New attending with no savings

[terrylikesyogurt]

Stage of Life: New Psychiatrist

Social Situation: 31M, recently engaged. No kids (nor planned). Neither of us make awful financial decisions, however, we are not very knowledgeable about investment and retirement saving.

Annual Income: ~$330k (Me: 226, Her: 104; I am eligible to moonlight but it's high-risk work given the pandemic). My salary is expected to rise in 3-5 years as I transition to a private practice and anticipate a take-home salary in the mid to upper $300k based on peers in my area.

Net Worth: negative infinity

Tax Bracket: 35% single (35% Federal, 0% state); 32% when MFJ

State of residence: Texas

Insurance Policies:
- No life insurance policies yet for either of us
- My $6k disability w/ option for another 10.5k, Guardian
- Her: None
- Adequate auto and rental insurance
- Adequate malpractice policies through employers
- Health insurance: standard employer plans (are we making a mistake not going w/ a HDHP? Generally healthy)

Debts:

• Mortgage: Renting! We live in a HCOL area and have decided to rent for at least another year. Given my connections due to medical school and residency I would prefer to open a practice in this city
• My student loans: Federal $86k at 6.8%, Private $13k at 10%. I applied for a state physician loan repayment program which repays 16% year one, 22% the next, 28% the following, and 34% in the 4th and final year), awaiting award notification.
• Her student loans: Federal 320K at 5-6.8%, going for PSLF and has made ~4 years of qualifying payments
• Cars: Both paid off
• Credit card debt: Neither of us carry any credit card debt
• Total debt: $420k

Assets:

• We have about 50k between us in separate checking accounts
• No 401k, 403b, 457, taxable accounts, IRA, Roth IRA, etc for either of us
• Emergency Fund: See cash on hand, above.
• My employer's 403b: Automatic 5% 401a contribution with an additional 1:1 match for my contributions to a 403b up to 5% (So $22k/year). Vesting takes a little over 2 years as long as I remain 0.75FTE or above. I have not heard back from all 3 possible 403b vendors but they're through Ameriprise, Franklin Templeton, and Metlife. The Metlife option is an annuity and there are a number of costs associated with any fund through them (>1.6% in total fees), but at least it includes a Fidelity target date fund. Unsure if either of the other 2 are annuities or not. How much should this influence my choice versus picking the best fund available?
• My 457: My employer appears offers a 457, I'm not sure if it's governmental or not, but I work for a state-funded agency
• Her 403b: Unknown what's available through her employer but I think that it's a pretty similar mix of options

Questions:
1) Clearly we have some work to do. Where do we start first? We are trying to live like trainees and limit big expenses in the next 2-3 years (two moves in my final year of residency/her first year as a professional killed our savings)

2) I have a $15k sign-on bonus inbound, should I pay off the 10% loans immediately?

3) I missed the window on funding a Roth IRA, so I should just open a traditional IRA this year and backdoor it, correct?

4) How should we re-allocate the ~$50k we have on-hand?

5) Should I even be thinking about the 457 or do I have other work to do first? How would I choose between funding the 457 or a taxable account first?

[wideopenspaces]

Congrats on the new job!
Is anywhere in Texas actually hcol? I'm from there, moved away 10 years ago but even Austin is not as expensive as CA, right??
Anyhow, I would personally hang on to the 50k given pandemic. Use the 15k to pay off the private loan if that won't be forgiven. Spend a couple years saving for retirement and a downpayment on a home. If the 457 is govt, I'd contribute to it. If not, taxable makes sense, you can use it to pay off loans in 6 years if PSLF doesn't work out for some reason. I don't have any advice about protecting you from her debt, probably a prenup?

[billy]

Im not a lawyer so take this with a grain of salt but according to this: https://studentloanhero.com/featured...20responsible. as long as you dont cosign, or as long as she refinances before you get married you should be ok (i.e. not responsible for her loans) even if living in texas. Any loans taken out after you're married however, may be considered to be communal.

[Lithium]

Retirement accounts: make it a goal to fund bdIRA x2, max out both 403b(s), and also 457(b) if it is governmental (if NG, learn more about the plan before deciding whether to fund). Max out HSA x 2 if available. bdIRA and HSA are available until next April, but the others need to be funded by 12/31. Attendings should always max available retirement account space whenever possible.

Loans - sounds like the plan is for your fiancee to go for PSLF and you're hoping the state will pay for your loans? I wouldn't pay yours off until you hear the status about the state's award. If they reject you, then put all your extra cash flow beyond retirement savings into your loans. I don't have good advice beyond that. I do know that for couples with a high earning spouse, choosing the right IDR plan for PSLF gets complicated in a hurry (if you're debating whether to do PAYE/MFS or REPAYE), which is where the student loan professionals earn their money.

As for protecting yourself... with all due respect, this is something you should have thought through very carefully before you got engaged (though at least you haven't tied the knot yet). Does your fiancee know how you feel? Are you going to treat "her" student loans differently than you would manage your own in order "to protect yourself?" Do you and her feel the same way about sticking with the PSLF program for another six years, as opposed to refinancing and slaying it faster? If that discussion hasn't happened yet, I recommend getting on the same page ASAP.

[Brains428]

I agree with Lithium. You have to have the conversation about debt and future earnings now.

I'd find the WCI podcast episode from the winter with the student loan advisor that talks about the benefits of MFS and PSLF.

There has to be a cheaper apartment where you are in Texas.

Use COVID as an excuse to do a small Zoom wedding. Maybe throw a reception when you're debt free.

