ACNModeratorStatus: PhysicianPosts: 629Joined: 01/08/2016
Pay off any debt at 4% or higher.
Stash away $15-30k for an emergency fund in an HY savings accounts.
Pay tuition with cash going forward. Save $XXX amount to pay your accumulated interested on your current loans at the end of 4 years so that it doesn’t capitalize.
Keep the car and pay off if 2.5% or higher.
If you're ever having a bad day, just remember in 1976 Ronald Wayne sold his 10% stake in Apple for $2,300.August 18, 2019 at 7:31 am MST #239565TimParticipantStatus: AccountantPosts: 3032Joined: 09/18/2018That allows us to live comfortably while only taking student loans to pay tuition. Of course, I plan to seek professional advice from someone that understands medical loans to help me navigate this investing process,Click to expand…
Purely behavioral. No mention of the path to earnings for either his wife or himself. The definition of “comfortable” seems to dictate more loans even when he has $200k cash. It seems the plan is simply to live above their means and finance it with debt, because it is available.
The house for 2 years? Not sure how the market is where he lives, why he bought the house and how that will play out.
A medical student at an osteopathic program has a LONG way to go to crack the “attending check” and no clue of the length of residency or training. It’s at least five years and the plan is for the wife to take on more loans?
For both, the higher paying specialties would put him in mid 30’s before he gets his first big check. My thought his without the paycheck plan, debt is likely to be a companion for many years. He has the opportunity to live within his means and really cute back on the debt he has and in the future.
1) Low paying fields, things will be fine.
2) Higher paying fields, things will be great.
The past (house and car) are done, what is the best financial path forward? Probably selling and getting rid of the payments. Until they have a whole lot more certainty, they should live like med students a rung lower that residents. Use the $200K to get back on a plan to live within their CURRENT MEANS.
Behaviorally, they are betting too much on an uncertain future and potentially will live with Mr. Debt a long long time. In that case, he won’t need to worry about investments, just paying the debt at 40. Living comfortably in med school is not worth the price. Now is a great time to reset the behavior.
Good luck.StatBariumEnemaParticipantStatus: PhysicianPosts: 52Joined: 01/23/2016
I wish I would have put more into a Roth when I was younger. I would probably save 12k/ year for both Roths for the next 3-4 years until you’re earning income to continue funding it. Doing this will set up a precedent for you to continue doing this. It’ll continue to grow tax free throughout your high earning years. You can use it for your own retirement or pass it along to your grandchildren in 60 years and pay it forward.
That 30-40k or so can serve as an emergency fund until you fund the Roths.
Then I would pay off whatever loans are higher interest. Maybe enjoy a single nice, but still cheap, vacation or a nice dinner or two as well.August 18, 2019 at 7:48 am MST #239574Brains428ParticipantStatus: PhysicianPosts: 393Joined: 11/09/2017
Take both the COMLEX and USLME. Even though the residency systems are blended, now, a lot of the allopathic residencies (especially the competitive ones) have no idea how to gauge what COMLEX numbers are. Even my pretty DO friendly radiology residency (1 out of 9-10 matches/year) had no idea what to do with COMLEX numbers at the time I matched and even after the fact when my former PD asked what I thought about some students who applied and didn’t take both exams. Crush both exams, and match to the residency of your choice.
To the money situation– I would do what you would need to do to graduate with as little debt as possible while fully funding own and spousal Roth IRAs. Keep the car and don’t buy another house when you go to residency unless you decide to become a neurosurgeon (8 years of post grad training)… and even then I would think twice about it.
In regards to your wife pursuing NP. I would have a discussion with her about it. It may not make sense from a balance sheet, but it may make sense from her fulfillment personally and professionally. Just like you going to med school, there has to be a thought process as to why you’d sacrifice so many earning years to pursue it. If she can start by next year, then she can be done and practicing before you finish residency. If she can wait until you’re an attending and you could just pay the tuition, then that could also work.
Good luck. Feel free to message me about any of the residency stuff along the way.August 18, 2019 at 9:00 am MST #239594SerrateAndDominateParticipantStatus: PhysicianPosts: 487Joined: 02/01/2018
Just curious if wife works at same hospital as your med school and if any tuition can be discounted. I’d imagine y’all would have looked into that already.
I think paying off the car is good because it’s a rapidly depreciating asset. Take a long hard look at spending. In all honesty, no need for you to take out any loans above tuition.
Sounds like putting that money towards your loans is a better bang for your buck since your tuition will be higher than hers. Lot of unknown factors at play. If she finishes NP school by the time you finish med school, who knows if she can get a job nearby? and you can end up somewhere that doesn’t have a nearby NP program (better or worse online programs exist)
End of the day, you two are in a great spot. Really take a long hard look at spending habits and goals. Don’t let this inheritance or future salary lead to drastic lifestyle inflation.
and go crush Step 1.
