This is a question regarding minimizing IBR payments vs Roth contributions.
I have just completed my PGY1 year in general surgery. As mentioned in WCI (p49, Ch: Medical School, Section: PSLF), as well as advised by our medical school financial advisor, my wife and I filed separately for my 2015 so that her income would not inflate my IBR. Furthermore, by showing a $0 income as a 4th year medical student, my first 12 payments were $0 (since an IBR plan on $0 income is $0; I've read a number of forums on whether or not these "$0 payments" qualify towards the 120 payments towards PSLF and they do in fact). Ultimately this was very beneficial for PGY1 year - I saved ~$3500 by not having any real payments, yet they counted toward the 120 required for PSLF. However, during this time I came to find out that the income limit for Roth for married couples is different if you file separately vs jointly. Effectively, you have to make next-to-nothing to contribute to a Roth if you file separately, as opposed to filing jointly in which the limit for 2015 was 183K. So I saved money via loan repayment, but lost it by not contributing to Roth.
Moving forward, I now wonder what Dr. Dahle and others think is the best action plan. It's probably some simple math to work out. 1) I can continue to file separately and my payments will be ~$350-$500 per month during my 7 year residency program but I can only contribute to my traditional, pre-tax IRA and not a Roth. Or 2) we can file jointly which will increase my payments to ~$600-1000 per month but my wife and I can both contribute to a Roth. My conclusion is that the benefit of minimal IBR repayments does not outweigh the benefit of Roth tax benefits, time and the principle of compounding interest.
I appreciate and look forward to hearing from folks, thanks!
I have just completed my PGY1 year in general surgery. As mentioned in WCI (p49, Ch: Medical School, Section: PSLF), as well as advised by our medical school financial advisor, my wife and I filed separately for my 2015 so that her income would not inflate my IBR. Furthermore, by showing a $0 income as a 4th year medical student, my first 12 payments were $0 (since an IBR plan on $0 income is $0; I've read a number of forums on whether or not these "$0 payments" qualify towards the 120 payments towards PSLF and they do in fact). Ultimately this was very beneficial for PGY1 year - I saved ~$3500 by not having any real payments, yet they counted toward the 120 required for PSLF. However, during this time I came to find out that the income limit for Roth for married couples is different if you file separately vs jointly. Effectively, you have to make next-to-nothing to contribute to a Roth if you file separately, as opposed to filing jointly in which the limit for 2015 was 183K. So I saved money via loan repayment, but lost it by not contributing to Roth.
Moving forward, I now wonder what Dr. Dahle and others think is the best action plan. It's probably some simple math to work out. 1) I can continue to file separately and my payments will be ~$350-$500 per month during my 7 year residency program but I can only contribute to my traditional, pre-tax IRA and not a Roth. Or 2) we can file jointly which will increase my payments to ~$600-1000 per month but my wife and I can both contribute to a Roth. My conclusion is that the benefit of minimal IBR repayments does not outweigh the benefit of Roth tax benefits, time and the principle of compounding interest.
I appreciate and look forward to hearing from folks, thanks!
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