[terrylikesyogurt]

Thanks all for weighing in. Writing from my phone, apologies for brevity. Our rent is very reasonable for our setting, hence the decision to continue renting vs a purchase at this time. My initial plan was as wideopenspace above suggested to keep renting a few years more and save for a down-payment. I am not necessarily banking on the state repayment program because my loans are so low, it turned out to be a perk of the job, however. If I do qualify, would it be best to instead put the money toward the 457 instead, then?

RE the SO. She's actually a wonderful person who, like me, wants a small and modest wedding and, thus far refuses to consider any assistance I've offered toward for her student debt in the future, so she is pretty adamant about PSLF for now. So again, a good person, but things happen and it would be just as irresponsible to not educate myself about potential consequences of a separation and bring them up if necessary. If she let's me, I would treat it all as our debt and pay it off in the way that makes the most sense. Considering her client base, working for a PSLF eligible institution makes sense, especially if they're able to pay near the top of her potential.

[Dicast]

1. Knock out the private 10% loan first. Just don't buy anything unless it is a necessity. Don't buy cars or cheap if you do.
2. Yes
3. Yes
4. I wouldn't rush to deploy the 50k until you have a few paychecks under your belt. Keep as much in the checking account/high yield savings as it takes for you to feel safe. Everyone has a different idea of an emergency fund.
5. Whomever you decide to use for the retirement account should be able to tell you if it is a governmental 457 plan. If you are employed by the state then it should be. I would also steer clear of any annuities if you can.
6. Once you are married it should really be "our" loans mentality. Sounds though like you are on the correct path of payoffs. I can only speak from my own experience that I paid the majority of my wife's 190k of student loans and my 165k at the same time. She finally finished 7 years of training to contribute for the last 1 year before we were student loan free. Totally worth it to me. During that time we just paid extra on whatever loan had the worse interest rate.

[terrylikesyogurt]

If all of the 403b options are annuities, should I still take it, but only fund it to 5% to get the match rather than the maximum allowable contribution?

[Tim]

Don’t mix retirement savings with the loan decisions.
Gross -Taxes-retirement (20%)=spending (includes loans and saving for house).
You= Max 403b, 457 and bdRoth done
Her = Max 403b, bdRoth done
If the 10% loan doesn’t qualify for that state program, pay it ASAP.
Cost of living: Dallas, Houston, and Austin all have areas the can be expensive. Drive and amenities are wants, not needs. Plan on keeping it low until her debt cloud clears.
Your debt: your plan is fine. If the program falls through, refi and pay ASAP.
Her debt: debt 2x earnings is iffy. 4x earnings is almost fatal. Since she is close to her earnings potential, PSLF is the obvious best choice. The question becomes what next? The suggestion for keeping it separate legal is huge. That would open up IBR options with forgiveness. A long tough road. I would consider some SL counseling to verify if that is feasible. 20 yrs is a long commitment. However, forgiveness is money for the benefit of both. PSLF, IBR, Refi have a plan for each that you both support.
I would not plan on a house until you have her debt situation under control.
Solving her debt problem the objective is to find the best solution. If keeping it separate works, great. If not, it’s going to have some forgiveness or not. It is truly intended as a joint decision.
You both might choose to postpone a house for a couple of additional years to kill her student loans to avoid the long term options . Family decisions.
Sticking to the 20% retirement savings should happen for both, those are given.

[Brains428]

Good thing finding a spouse with similar spending. We got married a couple months ago in a large park in our town. My sister (who lives in another state) got ordained and officiated it. So, if there is a nice scenic area around and a willing officiant, then viola- free wedding.

A friend of mine got married on the bike paths off Town Lake in Austin overlooking the water and the skyline. It was beautiful. Also free.

Don't forget the PSLF fund.

[nephron]

I can answer the last one regarding protecting yourself from her student loans if "things don't work out". Don't get married until you are reasonable sure things will work out. If you get divorced, I don't think that you will be liable for her student loans but I think that you will end up paying her a comparable amount. Maybe a pre-nuptial? Anyways, I am sure that there are tricks you can do ensure she gets the largest benefit from pslf. I don't know if delaying legal marriage maybe one of them.

[Timparsons952]

Very curious to know what profession she is in where top 5% of income is just over 100k yet requires >400k in student loans??

[childay]

Very curious to know what profession she is in where top 5% of income is just over 100k yet requires >400k in student loans??

OP youve received good advice above. My thought as well. I was reading along thinking "oh this doesn't sound too bad" and then WTF 400k whaaaaat? Is her financial frugality really as good as you say?

Edit: also why is moonlighting high-risk you should be able to telemedicine ? Alternately start that small private practice ASAP

[terrylikesyogurt]

Oops, I was mistaken about her loan burden, which stands at 320k. I was a bit off about salary potential too, the top 10%ile for Psychologists is in the 120s, so there's some room to grow (and she can easily exceed that in private practice if she chooses to go that route). Due to caring for an ill parent and having to make several moves / move them, our finances are currently in the shape they're in. We are posting here to get help because we know we are a little behind on this.

We are going to check out the podcast mentioned above and come up with plans for PSLF, IBR, and paying off on our own. This thread helped spark a very productive conversation about our financial future, so thanks. And thanks all for your concern but I am quite certain about the relationship. I didn't mean for it to become as large a part of this discussion as it has.

Moonlighting Tele gigs have variable schedules with nights and weekends you have to agree to and I'm just getting adjusted to my first job so I'm holding off. The local jobs which have more flexible schedules are in person gigs at the jail or crisis center.

Is the 403b still worthwhile even if all the options are annuities? In that case should I only contribute the minimum to obtain the match and put the rest in the 457 if governmental and taxable accounts?

[Lithium]

I'd be amazed if you don't have any options besides annuities among your various 403b vendors. I would rather use a governmental 457 than an unmatched annuity option in the 403b. If it's between that and taxable, depends on how bad the annuity is I guess.