llshanParticipantStatus: ResidentPosts: 5Joined: 05/31/2018
Hi everyone. I’m graduating residency in June and starting a new job in July. I will have 1/2 year of residency salary, 1/2 of attending salary, and 100K sign on bonus making of my income for the 2019 tax year. This will lead to a gross income of around 270-300K my first year out. The following years I’ll make around 300K.
I’m planning to put 18.5K into the 403B over the next 6 months because my employer will not allow me to contribute to a 401K until I’m with them for 6 months. Anyone feel strongly about recommending traditional 403B over a roth 403B? If I did the roth 403B I would plan to move it into my roth IRA after leaving residency.
Appreciate everyone’s thoughts in advance!January 9, 2019 at 9:54 pm MST #180082DicastParticipantStatus: PhysicianPosts: 403Joined: 01/09/2016
You have a great problem here. It looks like you’ll be squarely in the 35% tax bracket if you’re single. I think pre-tax would be a good choice. Who knows what the future tax rates will be? 35% is a pretty good up front savings though.
If you’re married you may find yourself in the 24% tax bracket if you don’t have an employed spouse. At that level I would think a Roth is worth considering. I’m sure there is some math that can compare the two options.
For what it is worth, at my house we max my wife’s Roth 403b despite our higher marginal rate. At some point we feel like it is good to have some Roth funds to balance out all of our pre-tax savings.
Either way you are going to win by maxing out the accounts.
Get outside of your bubble.PedsParticipantStatus: PhysicianPosts: 3789Joined: 01/08/2016
Trad. Not even close.January 10, 2019 at 6:18 am MST #180111Drop it into MDParticipantStatus: PhysicianPosts: 440Joined: 09/20/2018
I found this calculator helpful to demonstrate to myself why we are better off using tax deferred accounts. Make sure that you check the box “to increase with tax deferred savings” because even if you are maxing it out you will likely be saving the extra in another account. Also remember that the tax at contribution is your marginal rate but at distribution it is your effective rate.January 10, 2019 at 7:58 am MST #180137jhwkr542ParticipantStatus: PhysicianPosts: 1142Joined: 02/15/2016
Most likely traditional. About the only thing that might change the math is if you have a pension coming.January 10, 2019 at 8:09 am MST #180141jacoavluModeratorStatus: Physician, Small Business OwnerPosts: 1998Joined: 03/01/2018
Traditional. It’s most likely the right answer from a numbers perspective. But also, you can effectively change your mind about this later, because after finishing residency you could rollover to IRA and convert to Roth, and have the same end result.
But if you contribute to Roth now, there’s no undoing that.
Traditional maintains flexibility.
The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVAJanuary 10, 2019 at 8:14 am MST #180143llshanParticipantStatus: ResidentPosts: 5Joined: 05/31/2018jfoxcpacfpModeratorStatus: Financial Advisor, Accountant, Small Business OwnerPosts: 7509Joined: 01/09/2016
The generous $100k bonus tips the scales to a deductible 403b. However, if the market remains down, I might be tempted to split 50:50.
Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
https://fox-cpas.com/for-doctors-only/January 12, 2019 at 6:20 am MST #180687WallStreetPhysicianModeratorStatus: PhysicianPosts: 226Joined: 01/15/2017
Assuming your single, it’s time to start going to traditional contributions. Your tax bracket is too high to justify Roth contributions.
Of course, don’t forget to do your backdoor Roth IRA as well.
Former Wall Street trader, current physician and blogger @ http://www.wallstreetphysician.com
"As Gordon Gekko might say, 'Fees never sleep'" - Warren BuffettJanuary 12, 2019 at 7:32 am MST #180700