401k for Prelims/Transitionals

[bbpiano1]

The hospital I am doing my TY at allows contributions to the 401k after 1 year of service. Since my contract starts June 21, 2010 and ends June 30, 2011, I'll have 1 week at the end of my internship when I'll be a "2nd year employee". Should I try an see if I can drop money in the 401k that last week (if possible) and then rollover into an IRA/Roth?

---

Members don't see this ad.

 

[UserNameNeeded]

If you are allowed to and can afford to, I think it's a smart idea-- you can then put more money into a Roth IRA than the annual limit!

But aren't 401K contributions taken from your paycheck? Since you'll only qualify for 1 week, is it possible for you to just write a big check and have your employer put into the 401K?

 

[lord_jeebus]

I don't see the advantage to that over just contributing to the retirement plan at your advanced program, assuming they don't also require a 1 year wait.

As a resident I think it is better to max out a Roth IRA before making any 401(k) contributions anyway, as your tax burden is much lower now than it will be in the future.

 

[dsherida]

My program will match up to 1.5% of your salary in a 401k. I think it makes more sense for me to put 1.5% of my salary in their 401k (with employer match would be 3% total) instead of Roth. Agree???

 

[bbpiano1]

dsherida, I think you have to stay at the hospital for a number of years for them to match the amount you put in (ie I you put in $1000 today, and then they match it in 2012).

lord_jeebus, I think the advantage would be that in addition to a max $5000 contribution to a Roth IRA this year, I can also throw money into a rollover Roth.

 

[lord_jeebus]

lord_jeebus, I think the advantage would be that in addition to a max $5000 contribution to a Roth IRA this year, I can also throw money into a rollover Roth.

I see, that would be a nice move if you're able to save that much money.

 

[dsherida]

If hospital doesn't match any contributions to their 401k plan, would you rather take that money post tax and put it in a Roth and not contribute to the hospital retirement plan?

 

[docelh]

401(k) plans suck. While it's nice if they give you a match, you're often times locked into the crappy options your employer chooses for you.

 

[UserNameNeeded]

401(k) plans suck. While it's nice if they give you a match, you're often times locked into the crappy options your employer chooses for you.

I agree. Too bad contributions caps to 401(k)/403(b) plans are five times higher than the paltry $5,000 limit on IRA contributions.

 

[DOctorJay]

my internship program would match up to a certain amount. since the match was based on a calendar year and not an academic year i was able to increase my percentage to receive the maximum amount of the match in both calendar years of my internship. this meant that although i worked only for 1 academic year, i received the match for both calendar years. see if your plan works this way and maximize on it.

otherwise go with Jeebus' solution and get into a Roth IRA with an index mutual fund (look at Vanguard or T. Rowe price and learn more about this at getrichslowly.com) and dollar cost average throughout the year. also look at books "I will teach you to be rich" and "The automatic millionaire" to automate your savings. do it this way and you'll NEVER miss the money from your paycheck. make yourself sit down and shift money on a regular basis and it will be painful.

 

[blanche]

401(k) plans suck. While it's nice if they give you a match, you're often times locked into the crappy options your employer chooses for you.

agreed. HOWEVER--as residents we will likely leave our job in 1 to 5-or-so years. then, just rollover your crappy funds to a new plan ('rollover IRA'). you pick your brokerage and liquidate your funds to whatever you want to choose. that's what i did for my 401k from internship--which had a decent employer contribution, but absolutely craptacular fund options.

 

[nontrdgsbuiucmd]

I did the same thing when leaving an employer -- with more than a certain amount, I think it was $5K, I had the option of leaving money in that plan or moving it anywhere I wanted.

So if you leave an employer/complete training or whatever, you'd just roll the money over at that time to the fund that you choose.

In the meantime, if the options stink at your employer, you likely have an option to move the money into a bond fund or money market fund or some other secure type of investment rather than putting it into an equity fund that you don't trust.

If you're feeling creative, many 401Ks will allow you to borrow from the fund; mine allowed this up to 50% of total funds in the 401K. You could then take the "borrowed" funds (that you've borrowed from yourself) and invest them in the market if there's another fund not offered by your 401K that you really like; planning to pay back the borrowed funds out of the sign-on bonus from your new employer when done with medical training.

 

[ChainStreet]

401(k) plans suck. While it's nice if they give you a match, you're often times locked into the crappy options your employer chooses for you.

Even if 401(k) options are not decent, you can simply view it as putting money in tax sheltered account and then as several other memebers have pointed out, you can roll over to either IRA or ROTH IRA depending on your tax status and income.

When you roll over, you can either invest yourself in any stocks, funds or have some one manage the account. Bottom line is , its better to dump money in tax sheltered account because you are simply getting free loan by uncle sam to invest by not paying taxes even if you have to pay taxes when you take out the money( applicable for IRA but for ROTH you won't be paying taxes when you take out the gain as well).

I would suggest putting enough money to get the 401(k) match first , then dump in ROTH IRA and if you have enough left then go back to top off your 401(K).

My two cents....