Earn everything.August 18, 2019 at 10:07 am MST #239611trebizondParticipantStatus: ResidentPosts: 131Joined: 12/31/2017
I would recommend clarifying the tax situation of your loans and if a payment is made directly towards them whether it is taxable the way the 200,000 gift may be? If there is a tax difference, you might be able to request that the loans you already have be directly paid off by the person gifting you the inheritance (if they are amenable to that) and then gifting the remainder.LordosisParticipantStatus: PhysicianPosts: 1823Joined: 02/11/2019
I didn’t think you need to pay tax on a gift?
“Never let your sense of morals prevent you from doing what is right.”August 18, 2019 at 11:07 am MST #239622OutdoorsParticipantStatus: ResidentPosts: 27Joined: 08/12/2017
There are definitely ways you can max out the numbers mathematically by taking advantage of all your Roth retirement space. My thought is to use this inheritance to max out your tax-advantaged Roth retirement accounts over the next 5+ years (Roth IRA and Roth 401k). We’ve all seen those compound interest graphs where saving in your teens and 20s beats any other plan because of the time for compound interest to accumulate.
Step one, put the money in a high-interest online savings account like Marcus, Ally, or Capitol One while you take some time to think about your options.
If your wife continues to have earned income the next few years working as an RN, you can max out $6k in Roth IRA for each of you each year. She can also contribute the max to Roth 401k ($19k/yr) through her employer. Then if she goes to NP school when you start residency, you can use your earned income as a resident physician to again max out retirement accounts: $6k each to Roth IRAs, 19k to your employer’s Roth 401k, total of $31,000 each year in Roth accounts, or $155k of the inheritance spread out over 5 years.
If she’s a student those first few years of your residency, your combined income will still be low enough that the RePAYE loan interest subsidy will be very large. You’ll likely be paying almost nothing each month in payments, and your effective interest rate will be maybe 3% on Direct Unsubsidized loans. Then your first 2 years as an attending, you pay off all your student loans.
Imagine having $31,000 per year invested into a Roth IRA and Roth 401k for the next 5 years! (that’s 2 more years of med school + 3 of residency). With maximizing your Roth retirement space, you let the money grow tax-free for 30 years, then withdraw it tax free. Back of the envelope compound interest calculator at 7% interest shows $1,357,051 in Roth accounts 30 years from now.
Contribute for 5 years, $31,000/year at 7% interest gives you $178,272. Then if you contribute nothing more and let the $178k grow for 30 years, you get the $1.36 million number in tax-free accounts.
All that being said, personal finance is mostly behavioral >>> knowledge. You have to commit to a plan of action and not spend too much. If you keep taking out loans, then increase your lifestyle & spending instead of investing into the Roth accounts it doesn’t matter: you would have been better off just paying off the loans now. While you’re holding the inheritance over the next 5 years, keep it in a high-interest online savings or money market account, and don’t touch it until it comes time each year to invest in your Roth accounts.StarTrekDocParticipantStatus: PhysicianPosts: 2043Joined: 01/15/2017
Good fortunes from your family. Learn from that and make it yours to be responsible so you can too pay it forward. 🙂
1: Pay respects whatever/however you do it to your benefactor.
2. Live like a student. You have debt and accumulating it will be further tempted with this infusion. Remember lottery winners and how they turn out.
3. Take Roth IRA and max out tax shelters with your wife making 50k.
4. Payoff non student loans/nonmortages that are high interest (over 3%). Make commitment to #2.
5. Have a sizable emergency fund and life insurance term. You have an opportunity to insulate from downturn and protect your future. Do that.
6. CONSIDER attacking the student loans that are nonfederal with what’s remaining. You don’t know if your future positions may hold loan forgiveness opportunities and may want to consider keeping that avenue open.
–Remember future income will sustain you pretty much with dual income physician and RNP future. What’s uncertain is the current times and this $200k will go a long way if used wisely to protect your current situation.CraigyParticipantStatus: SpousePosts: 2052Joined: 09/16/2016
$200k gift for a 2nd year D.O. student?
Easy, pay off those first two years of D.O. school, about $100k/year these days, right? 😉
LEVEL 1 WCI FORUM MEMBER.August 19, 2019 at 7:08 am MST #239816adventureParticipantStatus: SpousePosts: 1183Joined: 10/24/2016My usual answer to start: take your wife out to a nice dinner and get a nice bottle of wine to toast your benefactor.Click to expand…I’d pay off the car and student loansClick to expand…If it were me: Be thankful you’re getting this break. Get on a written budget and use mint, personal capital etc, to see where your every dollar is going.Click to expand…
And check out some helpful folks: https://www.whitecoatinvestor.com/financial-advisors/August 24, 2019 at 3:51 am MST #241235