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Resident with a sum of cash, what should I do with it?

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  • Resident with a sum of cash, what should I do with it?

    I'm so glad I came upon this website.  A special thanks to WCI and all the commenters for opening my eyes.

    I'm in residency with 2 years total left (this includes a 1 year fellowship).  I have $250K, now near $350K with interest, in medschool loans, all government.  I'm in the IBR repayment plan (married file sep) with hopes to get payout from PSLF program with nearly 5 years of residency payments under my belt by the time I graduate.

    We basically live off of my spouses income and have been saving my residency income for the "in-case" PSLF does not work out or if I get an AWESOME private practive offer of $400,000+ and decide not to stick with PSLF.  I use my residency money for just regular living things, cafeteria food when I'm too tired to bring lunch/snacks, clothes when needed (I shop very frugally), and buying things for the kids (we have 4).  Our plan for loans is to live similarly off of one income when I'm an attending and pay my loans off within 1.5 years if possible, or stick with PSLF if it's around and functioning and I get an academic job.

    That said, ALL that residency money is sitting in a checking out!!!  After reading this site, I'm feeling like I should invest it into something that gets some interest, but nothing too risky since I may need all that cash for loans.

    Would a savings account or CD be a good option? I was reading about "ladder" CD approach?  What would you do with the money? It's to the tune of >90k now.

  • #2
    Sounds like 7 years really before you would need it. I would put it in equities but then I don't have 4 kids.

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    • #3
      Without knowing your total financial picture, it is hard to advise.  So with that caveat, I would keep it in cash.  CD rates aren't attractive to me for loss of liquidity.  Be sure you are maxing out retirement accounts and be aggressive in asset allocation there.  I look at it like this:  if you lost 50K on your 90K that would be a bigger deal than making 50K on it.  Liquidity matters with 4 kids in residency.  The calculus changes when you are out working as an attending with a known salary in a job you are confident is right for you.  For now, I would advise patience.

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      • #4
        If you are going to sit in cash, put it into a high yield savings account (~1% at Capital One 360) or Ally 11 month, no penalty CD (1.5% over $25k).  I would recommend funding any tax advantaged accounts you can fund (401k, Roth IRA, HSA, etc.).  While I agree liquidity matters with 4 kids, you do have two incomes at the moment and a fairly certain path to a significantly higher income, so I don't think you need to be that conservative with your cash holdings here.

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        • #5
          I have $250K, now near $350K with interest

          This was a funny quote to me, you HAD $250k in loans when you finished medical school, now you HAVE $350k in loans. Try not to minimize it, it's a lot of money so mentally you have to prepare to tackle the load, but it sounds like you have a game-plan so good for you.

          Another option is to keep the interest at bay while you can still deduct the student loan interest on your taxes.  Otherwise you'll likely have $400k+ when you finally finish.

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          • #6
            1. Put it in a "high interest" account tonight. Ally, BBVA, etc. Thats a load of free 1.25% money you could have. Buys a lot of cheerios.
            2. By your SO flowers for dealing with 4 kids, and you!
            3. Write an investment plan/statement.
            4. Likely max out retirement accounts

            Nice work getting to this point!
            You could also review your insurance needs, while life situation ( if your stuck with one! ), disability, investment goals, kids 529 type planning, etc.

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            • #7
              Going with @Hatton1. If you have to pay back the loans (unlikely), then I presume you will be set up on a repayment schedule rather than forking over a lump sum. Put it is an appropriately diversified equity mutual fund portfolio. IF the account is down when you get the unhappy news that PSLF is history, then make payments until the market recovers (bears last an average of 11 months according to a chart I posted on this thread yesterday). By staying in cash for that length of time, you will give up a tremendous growth opportunity. Also recommend you read Simple Wealth, Inevitable Wealth for the rationale behind this recommendation and instructions on how to allocate your portfolio.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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