457 Uncertainty

[ShockDoc]

I am a new attending - married with a child and one on the way. I’m making mid 200s in academics with no debt, no emergency fund, low 5 figure retirement savings. 1 year contract. Good retirement plan (>10% company contribution - not a match), minimal bonus structure, plenty of room for in house moonlighting. I originally planned to make out my 403b and my nongovernmental 457 (TIAA/cref total stock market index equivalent) while until I have an emergency fund, home down payment saved up, +/- new car for wife then adding a backdoor Roth +/- HSA +/- taxable in 1-3y once we’ve met our short term goals.

I’m very excited about my job - I like my coworkers, I like the city, have generous retirement package, work with residents and fellows, get to do some cutting edge stuff, have friends in the area. I HOPE this is a career move, but I’m having cold feet. I feel a bit undercompensated, we’re closer to home than where I trained, but still several hundred miles from parents. The other job I considered was a private practice job paying 150k more/y with raises up to about 250k more/y over the next 10 years. I also feel like the academic work is adding up to more hours outside of my clinical time than I expected. Plus, some little stuff is bugging me (they charge me for parking, etc).

My question is this:

Should I continue as planned with the 457 knowing there is some chance I may leave? Or should I wait it out for my first year and see if I want to stay here long term? Should I just put money in my 403b and pile up cash to buy a home if I end up loving the job?

Thanks!!

[Peds]

what are the distribution terms of the 457?

academics pays less, for more work. thats the deal.

[JBME]

Honestly mid 200s for an academic position is a bit more than normal and making you pay for parking is also normal. Feel free to shop around but I don’t think you’re getting ripped off. Having a generous retirement package is really worth appreciating. In my limited experience academic positions are better with retirement contributions than non academic positions. But yes they pay less

[MPMD]

Your second paragraph makes it sound like you are going to leave at some point, especially if I'm reading correctly that you aren't madly in love with the job, feel like you're getting overworked, and can make $150k+ more in PP.

457b is really all about the distribution options and they seem to vary pretty wildly. Can you post your options?

[wonka31]

Check the distribution options. Some allow even distributions over 'x years', which will soften a potential tax pill down the road. If the distribution options are not good and you are already considering leaving, there's a high probability that you will at some point. If you are maxing out your 457 at 18.5k, your tax savings is only about 3k. Consider just putting it in a taxable account until you get things sorted out.

[ShockDoc]

Distribution is lump sum or divided over 5 years. Honestly, I hope this is the job I have for the rest of my career, but I am having some second thoughts. I suspect it is a “grass is greener” phenomenon, but we’ll see.

[jz]

Agree with others, it's all about the distribution options.

[wonka31]

Five years is pretty reasonable, imo. I contribute to a similar plan, though have no plans of leaving my current employer. A forced lump sum would make me nervous, 5 years in maneuverable.

[ER-Rad]

I would vote for maxing out the 457b, for a few reasons:

- you get to use pre-tax money

- you get to "pay yourself first". If you are "piling up cash," you may be tempted to spend that cash, or have a spouse who is tempted to spend that cash. The same can be said with money in a taxable account. If you put money in the 457b, you know it is earmarked for retirement.

- many other jobs will have non-governmental 457b accounts that you can transfer the money into

 

However, you should put money into a backdoor Roth BEFORE putting money into the 457b, but you should easily be able to do both. If you are an attending physician in the United States, you should be maxing out a backdoor Roth IRA for yourself and your spouse every year until you retire, no exceptions.

[Raddoc123]

I’d check the financials of your institution and use it.  Failures and loss is real rare, never heard about an MD losing money.  You get to put in 18.5k for a reduction of 11k or so in take home pay.  Good deal.  When you retire, even early, you’ll have a nice sum for the first five years.

[ShockDoc]

Why should I do backdoor Roth before 457 given my tax bracket? Plus, I live in a state with income tax.

And it sounds nice to say that I should easily be able to do all of the above, but that’s not practical. I’ll have 60ish to taxes, 37 to 403b and 457 and tithe - there goes half. That leaves me with about 120 to live on and save for a home down payment. Our living expenses will be about 60-70. We also need to save up an emergency fund. There are a ton of things vying for my money for the next 24-36 months and it seems like saving 15ish% of my income for retirement plus >10% from my employer and 20-30% for EF and downpayment is good. We’re going to be living on about 20-25% of my income. Plus, we’d ideally like to take a vacation at some point and my wife’s car has literally had a dent for multiple years that I’d like to fix.

I’d like to think that 20k EF, 100k for a home, no debt and 100-150k in retirement plans by 2-3y out of fellowship is a pretty strong position.

[treesrock]

ShockDoc wrote:

Why should I do backdoor Roth before 457 given my tax bracket? Plus, I live in a state with income tax.

And it sounds nice to say that I should easily be able to do all of the above, but that’s not practical. I’ll have 60ish to taxes, 37 to 403b and 457 and tithe – there goes half. That leaves me with about 120 to live on and save for a home down payment. Our living expenses will be about 60-70. We also need to save up an emergency fund. There are a ton of things vying for my money for the next 24-36 months and it seems like saving 15ish% of my income for retirement plus >10% from my employer and 20-30% for EF and downpayment is good. We’re going to be living on about 20-25% of my income. Plus, we’d ideally like to take a vacation at some point and my wife’s car has literally had a dent for multiple years that I’d like to fix.

I’d like to think that 20k EF, 100k for a home, no debt and 100-150k in retirement plans by 2-3y out of fellowship is a pretty strong position.

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Most on this forum would recommend new attending do a few things for certain.  For your situation, the majority will tell you to max out your tax-deferred space and always utilize a Backdoor Roth.  You are "paying yourself first".  This goes along with the living like a resident mantra.  My vote goes along with others, maximize your contributions to your 403b, 457b, and Backdoor Roth IRA.  I agree with your plan to bulk up to emergency fund as well.  Yes, this means you will need to make some sacrifices to your current quality of life in order to do this, so it comes down to whether or not you (and your wife!) are willing to do thi.  Long term, you'll probably be fine either way, but fighting lifestyle creep as a new attending is super hard.  And one of the easiest ways to do it is hiding the money from yourself.

I'm a new attending 2-years out, and its astonishing to me how much more money I spend now compared to my fellowship years.  Trust me, just hide that money from yourself in those tax deferred accounts, otherwise you'll find a way to spend it.

Its unclear to me why you are saving for a downpayment on a house while you're contemplating leaving your current job?  Would the private practice job be in the same area if you were to leave?  Are you sure you don't have a non-compete?