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[Ophthodoc2018]

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[ThoracicGuy]

Hi all,

I am posting this in regards to one of my cousins since I, fortunately, do not have loans to pay off.

My cousin is a current PGY1 resident with ~300k loans (undergrad + med school). My question to you all is if he should max out on his roth IRA ($6,000) or should he use that money to pay off loans. At the moment, due to the COVID-19 pandemic, the stock market took a huge hit so it might be worth it for him to start a ROTH. I told him to create an emergency fund, in addition to consider refinancing his 6.5% interest into ~4% interest. I have been reading different things so I wanted to get some financial advice. Paying off debt gives an automatic investment return of ~4-7%. However, if he invests right now, there is a possibility of a big return since he is catching one of the troughs. I want to also mention that he is on the REPAYE income based loan repayement.

Here are the options:
1. No, use every cent saved (outside of emergency fund) to pay off loans.
2. Max out on Roth IRA ($6k) and that is all.
3. Max out on Roth IRA + put a bit of money into his individual non-retirement portfolio

Thank you for your help!

$6000 is a drop in the bucket for a $300k loan amount. I'd probably put that in an IRA and then work on loans. If his residency allows for a 401k with a match, I'd also put in what is required to get the max match if able.

 

[Ironheme]

I agree with @ThoracicGuy. Residency salary doesn't make much of a dent in a loan that size, but compounding interest in a roth IRA/minimizing how much Uncle Sam takes (such as HSA) is a good idea for what he can do now. It's what he does after he graduates that will make the most difference. Also, once he hits attending salary, he'll be phased out of direct contribution towards Roth.

 

[asdf123g]

$6000 is a drop in the bucket for a $300k loan amount. I'd probably put that in an IRA and then work on loans. If his residency allows for a 401k with a match, I'd also put in what is required to get the max match if able.

Any other advice for people like myself who are completely financially illiterate?
I know @Ironheme mentioned a HSA.

I dont even know where to start or what books to read or what youtube channels to watch etc....

 

[Raryn]

Any other advice for people like myself who are completely financially illiterate?
I know @Ironheme mentioned a HSA.

I dont even know where to start or what books to read or what youtube channels to watch etc....

I like Financial Waterfalls for New Residents and Attendings - The White Coat Investor - Investing & Personal Finance for Doctors from WCI for making it as simple as possible. He made a separate one for residents and attendings.

 

[ThoracicGuy]

Any other advice for people like myself who are completely financially illiterate?
I know @Ironheme mentioned a HSA.

I dont even know where to start or what books to read or what youtube channels to watch etc....

White Coat Investor is a great resource. He has a web site that has lots of great resources as well as a book that is very easy to read. You can find the book on Amazon.

Bogelheads are another good site, though some if it is certainly more advanced

Feel free to ask on here as well.

 

[Raryn]

White Coat Investor is a great resource. He has a web site that has lots of great resources as well as a book that is very easy to read. You can find the book on Amazon.

Bogelheads are another good site, though some if it is certainly more advanced

Feel free to ask on here as well.

There is also an SDN forum specifically for finances, though it's reasonably dead.

Finance and Investment

Discussion of everything other than financial aid. Includes investment, mortgage, retirement, banking, etc. Co-hosted with The White Coat Investor

forums.studentdoctor.net

 

[ThoracicGuy]

There is also an SDN forum specifically for finances, though it's reasonably dead.

Finance and Investment

Discussion of everything other than financial aid. Includes investment, mortgage, retirement, banking, etc. Co-hosted with The White Coat Investor

forums.studentdoctor.net

I thought we were in that forum actually with this post. That forum is active enough when someone does post.