Where to save money? Invest?

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doconboard

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HI everyone,

A first year resident here. Started earning money for the first time since July. I have:
- HSA account- employee puts ~60 a month in there
- 403 (b) account- 4% of salary that is matched to 2% by the employee
- Personal saving ~300/month

I will go in repayment from December. I also have a car loan repayment. Wife is still studying and will be studying for ~3 more years. My question is, will I continue to save this much if I continue to have the same kind of lifestyle I have once repayment starts? Also, is it better to put money in 403(b) or IRA accounts?

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HI everyone,

A first year resident here. Started earning money for the first time since July. I have:
- HSA account- employee puts ~60 a month in there
- 403 (b) account- 4% of salary that is matched to 2% by the employee
- Personal saving ~300/month

I will go in repayment from December. I also have a car loan repayment. Wife is still studying and will be studying for ~3 more years. My question is, will I continue to save this much if I continue to have the same kind of lifestyle I have once repayment starts? Also, is it better to put money in 403(b) or IRA accounts?
In my opinion, based on a wide variety of reading, the best for you would *probably* be the 403(b) up to the match and a Roth IRA for the remainder of what you feel like saving. If possible, I would make Roth contributions to the 403(b) in lieu of traditional contributions as well (with the caveat that many plans don't allow this)

Basically, the Roth IRA is for a number of reasons the better retirement account for a resident, but if you don't take advantage of the match you will be throwing away free money.

1) Your tax bracket right now is lower than it will ever be for the rest of your life, almost certainly including retirement. That means socking away post-tax (Roth) money is a better idea than pre-tax (traditional IRA, 401k, or 403b) money, as paying a little bit extra in taxes now (potentially saving less) will save you a LOT of taxes in the future.
2) For a Roth IRA, you can always withdraw the contributions penalty free at any point. That means if you put in the maximum $5500 for 2016, then come February it looks like you need an emergency $1k for car repairs, you can pull it out of the roth without any penalties, fees, or major hassle. You can't withdraw the earnings, but you can withdraw the contributions.
3) Depending on the plan offered by your employer, a Roth you open yourself *might* have better investment options. My general recommendation is to open the account via Vanguard (they have a wide variety of very low expense ratio mutual funds), though Fidelity and Schwab are not unreasonable (if you're careful about what you buy through them). If you're at a large university system, your 403(b) probably has tons of great, low cost mutual fund options (frequently even lower cost than you can get personally), but if you're at a more community employer that may not be the case.

So that's my conclusion:

1) Contribute the minimum amount to the 403(b) to get your employer match. That's free money you can't get any other way. Roth 403(b) if available, traditional otherwise.
2) If you have additional money you want to save, contribute it to a personal Roth IRA, ideally through Vanguard.

Oh, and if you want to do further reading, you could do worse than White Coat Investor's blog ( http://whitecoatinvestor.com/new-to-the-blog-start-here/ ) and/or book ( Amazon product ). He's a longtime poster on SDN as well, so may chime in at some point.
 
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Echo the above advice. Wanted to also recommend maxing out the HSA account if you can (2016 limits: $3350 individual, $6750 family) as it has great tax advantages (pre-tax contributions, grows tax free, and tax free withdrawals if used for health care) and can double as another type of IRA in the future.
 
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Echo the above advice. Wanted to also recommend maxing out the HSA account if you can (2016 limits: $3350 individual, $6750 family) as it has great tax advantages (pre-tax contributions, grows tax free, and tax free withdrawals if used for health care) and can double as another type of IRA in the future.

Strogie, shame on you. As a rocket scientist, you above all others, should realize what the math is saying about the macro environment.
 
Yes, make sure to get your match from your employer for the HSA and 401k or 403. But, if I were at your stage again I would also make sure to save up a decent amount of cash in an emergency fund. 6 months worth of living expenses/bills is a good rule of thumb. Put it in an interest bearing savings account and don't touch it! Having a healthy emergency fund prevents you from needing to go any further in debt while you're in residency and your wife is still in school. It does you no good to have all your money tied up in accounts that you can't touch until your retired. You need some cash to protect you from going further in debt.
Once you're done saving up your emergency fund, if you still have money left in your budget, I would recommend you start paying off any high interest rate debt. Anything over 5% interest perhaps. Your car loan maybe?, any credit cards?, any super high student loans? Now is a good time to start learning how to budget and save. Just develop a habit of doing it now so its easier later when you start earning big bucks!
 
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