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Advice for 2021. Debt vs invest

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  • Advice for 2021. Debt vs invest

    Big forum fan, first time poster. will try to keep things brief.

    I’m Halfway through training with 3 years left including including fellowship. Non medical partner making 80K

    currently contributing 8% + 5%match (her) and 5% with no match (me) to pre-tax retirement accounts. Maxing out each Roth IRA.

    mortage with 150K left, house worth 200K
    My loans at ~200K .. in repaye. Currently at 0%
    no other debts other than mortgage and loans .. 2 cars paid off
    Term life insurance in place (have kids)
    was declined for disability from one of WCI endorsed providers due to pre existing condition
    Emergency fund with 6 months In place

    we have about $3000 left over every month.. this year was used to pay off the 2018 car (bought new) and max Roth IRAs
    next year I will be able to moonlight more which will increase this to about $5 K/month = ~50 K year extra take home pay (after accounting for maxing Roth IRA)

    Questions is what to do with this extra cash?
    1. Increase pre retirement contributions so that we have less take home pay
    2. Start paying off Med school loans
    3. save for potential relocation expenses in case I match elsewhere, need new car in about 2 years (current is reliable but 160K miles)
    4. Other recommendations or do all 3

    I feel that option 1 is probably best long term but my wife and I come from dave Ramsey background and want to start taking on the loans and are having a hard time committing to that ... any advice would be appreciated.

    Edit: not planning for PSLF
    Last edited by Smalltownboy; 11-29-2020, 10:52 AM.

  • #2
    Welcome to the forum.

    I just finished residency this summer. Like you my spouse was working during residency and made a similar income. We didn't own a house during residency but rented.

    For us, we decided to use our extra money like this:
    1. Make sure we had a good emergency fund and money set aside for moving expenses on residency graduation. We didn't buy a house right at the end of residency and would've done a doctor's loan anyway so I didn't worry about having a big down payment set aside.
    2. After EF was taken care of we increased our retirement contributions. At the start of residency we did roth IRAs and 401ks up to match. By the end of residency we had switched to roth 401ks and were able to max my wife's 401k for a couple of years. Thanks to doing that and the great market over the last few years we were able to get to>150k in roth retirement savings by the end of residency which will hopefully serve us well when we approach retirement.

    Residency is a stressful time (even more with children which we didn't have) so make sure you don't get so focused on savings you miss out on things that bring joy along the way. My wife and I traveled every year during residency and enjoyed a lot of good meals and other experiences. We were fortunate and lived in a MCOL so our income went a long way.

    You're off to a great start and good luck!


    • #3
      All three with a tilt to #3.
      I would consider that the house could end up being a disruption in transition to fellowship and attending. With a working spouse, traveling light gives you much more flexibility. Keep the spouse, sell the house and rent the last year would simplify things. At least you would have simplified potential issues.


      • #4
        In no particular order of importance, I suppose:
        1. Change 401k contributions to Roth, if that is an option. You really don't need the deduction right now and this is a golden opportunity to build up your Roth base. Max the Roth for both of you. Your future self will be very grateful.
        2. Spend a little on one of the recommended student loan advisors to get an outside professional perspective (note, just a one-time review and discussion s/b plenty).
        3. The rest should go to an e-fund specifically to supplant LTDI bene's - depending on your specialty, this may be a high risk for you. If and when you are able to secure coverage, then use the e-fund for other goals.
        Note that this is general advice only and I am not your financial advisor.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          Not mentioned above is a 529...


          • #6
            Originally posted by extremerouge View Post
            Not mentioned above is a 529...
            Personally w/n recommend at this point.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


            • #7
              My situation is not much different than yours. I am maxing retirement and then putting everything else extra in "high yield" savings account. It will be used for student loan payoff, relocation, and/or a house down payment (after I rent for a year in my new location).


              • #8
                Thank you all for your input! I am going to do a combination of increasing our roth/pre-tax contributions and increase our e-fund with what is left over in case of disability/loans/relocation etc.