Announcement

Collapse
No announcement yet.

Investment options for final year of residency, w/ money from sale of house ?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Investment options for final year of residency, w/ money from sale of house ?

    I'm about to finish my last year of residency and will be doing a one-year subspecialty fellowship starting this August. For various reasons I unfortunately haven't started investing any money yet, but obviously I can't do anything about that at this point. During fellowship I'll be making basically a resident salary (mid $50k), but I had the good fortune of buying a house at the beginning of my residency that has appreciated over the last 5 years to the point that I'll likely be able to sell it for a profit of about $90k after all is said and done... Also, I'm currently not married. I'm looking to put some money into a retirement account.

    My first question is, can I still contribute to a Roth IRA in 2016 if the profit on my house puts my total income over the Income Limit?

    Second question, are there other income-limited investment options (like a Roth IRA) that would be beneficial to look at for a person in my situation?

  • #2
    I'm assuming you lived in the house for at least 2 years. In that case, you will owe no capital gains, so you don't have to worry about that $90,000 counting towards your income. It should be yours to keep, tax-free.

    Does your employer in your residency / fellowship offer a retirement plan like a 401(k) or 403(b)? You can sometimes make Roth contributions to these. If not, it would still be worth your while to make traditional tax-deferred contributions.

    Congratulations on finishing your residency in T-7 weeks or so.

    Best,

    -PoF

    Comment


    • #3
      Since you bought the house at the beginning of residency, your capital gains will not be taxable so your AGI will not be affected.

      Second question - after contributing $5,500 to a Roth, open up a taxable account and invest only what you will not need in the next 5 years. iow, if you plan to use part of that $ for a goal that is timed to occur in the next 5 years (emergency fund? car replacement? downpayment on another house?), it simply needs to be kept liquid in the highest rate interest-bearing account you can find.

      A taxable account in your situation is a good thing - you do not need the tax write-off, you will have "basis" in your investments, and you will pay tax at lower capital gains and dividend rates after you become an attending.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment


      • #4
        Thanks for the responses. Yes I will have lived in the house for about 5 years by the time I sell so the income from the sale won't be taxable. I am going to move into an apartment for a year during fellowship, but when I get a "real" job I was hoping to purchase a house eventually as long as it seems like a good job and plan to stay at for a while. With that said, I'm hoping to save a good portion of the proceeds from the sale for a down payment on another house within the next 5 years and for that I'll try to find the highest interest bearing account I can. I could certainly put $5,500 in a Roth IRA and have plenty left over for a down payment in the next couple years, but I just didn't know if there were other options in addition to a Roth IRA that I should be looking at where eligibility was based on an income cap that I'll likely be below for 2016.

        Comment


        • #5


          I could certainly put $5,500 in a Roth IRA and have plenty left over for a down payment in the next couple years, but I just didn’t know if there were other options in addition to a Roth IRA that I should be looking at where eligibility was based on an income cap that I’ll likely be below for 2016.
          Click to expand...


          You'll get a deduction for student loan interest paid up to $2,500. Beyond that, most of the tax benefits are phaseouts that you lose at higher levels. There is nothing else that I can think of that you will have the ability to contribute to based on lower income. Well, except for a Coverdell ESA, which I suppose is not a consideration at this point, anyway.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

          Comment

          Working...
          X