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**FutureDoc** · 10-12-2016, 08:29 PM

Well, my wife and I are a little behind you in training (both interns, me in Internal Med and her in OBGYN), but I can tell you what we plan to do. If we work employed positions we will be negotiating for maximum loan forgiveness in addition to other benefits. Then we will be looking to see if we qualify for any of the state or federal underserved area loan forgiveness programs. Then I plan on doing some moonlighting independently in my off weeks, and possibly involve her as well though probably not.

With this, I plan on making sure that we both max our 401k/403b as well as any 457s, do dual back door Roth IRAs, and then fund a solo 401k up to the maximum from moonlighting work. That comes to roughly 95 grand in tax advantaged accounts, which on a 500k plus budget should be easy to do as a starter. The REST of your extra money should be going to aggressively paying down loans. Here's the thing, with a dual physician salary you shouldn't be thinking "do one thing, or another" it should be max out all of your tax advantaged space. I ran some rough numbers and with the salaries you quoted, you can max everything I just said here and after taxes and retirement accounts your take home pay will still be 25k a month. Live like "residents" on 10k a month for your expenses and start shoveling the other 15k towards your loans/saving/whatever else you want to do to build your net worth.

You've already won the game at this point, just pick a plan and stick to it, and don't let lifestyle inflate dramatically.

700 grand in loans is pretty absurd and it will take a while to dig out, but you have two really big shovels. 15k a month plus whatever your jobs are offering you (from offers I've seen that should be at minimum 20-30k per year for each of you) will completely eliminate you loans in just under 4 years. That's less time that it takes for her to do residency, and that's on top of socking away 99 grand a year in retirement accounts!

**PhysicianOnFIRE** · 10-12-2016, 10:06 PM

Can you elaborate on the hospital's loan repayment / forgiveness plan?

Are your loans currently @ 6.8%?

The Rockies seem appropriate. Surrounded by mountains, including a mountain of debt! It's great that you're making a plan now.

Best,

-PoF

**DMFA** · 10-12-2016, 10:13 PM

Debt THAT high? Consider PSLF. Ensure any loan forgiveness does not count as taxable income (PSLF is untaxed) and doesn't indenture you as a servant.

**DMFA** · 10-12-2016, 10:17 PM

And if you don't do PSLF, then you should be doing RePAYE to minimize accruing interest and, as soon as you can afford payments once out of training, private refinance to a lower rate. Those gargantuan amounts at nearly 7% is literally hurting my eyes.

Once I'm at my computer I can stop being vague and use actual numbers...

**The White Coat Investor** · 10-12-2016, 11:19 PM

azureabyss wrote:

Hello! Long time lurker, now finally posting as it is getting ‘real’ in our lives!

Quick Bio:

Peds Hospitalist Attending; Student Loan Debt: $410,000 (yes, private med schools suck+ I had a big car payment); Fed Loans; PAYE (currently ~$670/mo); work at a 501c3

Wife: OB-Gyn Resident (4th Yr); Student Loan Debt: $315,000 (same med school – she had free housing/food for 2.5 years). Fed Loans; PAYE (~$350/mo)

No CC Debt (paid off early 2016);

Car Loan: 1.99% and owe $12k; other car we own outright.

Currently Rent

Taking jobs in the Northern Rockies-rural America at it’s finest!

Me: ~250k/yr + student loan repayment options (‘loan’ from the hospital – have to work a yr to forgive that amt)

Her: >300k/yr + student loan repayment options (same as above)

Our Questions: SERIOUSLY – WHAT TO DO?

Do we pay off student loans as fast as possible w/ the help of the hospital system + any income to pay off loans asap?

Do we invest invest invest as much as possible and stay there until THEY pay off our student loans/close to it? If so – in what (I have the book…looking at backdoor IRAs for both of us, maximizing out their retirement plan, etc).

Do we cut it down the middle – invest and pay off?

Save it all, and live ‘fat and happy’

Or….?

We are all ears about what to do – we’re talking w/ a tax attorney (friend of mine) on how to shelter $$$ but in the absence of any tangible property minus an older suv and a newer one that’s on loan – we don’t own much besides sporting equipment, computers and 1 tv, and clothes to go to work.

We know there are other two physician families on here so hoping to get some advice from them and anybody else who knows…well a lot

ANY help would be appreciated! Thanks!

Click to expand...

You're working at a 501(c)3 so go for PSLF while using the rest of your income to max out retirement accounts, save up a down payment, and build up a side fund in case something happens to PSLF.

**DMFA** · 10-13-2016, 12:04 AM

K, few questions to make sure everything is more or less tight:

filing taxes separately or jointly?

fed loan interest rates? (I'll estimate 6.5%)

this employer loan forgiveness program - is the forgiven amount taxable, and how does it work?

family size? (kids increases poverty line which adjusts the RePAYE/PAYE amounts)

how much of that amount owed is principal, and how much is interest?

did you make PSLF-qualifying payments (basically, any income-driven repayment) while in residency, and how many?

