New Attending Savings Questions

[manuelmas]

Hello:

I recently started to work as an Attending Physician in a University hospital. I have read White Coat Investor in the past, but the influx of paperwork and information that comes with new employment has been overwhelming. Naturally, this has raised several questions:

 

Savings:

- My employer offers a mandate program called Optional Retirement Program. It dictates that 6.65% of my pre-tax earnings will be kept for a Savings account with a 8.5% Employer match. This savings account appears to have no maximum cap. I was planning on saving much more for retirement. They also offer Traditional 403B and Roth 403B. Should I use either one of those for additional savings or should I do one on my own? Should I do something else?

 

 

If you need any more information, please don't hesitate to ask.
Thanks a lot.

[jfoxcpacfp]

manuelmas wrote:

Should I use either one of those for additional savings or should I do one on my own? Should I do something else?

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Hard to say without a plan. Do you have debt and a plan for paying it off? Short-term (next 5 years) goals? do you have appropriate amounts of term life and disability coverage (I believe you are asking about these in another post)? You don't want to tie up all extra cash flow in retirement accounts before taking a comprehensive assessment of all financial goals and how they relate. That calls for a financial plan. Might want to read Financial Guide for New Attendings and/or talk to a fee-only financial planner, and/or read The One Page Financial Plan and/or share more about your plans here.

[manuelmas]

Hello:

I already have savings in a Roth IRA which I maxed out last year as well as on index funds additional to that. I don't have any debt other than a small (9,000k) educational loan (4 loans tied into 1 account, interest rate ranging from 4-6%). As you said, I am asking about term-life and disability coverage on another forum post, but yes, the plan is to get a private one ASAP.

[jfoxcpacfp]

Get a private what? Plan, financial advisor or insurance policy? I would need to know a lot more to advise how much to save for retirement at this point, but you can put a lot of the pieces together by digging into this site. The information I referenced above would help you make some of these decisions.

[childay]

Sorry what kind of plan is this?  Is it a 457B?

[jfoxcpacfp]

childay wrote:

Sorry what kind of plan is this?  Is it a 457B?

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Wondering myself - 401a?

[manuelmas]

jfoxcpacfp wrote:

Get a private what? Plan, financial advisor or insurance policy? I would need to know a lot more to advise how much to save for retirement at this point, but you can put a lot of the pieces together by digging into this site. The information I referenced above would help you make some of these decisions.

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Apologies, to get a private insurance/disability plan.

 

jfoxcpacfp wrote:

childay wrote:

Sorry what kind of plan is this?  Is it a 457B?

Click to expand…

Wondering myself – 401a?

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Which plan are you referring to?

[manuelmas]

So, the ORP is this:

 

https://nb.fidelity.com/public/nb/ut/planoptions/plandetails?planId=82501&option=planBasics

[jfoxcpacfp]

Ah, I see. It's an alternate to the TRS Teacher Retirement System, Texas-specific. Let me take a look at it.

[jfoxcpacfp]

The amount of income that can be taken into consideration for your ORP (as of 2012) is $245k. The funds choices are reasonable (Fidelity) and you have a good match. Without more study, I'd say this is a pretty big benefit. As for the 403b, traditional or Roth, I'll go back to my original recommendation of a financial plan before advice.

[manuelmas]

jfoxcpacfp wrote:

The amount of income that can be taken into consideration for your ORP (as of 2012) is $245k. The funds choices are reasonable (Fidelity) and you have a good match. Without more study, I’d say this is a pretty big benefit. As for the 403b, traditional or Roth, I’ll go back to my original recommendation of a financial plan before advice.

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Well, I am planning on paying off the 9k loan and saving for retirement and a possible home/apartment down-payment. I already have money saved for both down-payment and retirement.  I just finished fellowship so I don't plan on changing my lifestyle. I can save around 20% for Retirement. I already have Emergency Fund setup.

In general, was planning on using 50% of my paycheck and the other 50% saving it between retirement, down-payment and funds I keep for upcoming trips, gifts.

[The White Coat Investor]

manuelmas wrote:

Hello:

I recently started to work as an Attending Physician in a University hospital. I have read White Coat Investor in the past, but the influx of paperwork and information that comes with new employment has been overwhelming. Naturally, this has raised several questions:

 

Savings:

– My employer offers a mandate program called Optional Retirement Program. It dictates that 6.65% of my pre-tax earnings will be kept for a Savings account with a 8.5% Employer match. This savings account appears to have no maximum cap. I was planning on saving much more for retirement. They also offer Traditional 403B and Roth 403B. Should I use either one of those for additional savings or should I do one on my own? Should I do something else?

 

 

If you need any more information, please don’t hesitate to ask.
Thanks a lot.

Click to expand...

Pretty funny name for a mandatory program. Big match so a big benefit. Basically, you're getting 15% toward retirement right there. For your first six months, maybe the Roth 403b, then the traditional 403b after that. And of course a personal and spousal backdoor Roth, you're spouses's employer's provided accounts and maybe an HSA. After that you're looking at an individual 401(k) if you have a side business and/or a taxable account for savings.

Make sure you are adequately insured and have a plan for any student loans, an eventual house purchase etc.

[Farfetched]

The White Coat Investor wrote:

manuelmas wrote:

Hello:

I recently started to work as an Attending Physician in a University hospital. I have read White Coat Investor in the past, but the influx of paperwork and information that comes with new employment has been overwhelming. Naturally, this has raised several questions:

 

Savings:

– My employer offers a mandate program called Optional Retirement Program. It dictates that 6.65% of my pre-tax earnings will be kept for a Savings account with a 8.5% Employer match. This savings account appears to have no maximum cap. I was planning on saving much more for retirement. They also offer Traditional 403B and Roth 403B. Should I use either one of those for additional savings or should I do one on my own? Should I do something else?

 

 

If you need any more information, please don’t hesitate to ask.
Thanks a lot.

Click to expand…

Pretty funny name for a mandatory program. Big match so a big benefit. Basically, you’re getting 15% toward retirement right there. For your first six months, maybe the Roth 403b, then the traditional 403b after that. And of course a personal and spousal backdoor Roth, you’re spouses’s employer’s provided accounts and maybe an HSA. After that you’re looking at an individual 401(k) if you have a side business and/or a taxable account for savings.

Make sure you are adequately insured and have a plan for any student loans, an eventual house purchase etc.

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It's called optional retirement plan because it's mandatory to pick a pension system with periodic contributions, OR this optional plan, at lease at my institution, which from the descriptions sounds to be the same as the OP's plan.

[childay]

Interesting so you basically have to decide whether to participate in a defined benefit or defined contribution plan

http://www.thecb.state.tx.us/reports/pdf/0869.pdf

 

edit: or perhaps the TRS plan isn't available to you?

 

[manuelmas]

childay wrote:

Interesting so you basically have to decide whether to participate in a defined benefit or defined contribution plan

http://www.thecb.state.tx.us/reports/pdf/0869.pdf

 

edit: or perhaps the TRS plan isn’t available to you?

 

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Yes, TRS is the default unless you choose the ORP. I chose ORP because it gives me flexibility if I move to another state or employer.