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Traditional vs Roth IRA/403b as resident with large moonlighting and REPAYE?

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  • Traditional vs Roth IRA/403b as resident with large moonlighting and REPAYE?

    So I am a PGY-3 (out of PGY-6) and live in NYC where my marginal tax rate is ~40% with federal/state/local/FICA (https://smartasset.com/taxes/new-york-tax-calculator) with an income of ~73k + 20k moonlighting. I also have ~350k federal loans on REPAYE. I am a huge follower of boggleheads, WCI, and /r/investing and have amassed ~100k in roth IRA and 403b since starting residency. Fortunately my rent is super low due to connections in NYC, so I am able to max my IRA every year, and my 403b last year. I am on track to also do similar amount of moonlighting. I have no dependents and no loans except student loans. I spend <800 per month on credit card (food, bills, fun, gf, etc) which gets paid off monthly. I have 4k emergency fund.

    My question is, should I switch over to traditional IRA and 403b? I will most likely NOT do PSLF.

    Advantages: lower REPAYE payments with greater federal subsidy, save extra on NYC/NY taxes with possibility of moving to a lower tax state in retirement (almost definitely a place with no city tax).

    Disadvantages: As per usual WCI arguments, tax rate probably will go up in the future, probably will have higher income in retirement than in residency, etc.

    In the above discussion, it seems more of a wash of a fellow in a similar position as me, and some people recommended switching to traditional.

    Thoughts? At what residency income with moonlighting would you switch to traditional?

  • #2
    It's a tradeoff either way but I think your future self will thank you for building up a Roth account and will not remember the NY taxes you paid. Good job on saving and welcome to the forum!
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Originally posted by axiomatic View Post
      So I am a PGY-3 (out of PGY-6) and live in NYC where my marginal tax rate is ~40% with federal/state/local/FICA
      hi, do you understand how FICA is considered in all this?

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      • #4
        Originally posted by jfoxcpacfp View Post
        It's a tradeoff either way but I think your future self will thank you for building up a Roth account and will not remember the NY taxes you paid. Good job on saving and welcome to the forum!
        Yes that is my suspicion. I don't really notice that much paying the extra tax currently since I have everything I really want right now and no major expenses. In retirement I'll probably be spending more.

        Originally posted by Peds View Post

        hi, do you understand how FICA is considered in all this?
        Ah I think so yes, I just lumped FICA in with the taxes to give an idea of my take home. My understanding is that if I don't pay FICA now (via traditional contributions), then obviously I won't pay FICA during retirement (unless I take a post-retirement job). So really I guess my marginal TAX rate is 32%, and lets say I do contribute to traditional and move to a no state/local income tax area, then I'd save the 10% state/local tax (or ~1/3 of my marginal tax rate currently) depending on how I structure my roth and traditional withdrawals.

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