Estimating $725k debt at 6.5%, basically assuming joint filing:

Monthly interest accrual: $3927.08

10-yr std payment: $8232.23 (assuming no add'l capitalization)

Assuming your joint AGI $550,000, 5% annual earnings increase, and it's just you two, no kids, and you do PSLF (120 payments while working for a 501c3, which you can retroactively certify and could probably include residency):

PAYE and RePAYE monthly payment: $4,383 (greater than accruing interest, so you wouldn't benefit much from RePAYE)

Total paid over 10 years: $667,754

Amount forgiven tax-free after 10 years: $474,162

Otherwise, if you don't do PSLF and stick to RePAYE/PAYE at that interest rate, you'll pay a total of $1,245,000 over about 16 years.

If you were to refi to a private lender once your wife starts earning, assuming 3.5% interest (could prob get with variable rates and a 5-year term):

Monthly payment: $13,189

Total paid over 5 years: $791,341

So, in total:

if you're committed to working at 501c3's for the remainder of 120 qualifying payments (max 10 years): strongly consider PSLF

if you're not: refinance to a private lender and pay off ASAP

if your employer loan forgiveness plan is pretty good and the forgiveness is NOT taxable: stick to them

You have to be very careful about loan "forgiveness" programs that aren't just more loans and whose forgiveness is taxable...because you will have a very hefty tax bill (at your income and amount owed, could easily be $300,000) in the year of forgiveness.

K, now for other stuff:

Your car loan is at 2%. Meh. You're probably better off investing for retirement than trying to kill that off. Would have been best not to have gotten the loan in the first place, but life happens, hindsight's 20/20, etc.

Once you refi your loans or commit to PSLF, you're more likely to gain higher interest from your retirement investments than you would lose from interest on your debt.

If you're not going to pay your loans anyway, it doesn't really matter much they are (other than potential creditors for, say, a mortgage once you have enough to put 20% down), and put your money elsewhere.

Do you also earn on 1099s with contract work? If you do, you can put away 20% of that into a solo-401k.

What is your employer retirement plan? I'm assuming 403b. Any matching? That's at least $18,000 apiece, not including matching. Do they have a 457 as well?

Backdoor Roth IRAs ($5,500 each) for the both of you, probably prioritized after the employer plan.

Are you eligible for HSA? (deductible > $2600, OOP > $13,100 for family) If so, that's another $6,650 in tax-advantaged investments (per family).

Beyond that, if you're still not saving about 20% of your income for retirement, you can make up the rest in 529 college savings for future children, or for a good ol' taxable brokerage account with tax-efficient (low-turnover, low-dividend, e.g. funds specifically labeled "tax-managed").

The biggest key to being not broke (dare I say rich) is not spending and maximizing tax efficiency.

Finally, don't make seminal financial decisions based on some bros' musings on a forum. You and your spouse should really sit down with a planner to hammer every single detail out. Sorry for having more questions than answers.

**jfoxcpacfp** · 10-13-2016, 12:07 AM

azureabyss wrote:

Do we pay off student loans as fast as possible w/ the help of the hospital system + any income to pay off loans asap? Do we invest invest invest as much as possible and stay there until THEY pay off our student loans/close to it? If so – in what (I have the book…looking at backdoor IRAs for both of us, maximizing out their retirement plan, etc). Do we cut it down the middle – invest and pay off? Save it all, and live ‘fat and happy’

Click to expand...

If "live fat and happy" means what I think it does, I would mark that off your list. You want to live lean and mean. As FutureDoc says, you have a big shovel (think I'll steal that term).

You didn't list the student loan repayment options from your hospitals. How much will they pay off in a year? Or do they start a schedule of repayment after you have worked for a year and it lasts X# of years paying of $XXX per year? Need to consider the tax impact of the extra income, of course.

With all due respect to your friend, who I am sure is very smart, a tax attorney is probably not going to help you a lot at this stage in your lives. Your focus s/b on cash flow and planning. Read The One Page Financial Plan in addition to The WCI Guide.

**jfoxcpacfp** · 10-13-2016, 12:07 AM

**azureabyss** · 10-13-2016, 01:12 AM

Thanks everybody! Some clarifying comments

filing taxes separately or jointly?

Married filing Separately

fed loan interest rates? (I’ll estimate 6.5%)

7.1% :-(

this employer loan forgiveness program – is the forgiven amount taxable, and how does it work?

So it's a 'loan' that is given to us (each of us gets $50k/year) that takes one year of work to pay off that amount. So, if we would take 'two' outflows of $50k/year, we would have to work two years to pay it off (it doesn't lag a year). So yes, it's taxable. THIS IS OUR MAJOR FEAR - major tax burden. Is there another way to 'get' this? How do we lessen the tax burden of this?

family size? (kids increases poverty line which adjusts the RePAYE/PAYE amounts)

One on it's way!

how much of that amount owed is principal, and how much is interest?

I'd estimate (it's been a month or two since I looked) that 75% of each of our amts if principal, and the rest is interest

did you make PSLF-qualifying payments (basically, any income-driven repayment) while in residency, and how many?

