Med School Money Management

[GuardGirl]

Hi there, I'm new to the forum but have been stalking the blog here and there. Now I'm getting ready to start medical school and looking more seriously at my finances.

Background: I'm 26 years old, recently got my first acceptance to an in-state medical school, still waiting for more acceptances after interview season. I enlisted in the military after Freshmen year to get the GI Bill benefit and graduate without any student loans. As of today, I have zero debt. $3,000 in liquid savings, and ~$10,000 in a Roth IRA. I have about 2 years left of my GI Bill benefit, which I intend to use for the first part of medical school. Additionally, I'm in the Air National Guard and my total service time is approaching 8 years.

I love serving my country, but have decided against HPSP and USUHS to finance med school because I like the flexibility the Guard/Reserves offers. I feel like a civilian most of the time (more freedom than Active duty) and still contribute to my country. By pursuing a civilian medical career and staying in the guard part-time, I feel I will have more freedom down the road with more ability to choose where I work, live, etc...

I plan to continue my service in the Air National Guard while in medical school because I like it so much.  I will commission under the Early Appointment Program for Physicians and earn about $500 per drill, which usually occurs once a month. I am toying with the idea of contributing 90% of this paycheck (whatever is left after Tricare, dental, and SGLI deductions) into my Roth IRA, since it is the only earned income I will have (my understanding is GI Bill and student loans don't count as income for Roth IRA).  I hope to live as frugally as possible on my GI Bill so it will cover the first two years, but I will still have to take out some amount of student loans when it runs out. Is it wise to contribute so much to my Roth IRA if I have to take out student loans? Or should I be using this money to support myself/reduce the amount of loans I need to take out in medical school? I am hoping to contribute so much to my Roth IRA because I figure the earlier I contribute, the better. I am also aware that after residency I will likely not be eligible to contribute to a Roth account.

Thanks in advance for the feedback! I can give more details if there are questions.



 

 

[hightower]

In my mind it makes no sense to contribute to a retirement account while going into debt for medical school. Especially given the high interest rates you'll likely pay. Without actually running numbers Im going to assume that you would be better off reducing how much you borrow. You're only in school 4 years. During residency you can resume contributions to a Roth and you'll get to contribute to a 401k with a match from your residency employer as well.

I am curious to hear what others think however.

[Peds]

agree. would not take out loans to fund retirement. if you work extra or find other income then sure, go for it.

and, as it stands, you can do a roth IRA after residency. google backdoor roth. thats what most of us are doing....

[jfoxcpacfp]

From the bottom of my heart, thank you for your service.

How much debt do you plan to take on? Surely not much with GI bill benefits. I disagree somewhat with the advice not to set up the Roth, but that is because you are so young and you don't get to make up Roth contributions for any year you miss, plus I doubt you'll take on much debt. You'll probably also qualify for the Saver's Credit if you have enough earned income so it might pay to do some moonlighting if you can fit it into your schedule.

[The White Coat Investor]

GuardGirl wrote:

Hi there, I’m new to the forum but have been stalking the blog here and there. Now I’m getting ready to start medical school and looking more seriously at my finances.

Background: I’m 26 years old, recently got my first acceptance to an in-state medical school, still waiting for more acceptances after interview season. I enlisted in the military after Freshmen year to get the GI Bill benefit and graduate without any student loans. As of today, I have zero debt. $3,000 in liquid savings, and ~$10,000 in a Roth IRA. I have about 2 years left of my GI Bill benefit, which I intend to use for the first part of medical school. Additionally, I’m in the Air National Guard and my total service time is approaching 8 years.

I love serving my country, but have decided against HPSP and USUHS to finance med school because I like the flexibility the Guard/Reserves offers. I feel like a civilian most of the time (more freedom than Active duty) and still contribute to my country. By pursuing a civilian medical career and staying in the guard part-time, I feel I will have more freedom down the road with more ability to choose where I work, live, etc…

I plan to continue my service in the Air National Guard while in medical school because I like it so much.  I will commission under the Early Appointment Program for Physicians and earn about $500 per drill, which usually occurs once a month. I am toying with the idea of contributing 90% of this paycheck (whatever is left after Tricare, dental, and SGLI deductions) into my Roth IRA, since it is the only earned income I will have (my understanding is GI Bill and student loans don’t count as income for Roth IRA).  I hope to live as frugally as possible on my GI Bill so it will cover the first two years, but I will still have to take out some amount of student loans when it runs out. Is it wise to contribute so much to my Roth IRA if I have to take out student loans? Or should I be using this money to support myself/reduce the amount of loans I need to take out in medical school? I am hoping to contribute so much to my Roth IRA because I figure the earlier I contribute, the better. I am also aware that after residency I will likely not be eligible to contribute to a Roth account.

Thanks in advance for the feedback! I can give more details if there are questions.



 

 

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A few comments.

First, thanks for being willing to serve.

Second, both investing and minimizing your student loans are excellent uses of money. We can argue until the cows come home about which is better, but I wouldn't spend a lot of time worrying about it. Do whichever you like or split the difference.

Finally, under current law, you certainly can continue to use a Roth IRA after residency via the Backdoor Roth IRA.

[adventure]

Thank you for serving.

As a (nonMD) spouse of (a MD), and enjoying the ride together through medical school, residency, fellowship, etc, I'd offer these 2 cents in addition to the posts above: limit borrowing to what you can, but medical training is a draining process, so if you need to use some money to keep your physical but mostly mental well being, don't hesitate. You can deal with retirement and debt reduction at some point, but a balance between living like a student/resident and being wise enough to get some sleep and stay fed is worth a touch more debt (stay balanced!)

[DMFA]

Take a vacation at least once a year. Sure, try to keep it inexpensive, but being sane is fairly important imo.