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I'm a first year resident at a 3 year program. Thankfully I have no loans left from undergrad and only 25k in loans from med school (a combination of $ saved from a previous job and grants).
Loans are all subsidized. Interest (6.8%) and repayment won't kick in until this coming January. Originally I was planning to go into forbearance for residency but pay enough to prevent interest from accruing and then kill the principal in my first year out of residency. At the same time I was going to put whatever extra I could into a Roth…….
However, I just found out that my program offers an employer-matching retirement program, and now I'm a bit uncertain as to how to allocate. In my current situation I'm trying to set aside at least $250/mo total for loan payments/investing and titrate up as my budget allows in a given month.
I'm considering two options:
a) Focus on paying the interest on my loans each month. This works out to ~$140/mo in order to prevent 4k in interest from accruing on the principal during residency. I'd also get the perk of using these dollars as a tax write-off. I'd put an additional ~$110/mo in the hospital's matching-contribution plan each month (small but something).
b) Try to capture as much of my employer's matching funds for the retirement account. If I put $250/mo in the hospital retirement plan, the employer match contribution will be at least $3k (and possibly more) over the course of my residency and will be fully vested at the end. It's a 403b with a major brokerage with decent expense ratios but unfortunately there's no Roth option. So I guess I'd roll the 403b into a Roth at the end of 3 years (albeit not at a true "resident" tax bracket since I'd likely have an attending salary for half of that year).
At this point I'm feeling option B>A, but I've been going back and forth. Option A has the prospect of a "guaranteed" 6.8% return, yearly tax deductions, and I'm generally debt-adverse. On the other hand my relative amount of debt isn't all that high (and will be paid off in my first year as an attending anyway) and option B would allow a few extra years of ol' compound interest to accrue with the help of free money from my employer.
What would you do? Thanks in advance for any advice, I want to make sure I'm not missing anything.
Loans are all subsidized. Interest (6.8%) and repayment won't kick in until this coming January. Originally I was planning to go into forbearance for residency but pay enough to prevent interest from accruing and then kill the principal in my first year out of residency. At the same time I was going to put whatever extra I could into a Roth…….
However, I just found out that my program offers an employer-matching retirement program, and now I'm a bit uncertain as to how to allocate. In my current situation I'm trying to set aside at least $250/mo total for loan payments/investing and titrate up as my budget allows in a given month.
I'm considering two options:
a) Focus on paying the interest on my loans each month. This works out to ~$140/mo in order to prevent 4k in interest from accruing on the principal during residency. I'd also get the perk of using these dollars as a tax write-off. I'd put an additional ~$110/mo in the hospital's matching-contribution plan each month (small but something).
b) Try to capture as much of my employer's matching funds for the retirement account. If I put $250/mo in the hospital retirement plan, the employer match contribution will be at least $3k (and possibly more) over the course of my residency and will be fully vested at the end. It's a 403b with a major brokerage with decent expense ratios but unfortunately there's no Roth option. So I guess I'd roll the 403b into a Roth at the end of 3 years (albeit not at a true "resident" tax bracket since I'd likely have an attending salary for half of that year).
At this point I'm feeling option B>A, but I've been going back and forth. Option A has the prospect of a "guaranteed" 6.8% return, yearly tax deductions, and I'm generally debt-adverse. On the other hand my relative amount of debt isn't all that high (and will be paid off in my first year as an attending anyway) and option B would allow a few extra years of ol' compound interest to accrue with the help of free money from my employer.
What would you do? Thanks in advance for any advice, I want to make sure I'm not missing anything.
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