So there was a resident and an attending

[pdsquash83]

Hello All,

Next year (July 2017) I will finally be done with my medical training and my dearest wife will have another two years of residency. I was wondering what is the best way to start our finances.

Resident Plan: My plan had been to contribute a 100% of her resident income to our hospital's 403b till she gets to the max of 18,000. We will then contribute another 5500 to her backdoor IRA. No hospital match for residents.

Attending Plan: Contribute up till the max of 18,000 and then add another 5500 to my backdoor. We have a small staff match by the hospital. I will have a large taxable investment account.

Are there any other creative ways to maximize our pre-tax savings? Should we consider filing taxes separately?

Thanks,

[Lithium]

Do one or both of you have an HSA or 457(b)?

[Guest]

1)Consider (again consider) converting 401k to roth while your tax bracket is low.

2)Solo prop to get some 1099s (? locum, surveys etc.). If reasonable income, then solo 401k. Can also claim reasonable home office deduction.

3) Charity (esp. dividends from taxable account)

4) 529 plan (better if your state offers state tax break).

As your income grows, you will find it harder and harder to "save" more money.

 

[pdsquash83]

Lithium wrote:

Do one or both of you have an HSA or 457(b)?

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Nope unfortunately we don't

[pdsquash83]

wci wrote:

1)Consider (again consider) converting 401k to roth while your tax bracket is low.

2)Solo prop to get some 1099s (? locum, surveys etc.). If reasonable income, then solo 401k. Can also claim reasonable home office deduction.

3) Charity (esp. dividends from taxable account)

4) 529 plan (better if your state offers state tax break).

As your income grows, you will find it harder and harder to “save” more money.

We are both residents now putting us in the joint filling tax bracket of 100k. I would anticipate that we would be at a lower tax bracket when we retire. Why should we convert from a 401k to a roth now?

[jfoxcpacfp]

pdsquash83 wrote:

Are there any other creative ways to maximize our pre-tax savings? Should we consider filing taxes separately?

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No reason that I can see to file separately unless for IBR on student loans.

pdsquash83 wrote:

We are both residents now putting us in the joint filling tax bracket of 100k. I would anticipate that we would be at a lower tax bracket when we retire. Why should we convert from a 401k to a roth now?

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For all of the future tax-free growth. I don't know if the $100k is before itemized/standard deductions + exemptions but you are still in a relatively low tax bracket with room to spare. What makes you anticipate that you will be in a lower tax bracket in 30 years? If you are maximizing your pre-tax savings, I anticipate you're going to need a lot of taxable income for living expenses.

[pdsquash83]

jfoxcpacfp wrote:

pdsquash83 wrote:

Are there any other creative ways to maximize our pre-tax savings? Should we consider filing taxes separately? 

Click to expand…

No reason that I can see to file separately unless for IBR on student loans.

pdsquash83 wrote:

We are both residents now putting us in the joint filling tax bracket of 100k. I would anticipate that we would be at a lower tax bracket when we retire. Why should we convert from a 401k to a roth now? 

Click to expand…

For all of the future tax-free growth.

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Isn't my 401k tax free growth now?

[jfoxcpacfp]

pdsquash83 wrote:

jfoxcpacfp wrote:

pdsquash83 wrote:

Are there any other creative ways to maximize our pre-tax savings? Should we consider filing taxes separately? 

Click to expand…

No reason that I can see to file separately unless for IBR on student loans.

pdsquash83 wrote:

We are both residents now putting us in the joint filling tax bracket of 100k. I would anticipate that we would be at a lower tax bracket when we retire. Why should we convert from a 401k to a roth now? 

Click to expand…

For all of the future tax-free growth.

Click to expand…

Isn’t my 401k tax free growth now?

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Nope, just tax-deferred. Growth in Roths and HSAs is tax-free.

[DMFA]

There's a lot more to Roth accounts than simply tax-now instead of tax-later.  Everyone should probably have some Roth space for their tax-inefficient holdings, no RMD, penalty-free withdraw of principal, etc.  That, and if you can't deduct TIRA contributions, then backdoor Roth IRA contribution is probably your best option for an additional $11,000 (for the two of you) in tax-advantaged investments.