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Starting a Roth IRA as an intern

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  • Avatar mikemini88 
    Participant
    Status: Resident
    Posts: 2
    Joined: 07/18/2019

    Hello! I am a PGY-1, new to the world of finance but have been embracing it! and been following this website for a while now. My employer offers a 401(k) plan with 100% employer match but does not offer a tax-free account like a Roth IRA. I am living in a low cost of living area for residency and would like to maximize my savings as much as possible and have diversification for retirement in terms of a tax-deferred and tax-free account. I have already enrolled in my program’s 401(k) plan and plan on contributing at least up to the employer match (and more). I am looking into opening up a separate Roth IRA with Vanguard with some money I’ve been saving up on the side during medical school ($5k).

    Here are my questions:

    1) Is this a good idea?

    2) With the income regulations of a Roth IRA that can prohibit you from making contributions if you make over a certain amount per year, what happens if I start and open up a Roth IRA in residency while making ~$50-55k/year –> graduate –> and then become an attending possibly making >$200K/year? What would happen to the Roth IRA account I opened now, 3-4 years from now?

    Thank you very much in advance!

    Mike M

    #231612 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4405
    Joined: 01/08/2016

    Yes get match
    Then max rIRA
    If you still have money back to 401k.

    To your ?: You should keep reading the site, you haven’t gotten far enough….. Welcome.

    #231614 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8113
    Joined: 01/09/2016
    1. Yes, great step to take.
    2. Answers to multi parts:
      • You will begin using the “backdoor” Roth approach
      • Nothing – it will continue on as is and will receive your backdoor conversions annually.

    Explaining Backdoor Roth IRAs

    Instructions for Backdoor Roth IRAs

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #231615 Reply
    Avatar Anne 
    Participant
    Status: Physician
    Posts: 1159
    Joined: 11/07/2017

    Agree with Peds but I will answer since you are an intern and likely busy and tired. There is no issue with the Roth in the situation you described. The income limits apply to new contributions only. Assuming the ability to do a backdoor Roth stays open your Roth will continue to grow tax free and you can continue to add to it via the backdoor. If that loophole closes, the amount you have already contributed will continue to grow tax free.

    Good job on being proactive with your finances. My advice is to set it and forget it and concentrate on becoming a great doctor.

    #231616 Reply
    Avatar JBME 
    Participant
    Status: Spouse
    Posts: 523
    Joined: 03/26/2018

    You should see if your program offers a Roth 401k instead of a 401k. If it does, do that in addition to your Roth IRA

    #231689 Reply
    Avatar mikemini88 
    Participant
    Status: Resident
    Posts: 2
    Joined: 07/18/2019

    Thanks for all the input everyone! Just opened my rIRA account 🙂 now will get ready for the ICU next week!

    #232150 Reply
    Liked by Anne
    Lordosis Lordosis 
    Participant
    Status: Physician
    Posts: 1807
    Joined: 02/11/2019

    See if you can use an HSA. We were able to as residents and they matched that a little too.
    Good job getting a jump start.

    “Never let your sense of morals prevent you from doing what is right.”

    #232230 Reply

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