Dismiss Notice

Interview Feedback: Visit Interview Feedback to view and submit interview information.

Interviewing Masterclass: Free masterclass on interviewing from SDN and Medical College of Georgia

Dismiss Notice
Hey Texans—join us for a DFW meetup! Click here to learn more.

Taking Advantage of Being Poverty Stricken

Discussion in 'Nontraditional Students' started by CoverMe, Dec 10, 2005.

  1. CoverMe

    CoverMe Registered Republican
    7+ Year Member

    Joined:
    Dec 4, 2002
    Messages:
    606
    Likes Received:
    1
    i'm posting this on the non-trad forum, because of the increased likelihood of someone having had this experience, or maybe just because i'm hoping there's a CPA-turned-Med Student around here somewhere.... Maybe the answers will help you guys with your finances thru medical school too.

    In my former professional life, I contributed to a 401k. There isn't a lot in there... in fact, the account has just recovered to it's 1999 level of about $10K. I was thinking, that while i'm in medical school, and well below the poverty line, I should take that money out and put as much of it into a Roth as possible, and the rest into some other investment.

    The point being, that I'd rather take the tax hit NOW (when i'm in a low/no tax bracket) than later, when I'm in a higher bracket.

    I don't want to use the money, it's nice to know it's there for dire emergencies, but other than that, I have no plans on spending it. I'm just trying to take advantage of this current state of poverty.

    So, to expound and recap...
    1) Is there a mandatory tax percentage "penalty" for taking money out of a 401(k) before you're the right age?

    2) If so, what is the percentage?

    3) Is it a straight penalty, or would those taxes be included in the taxes you paid for the year... and if you had an income of $0, would it be fully refunded at the end of the year??

    4) What's the current max/year for investing in a Roth? What about "catching up" if you haven't previously invested via a Roth IRA?

    5) Any suggestions for doing something very hands-free, with the rest of the money (i'm not a day trader, i'm inclined to put money somewhere and let time and the stock market do it's thing... ie. I haven't changed my mutual fund designations since I chose them when I started the 401(k)... I've still got Janus 20 and a couple others).

    6) Can I handle this myself, or do I need to hire someone to do it for me?

    Thanks in advance, and best of luck!
    Christine
     
  2. Note: SDN Members do not see this ad.

  3. Twitch

    7+ Year Member

    Joined:
    Jun 17, 2004
    Messages:
    1,450
    Likes Received:
    2
    Status:
    Medical Student
    Hi Christine,

    I've handled it myself and I'm no CPA. All it takes is a little time to read the info on irs.gov. It's typically a good idea to review your 401k investments every quarter. Note I said review not necessarily turn.

    Taking money out when your income = $0 is a good idea as long as you do it the right way and try not to take too much out. You can withdraw money from your retirement account penalty free but you must first roll it over to an IRA - not a ROTH. A stipulation is that the money be spent on higher education expenses, first time home buyer and some others - you should read up on irs.gov before taking the plunge. If you're just saving for a rainy day, leave the money in retirement. You can use it when you get to med school.

    Do a search or scroll down in this forum - I've made several comprehensive posts on financial issues for non-trads.
     
  4. CoverMe

    CoverMe Registered Republican
    7+ Year Member

    Joined:
    Dec 4, 2002
    Messages:
    606
    Likes Received:
    1
    Thanks for the post!!! Actually, I'm already an OMS-1. I'm doing fine on my loans, and my interest on my loans is less than what i'm making on my 401(k), so i'm taking the loans and leaving the 401(k) in place.

    I don't have any intentions of spending the money in the 401(k)... i just figured that since they were "pre tax" dollars, it might be to my tax advantage to take them out while my income is so low (read: $0). I just want to roll them into something else, but so that they'd essentially be already "taxed dollars" and save me some potential taxes down the road.

    I'm up to my ears in medical school... so reading up on it at irs.gov is probably not going to happen... hence, the request for free advice!!! :)
     

Share This Page