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Financial strategies for next 3 years for medical students/residents
Just wanted to get together some thoughts for how best to manage our finances in the near future esp as it pertains to medical students/residents. Feel free to contribute and I'll add/update/correct (if needed) this post.
1) Strategy: Buy ETF's
Suggested porfolio for busy students/residents who won't actively manage it:
30% FTSE All-World ex-US ETF
60% Total Stock Market ETF
10% Total Bond Market ETF
Another portfolio mix suggested by our own etf:
30% FTSE All-World ex-US ETF
40% Total Stock Market ETF
15% REIT ETF
15% (upto 30%) Emerging Markets ETF
Rationale:
The above are ones I found with low expense ratios and ofcourse there is the lack of (long term?) capital gains tax:
"In 2008, 2009, and 2010, the tax rate on eligible dividends and capital gains is 0% for those in the 10% and 15% income tax brackets."
Source
If you're a broke student (like most of us) and have already maxed out your loans to pay for school then the above strategy may not apply. However, if you have some savings, or with some creative financing this could be pulled off with almost $0 in transaction fees (though you may have to pay a tiny premium on NAV).
2) Strategy: Convert any IRA's you have to Roth
Rationale:
You're in 15% or lower tax bracket (0% if you're a student with no income) and you'll pay your taxes at a lower rate then you would later when you're in a higher tax bracket. If you're that lucky student with no income, make sure to stagger out your conversion to keep in that 0% tax heaven.
3) Strategy: Save in a Roth IRA if you or your spouse works
Rationale: If you're medical student whose spouse works or are a resident with an income you can put aside money in a Roth IRA. At this time we'll be in our lowest tax bracket and putting money in a Roth when @ a 15% bracket is a good thing (assuming you'll take it out at a higher bracket). Once we're done with our training our incomes will be too high to invest in this financial product. Isn't it ironical once we'll actually have money to invest we won't be able to utilize it in a Roth? So we're stretched out right now as it is, but think of it this way, it's just $166 per paycheck. Where do you invest the money in your Roth? See strategy #1.
Will add more strategies - please post if you'd like to contribute
Just wanted to get together some thoughts for how best to manage our finances in the near future esp as it pertains to medical students/residents. Feel free to contribute and I'll add/update/correct (if needed) this post.
1) Strategy: Buy ETF's
Suggested porfolio for busy students/residents who won't actively manage it:
30% FTSE All-World ex-US ETF
60% Total Stock Market ETF
10% Total Bond Market ETF
Another portfolio mix suggested by our own etf:
30% FTSE All-World ex-US ETF
40% Total Stock Market ETF
15% REIT ETF
15% (upto 30%) Emerging Markets ETF
Rationale:
The above are ones I found with low expense ratios and ofcourse there is the lack of (long term?) capital gains tax:
"In 2008, 2009, and 2010, the tax rate on eligible dividends and capital gains is 0% for those in the 10% and 15% income tax brackets."
Source
If you're a broke student (like most of us) and have already maxed out your loans to pay for school then the above strategy may not apply. However, if you have some savings, or with some creative financing this could be pulled off with almost $0 in transaction fees (though you may have to pay a tiny premium on NAV).
2) Strategy: Convert any IRA's you have to Roth
Rationale:
You're in 15% or lower tax bracket (0% if you're a student with no income) and you'll pay your taxes at a lower rate then you would later when you're in a higher tax bracket. If you're that lucky student with no income, make sure to stagger out your conversion to keep in that 0% tax heaven.
3) Strategy: Save in a Roth IRA if you or your spouse works
Rationale: If you're medical student whose spouse works or are a resident with an income you can put aside money in a Roth IRA. At this time we'll be in our lowest tax bracket and putting money in a Roth when @ a 15% bracket is a good thing (assuming you'll take it out at a higher bracket). Once we're done with our training our incomes will be too high to invest in this financial product. Isn't it ironical once we'll actually have money to invest we won't be able to utilize it in a Roth? So we're stretched out right now as it is, but think of it this way, it's just $166 per paycheck. Where do you invest the money in your Roth? See strategy #1.
Will add more strategies - please post if you'd like to contribute
) I'm not too worried about the risk involved with holding 1 stock now that I've done some research. It's a utility which pays decent dividends (usually about a 4% return in dividends each year) and the price has grown slowly with no leaps or bounds over the past year (gained about $2 a share since it's been in my name).
