What account to open to save for possible student loan repayment

[DocAti510]

Hi all,

I'm a second year resident, relatively new to WCI and over the past few months have been trying to learn about managing my finances and setting myself up as best as possible for the future. I have about 170K of student loans, and am going back and forth about how I should handle this debt. I am still trying to figure out if PSLF is the best option for me, I am an internal medicine resident planning on fellowship that would be 2-3 years long, giving me a total of 5-6 years of training. I am currently single and enrolled in REPAYE but will likely be getting married in the next 2-3 years. In short, I have about $1000/month that I could be putting towards paying my student loan debt doubt right now, but given that I may decide to do PSLF I'm hesitant to do that and I would like to set this money aside in some sort of an account so if/when I decide I don't want to do PSLF I will have the money available to put towards my loan. My question is, what would be the best type of account to open to put this money? I would like it to be relatively safe but also would like to see a little bit of growth too. If anyone has any suggestions about the type of account that would be best to open I would appreciate your input!

Thanks!

[Faithful Steward]

If you're not already doing so, I would suggest contributing $5,500/year to a Roth IRA and the other $6,500/year into a taxable brokerage account. The brokerage account would be there to help you pay down your loans if you decide not to pursue PSLF. If you do go the PSLF route, then the brokerage account becomes a windfall that could be used as a down-payment on a home.

[nachos31]

It's great that you're thinking about what to do with your loans and considering alternatives. In general, you'd want to use a taxable (regular brokerage) account for a student loan payoff fund you keep on the side.

However, that disposable income you have would likely be better used during your training to start some retirement accounts. Sounds like you have about $12,000/year. I'd put $5500 in a Roth IRA and the remainder in your employer's (residency's) 401k/403b retirement account. If your 401k/403b comes with a matching contribution from your employer then contribute to that first up to the point you get the full match, then fill the Roth IRA, then any remainder in the 401k/403b.

This takes planning as contributing to the 401/403b requires you set it up to pull from your paychecks before you get paid while contributing to the Roth IRA is with money you already have.

[DocAti510]

Thank you for the responses so far!!

For a little more information - I actually am planning to fund the Roth IRA to the full amount this year, but beyond that I will still have the $1000 a month. I am thinking about contributing some of that money to 403(b), unfortunately I don't get a match from my employer though. If I were to open up a taxable account, do people generally suggest opening at Vanguard? And what do people think would be a good fund to invest in for the purpose of potentially paying off student loans a few years down the road.

Thanks again for all the help and insight

[DMFA]

Taxable brokerage account. Vanguard, Fidelity, Schwab, Etrade all have similar options for similar prices.

Total US stock and total int'l stock would be the mainstays since they naturally have low turnover and dividends, and if you want bonds in there, then an intermediate municipal/tax-exempt bond fund would be useful. If you're Vanguard, that'd be the ETFs VTI, VXUS, and VTEB respectively. If you want an all-in-one and are okay with 50/50 stock/bond (such as if you equally value low volatility/preservation of capital and risk/earning), and have $10k to put in, the tax-managed balance fund VTMFX can be useful.