First World Problem (like Jim calls it)

[Drknowsbest]

So first of all, can I say how awesome your podcasts are? The drive to work is so much more enjoyable and I listen to the episodes multiple times since it goes over my head.

My husband and I (both physicians) recently moved to a very HCOL but high quality of life state (Hawaii)

We have paid all of our student loans, and have a paid rental property. We max out our 401k and backdoor roth as well as put away generously toward the girls 529. we are putting away close to 10000/month to a vanguard taxable account.

My job just started to offer mega roth for my position. The question is, for tax diversification, does it make sense for me to max out to that post-tax account and roll it into the roth the following year? If so, since the interest in the 'year of' gets taxed before being rolled over, is it better to contribute at the end of the year to get hit with less taxes, or the beginning for max return (in current market any way)

Thanks.

[The White Coat Investor]

Thanks for your kind words.

 

Earlier is generally better. And yes, if your choice is Mega Backdoor Roth vs taxable, then Mega Backdoor Roth always wins.

[PhysicianOnFIRE]

 

Drknowsbest wrote:

My husband and I (both physicians) recently moved to a very HCOL but high quality of life state (Hawaii)

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Are you familiar with Walter Nguyen, MD, a.k.a. The Senior Resident? He's a radiologist in Honolulu and has an excellent blog that deserves more attention. He also knows the best spots for poke.

[jfoxcpacfp]

Drknowsbest wrote:

My job just started to offer mega roth for my position. The question is, for tax diversification, does it make sense for me to max out to that post-tax account and roll it into the roth the following year? If so, since the interest in the ‘year of’ gets taxed before being rolled over, is it better to contribute at the end of the year to get hit with less taxes, or the beginning for max return (in current market any way)

Click to expand...

I vote yes with WCI for the mega - you are so fortunate, hope you realize that, because it's not easy for a physician who is not an IC to have access.

To answer your question, it is always better to have income and pay taxes (if you are strictly looking at finances and not quality of life issues such as work less and have more family time) than to have less income in order to pay less taxes. So, yes, I would recommend contributing at the BOY rather than EOY.

The above assumes, of course, that the market consistently heads north in the short term (<5 years), which, as we all know, is not reliable. However, the odds are with you because the market is up, on average, 7 out of 10 days. So what do you do when you contribute at the BOY and your account is lower at the EOY? You go ahead and convert and wait for growth. You are no worse off and there is nothing to be gained by waiting until the following year to convert but the possibility of taxable income if and when the market picks back up.

[q-school]

welcome!  and congrats on the move.   when can we visit?

also, you guys are killing it.  you are going to be fine as long as you keep the savings rate as high as you have.   once you decide on your emergency fund, which it sounds like you have, although there is great debate here on how much it should be, i think the mega roth would be awesome for you.  also for legacy planning issues which we are currently discussing in another thread.

 

 

[Re3iRtH]

I recently finished my internship + radiology residency in Hawaii. I heard of Walter but I had no idea he had a podcast! Will need to look that up.