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All of salary to 403b?

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  • All of salary to 403b?

    My soon to be husband is finishing 3/3 year residency this July and will start making attending salary. I am finishing 3/5 year residency. To maximize my tax deferment of $18k for this year I would have to contribute $3k per month x 6 months in my university 403b. Currently my paycheck is about $3k/month. We have done Roth IRAs every year so far, joined repaye for loans and plan to refinance his loan as soon as possible to make bigger payments. Also we have no major tax deductions- no kids or morgage.

    Is it warranted to fully contribute to the 403b??

  • #2
    As long as you can afford it, I would.

    If your after-tax paycheck is $3,000, and you defer $3,000 in gross income monthly, you'll still get a paycheck of at least a few hundred dollars. If you invest it as a Roth 403(b), you won't get much of a check, but this might be your last year in a lower tax bracket, so it would be a good time to invest in a Roth 403(b) if that's an option.




    • #3
      Is soon-to-be husband already paying for everything?  When will the wedding happen?

      Wait a few months for that attending salary to kick in, that marriage to happen, before putting any financial strain on the relationship, all in the name of deferring some taxes.


      • #4
        I would probably tell you to skip it unless you can fill out Roth space in your 403b. It appears you are only in 15% tax bracket, tops, and I don't see the argument for growing that money in an account that will be taxed at your top marginal bracket in the future. By the time you graduate training, you will, presumably, be married to an attending and it could be pretty costly to r/o into a Roth. If you really want to invest $18k this year, I'd recommend a taxable account.

        That advice may change if you get married to your new attending in 2017.
        My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
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        • #5
          I have a comfortable $6k in the bank and he just did some moonlighting and expects a comfortable extra paycheck from that- so I don't think we would be too strained for money if I put away now. The wedding is September 2017.

          I expect our collective income pre tax to be about $200-250k for 2017. When I'm done with residency we will be well over $500. So I am not sure if putting in a Roth 403b or not makes sense for this year.

          Also, I don't think there is a very good consensus on whether to rush the loan repayement if we get a less than 5% rate versus start putting money in the taxable accounts. Our collective loans are roughly $300k.

          Thanks for the input!


          • #6
            WCICON24 EarlyBird
            If your loan plan is to definitely refinance to a private lender I would contribute all your income now and ongoing to the Pre-tax 403b you have.  You all will get taxed at a high marginal rate for 2017, and ongoing.  You will need to backdoor Roth it moving forward.  As for the loans, depends on the interest rate.  Anywhere close to 5% I'd be paying that nonsense off ASAP.