment. In your situation, you cannot contribute to a Roth so you will opt for the backdoor Roth instead. Not a biggie - and no impact on your 403b contributions.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        Hello,

        Thanks for your comment. It seems the limit is $6000 a year. Would you recommend I max that or also contribute to my school's 403b, or both? Trying to figure out which one will bring the most growth down the line. I'm thinking the nondeductible IRA if I convert that to Roth IRA?

        Comment


        • #5
          Originally posted by StealthEXE View Post
          Hello,

          Thanks for your comment. It seems the limit is $6000 a year. Would you recommend I max that or also contribute to my school's 403b, or both? Trying to figure out which one will bring the most growth down the line. I'm thinking the nondeductible IRA if I convert that to Roth IRA?
          The Roth IRA would probably give the most growth, but since you may be going for PSLF, that will increase your monthly payments as well. It's not straightforward at this point which to do. What field you going into? If you're more likely going into private practice, then I'd do the Roth.

          Also, if you get a match through your 403b, absolutely get that first. HSA would be even better if you had access to that.

          Comment


          • #6
            Since your wife is working and assuming you are a “one income household” (what’s mine is hers and what’s hers is mine), then I would do the following if you can afford it:
            - max wife 401k plan 19.5k
            - max your 403b plan 19.5k
            - max traditional IRA for you and convert to Roth 6k
            - max traditional IRA for wife and convert to Roth 6k.

            Comment


            • #7
              Originally posted by jhwkr542 View Post

              The Roth IRA would probably give the most growth, but since you may be going for PSLF, that will increase your monthly payments as well. It's not straightforward at this point which to do. What field you going into? If you're more likely going into private practice, then I'd do the Roth.

              Also, if you get a match through your 403b, absolutely get that first. HSA would be even better if you had access to that.
              Yeah unfortunately I am still on the fence to go academic or private. If I knew now, I would just refinance my loans and forgo PSLF. Unfortunately at our institution residents don't get their 403b matched and it seems most of my residents aren't even contributing to their 403b.

              Can you explain more how Roth IRA would increase my monthly payments? Even if I keep the savings in a Roth IRA, does it count towards my yearly discretionary income? I guess I thought that it would only apply after I take it out. If that is so I may need to reconsider PSLF.

              Originally posted by WorkforFIRE View Post
              Since your wife is working and assuming you are a “one income household” (what’s mine is hers and what’s hers is mine), then I would do the following if you can afford it:
              - max wife 401k plan 19.5k
              - max your 403b plan 19.5k
              - max traditional IRA for you and convert to Roth 6k
              - max traditional IRA for wife and convert to Roth 6k.
              Do you recommend doing it in that order or in no specific order?

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