Roth IRA and 403B

[Dawkter]

---

Members do not see this ad.

Recently starting my first job as a resident and it seems as though people on the SDN anesthesia forums have some great opinions regarding early investing. My employer does not match 403b contributions.

A few questions for you:

1. Is there a difference between Roth 403b (employer offers it) and Roth IRA?

2. The maximum cap for a Roth IRA is $5,500. This is probably the most I can save in a given year. Should I split my savings between 403b and Roth IRA or max out on the Roth IRA?

3. If my employer begins to match 403b contributions, should I avoid the Roth IRA at this point?

4. Am I better off putting more money into one of these retirement vehicles or paying back my student loans?

Thanks for any help you can offer, much appreciated 😀

 

[BLADEMDA]

If your employer matches your contribution then go that route. If you have massive student loan debt at a high interest rate then start paying that off first.

If you think Obama will forgive your student loan debt then start investing as a Resident. Remember, if you invest money pretax but have to borrow more money as a resident or pay high credit card interest then investing is a bad idea at this time.

 

[davefromcamp]

Recently starting my first job as a resident and it seems as though people on the SDN anesthesia forums have some great opinions regarding early investing. My employer does not match 403b contributions.

A few questions for you:

1. Is there a difference between Roth 403b (employer offers it) and Roth IRA?

2. The maximum cap for a Roth IRA is $5,500. This is probably the most I can save in a given year. Should I split my savings between 403b and Roth IRA or max out on the Roth IRA?

3. If my employer begins to match 403b contributions, should I avoid the Roth IRA at this point?

4. Am I better off putting more money into one of these retirement vehicles or paying back my student loans?

Thanks for any help you can offer, much appreciated 😀

Great questions. I'm no expert but for us I wonder what is the best too. You will soon make too much for a ROTH. The ROTH advantage is that when you pull your retirement out later it won't be taxed. For me I'm in a higher tax bracket now than I will be when I retire so I avoid it and invest in 403b etc. For what it's worth if someone matches, contribute the most you can, it's free money! Sit down with a financial planner it could be worth it.

 

[Colba55o]

In my experience, hospitals rarely if ever "match" retirement funds for housestaff. That seems like it would be a lousy investment on their part, since residents are only there temporarily; but if you are one the lucky ones, then yes invest all you can to maximize their matching contributions. Splitting between the two wouldnt seem beneficial.
Also you have to think about how you want to invest the Roth IRA which is another topic with many opinions.
Re: loans, I think the overriding theme is diversification of your resources. I'm just about done with residency but I paid some money toward loans (through income based repayment), made small payments when I could to the private loans that couldnt be consolidated federally, and also put money into my Roth IRA (I didn't have enough to even get to $5500/year)
Basically you should be both paying off loans and investing for retirement at the same time. A little bit here a little bit there...

 

[Mman]

In my experience, hospitals rarely if ever "match" retirement funds for housestaff. That seems like it would be a lousy investment on their part, since residents are only there temporarily; but if you are one the lucky ones, then yes invest all you can to maximize their matching contributions. Splitting between the two wouldnt seem beneficial.
Also you have to think about how you want to invest the Roth IRA which is another topic with many opinions.
Re: loans, I think the overriding theme is diversification of your resources. I'm just about done with residency but I paid some money toward loans (through income based repayment), made small payments when I could to the private loans that couldnt be consolidated federally, and also put money into my Roth IRA (I didn't have enough to even get to $5500/year)
Basically you should be both paying off loans and investing for retirement at the same time. A little bit here a little bit there...

the (in)famous move for residencies is to offer matching of retirement contributions, but not let you vest until you've been there well past when your residency would've ended. In essence, you get no matching unless you stay on staff for some time.

 

[pgg]

1. Is there a difference between Roth 403b (employer offers it) and Roth IRA?

Contribution limits are a lot higher for 403(b) plans, $17.5K in 2013 vs $5.5K for Roth IRAs.

Withdrawal rules are different.

Roth IRAs do not have required minimum distributions. Roth 403(b) accounts do.

Roth IRA principal is withdrawable penalty-free after five years. If less than 5 years have passed, 1st time homebuyers can withdraw $10K penalty-free. I don't think (not 100% sure) that there are any circumstances in which you can make a penalty-free early withdrawal from a 403(b).

There might be other differences but I think those are the high points.

 

[pgg]

So the bottom line is to always max out Roth IRA before contributing to 403b?

The usual generic advice is to use the 401k or 403b and max out the employer match, then max out Roth (or traditional) IRA, then max out the 401k or 403b, and then save in taxable accounts.

If you're eligible for a HSA it should probably be inserted right after the matched 401k or 403b (and then don't squander the extra tax-advantaged space it gives you it by spending it on health expenses, ie use it as a loophole not for its Congress-intended purpose).

 

[deleted126335]

The usual generic advice is to use the 401k or 403b and max out the employer match, then max out Roth (or traditional) IRA, then max out the 401k or 403b, and then save in taxable accounts.

If you're eligible for a HSA it should probably be inserted right after the matched 401k or 403b (and then don't squander the extra tax-advantaged space it gives you it by spending it on health expenses, ie use it as a loophole not for its Congress-intended purpose).

👍

 

[D P356]

If your employer matches your contribution then go that route. If you have massive student loan debt at a high interest rate then start paying that off first.

If you think Obama will forgive your student loan debt then start investing as a Resident. Remember, if you invest money pretax but have to borrow more money as a resident or pay high credit card interest then investing is a bad idea at this time.

The bolded as well as the concept of IBR reminds me of a bumper sticker that I once saw....
"You can trust the government; just ask the indians"

 

[ChiDO]

www.whitecoatinvestor.com

Go there and read about almost every question you have....great blog.