Yes - by the end of this academic year, I will have made four years of payments

The White Coat Investor wrote:

You’re working at a 501(c)3 so go for PSLF while using the rest of your income to max out retirement accounts, save up a down payment, and build up a side fund in case something happens to PSLF.

We've started that - we have >$15k in our bank accounts but unfortunately they are just in a standard checking account(s).

jfoxcpacfp wrote:

If “live fat and happy” means what I think it does, I would mark that off your list. You want to live lean and mean. As FutureDoc says, you have a big shovel (think I’ll steal that term)....

Thanks!! We agree - it's focusing on the cash flow and planning and figuring out where to start (I'll click the link) w/ this kind of cash flow is what is boggling our mind.

We were NOT thinking of living fat and happy - our goal is to get out of this giant hole in the next four to five years and be student loan debt free. I added that line about 'fat and happy' for strictly completeness sake and as a conversation starter.

In short, we were either thinking of taking all of either one of our salaries, and putting that towards student loans, and using the other to pay for the ins/outs/daily needs of our growing family. Reasonable? Smart? Dumb? Mind-numbingly stupid?? Let us know!

NOW - how to do that AND maximize our retirement accounts while putting money into a rainy day fund and college account(s)...

DMFA wrote:

Finally, don’t make seminal financial decisions based on some bros’ musings on a forum. You and your spouse should really sit down with a planner to hammer every single detail out. Sorry for having more questions than answers.

HOLY SMOKES THANK YOU for all of that work! I already printed that out as a starting point to start going over numbers.

As you can tell - it's the size of these #s that's blowing our mind (and it's nothing compared to what a two surgeon family makes, or heck even a well paid Plastics or Ortho guy/gal practicing in rural America). With so many options - we want to really A) Maximize our Income B) Minimize our Tax Burden C) Provide for college funds and D) Maximize our retirement funds.

**DMFA** · 10-13-2016, 01:32 AM

OMG, if you've already made 4 years of PSLF, it's a no-brainer: PSLF all the freakin' way, man. Are the payments you have already made certified for PSLF, or do you need to file it?

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

EDIT: also, since there is a very real possibility PSLF could be taken away from us since bureaucrats (who created this stupid system) think we're gaming the system they created, you should certify all payments ASAP. There's no reason not to certify payments already made if not done; even if you choose not to pursue the program after all, you're not penalized for what you've already done. If PSLF is taken away, current participants would likely be "grandfathered" in...but, it would be wise to have a fairly big pile of money available just in case. Roth IRA contributions' principal are withdraw-able without penalty

**azureabyss** · 10-13-2016, 01:49 AM

DMFA wrote:

OMG, if you’ve already made 4 years of PSLF, it’s a no-brainer: PSLF all the freakin’ way, man. Are the payments you have already made certified for PSLF, or do you need to file it?

https://studentaid.ed.gov/sa/repay-loans/forgiveness-cancellation/public-service

EDIT: also, since there is a very real possibility PSLF could be taken away from us since bureaucrats (who created this stupid system) think we’re gaming the system they created, you should certify all payments ASAP. There’s no reason not to certify payments already made if not done; even if you choose not to pursue the program after all, you’re not penalized for what you’ve already done. If PSLF is taken away, current participants would likely be “grandfathered” in…but, it would be wise to have a fairly big pile of money available just in case. Roth IRA contributions’ principal are withdraw-able without penalty

Click to expand...

Sooooo.....should we take the $50k/year (and have it count as income as it's taxable) or...? I would have approximately 74 payments left at the end of this academic year to pay - my wife would have ~90-100.

Guess we are just confused (and we are def getting an advisor if we can't figure it out) as to whether it's smarter to just pay PSLF off of the offered salaries and NOT do the extra $50k/year for a smaller tax burden or to take it all?

AND, since we are doing PSLF, is the $50k/year NOT taxable or how does that work?

**jfoxcpacfp** · 10-13-2016, 02:34 AM

azureabyss wrote:

AND, since we are doing PSLF, is the $50k/year NOT taxable or how does that work?

Click to expand...

If you receive a "loan" and it is forgiven, it will be taxable. otoh, loan forgiveness from the gov't (via PSLF) is not taxable.

**FutureDoc** · 10-13-2016, 02:36 AM

If you've been making PSLF payments since intern year then that changes everything and it totally makes sense to keep with it and finish out, that is an enormous benefit! Seriously, your PAYE payments on full attending salary and MFS will be an absurdly low $1900(ish) a month. Which if you multiply that for another 74 payments... comes out to a whopping $140,000, with the rest forgiven! With your wife needing more payments, having lower loans, and having a higher income the benefit is less but still substantial.

Which is where WCI's advice to save up a side fund comes in, over the next six years you should have plenty of cash flow to save up enough to pay off your loans in the event of PSLF going away, whil still living comfortably and maxing your retirement accounts.

Also on the "Loan repayment" deals with your employers, basically it sounds like they just loan you 50,000 each year and then forgive the loan if you work there, right? That forgiveness makes it count as taxable income... so that's what you should look at it as. Think of it as them offering you and your wife another 50k a year in salary.

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