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Graduating Resident going into IC

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  • Graduating Resident going into IC

    I recently accepted an IC position for next year post-graduation.  I am to be paid a signing bonus in a staggered fashion with about 8k to be distributed to me before the end of this year.  Since I don't really have an immediate need for this money, I am wondering how best to tax shelter it.  My wife and I file MFS to keep her IBR loan payments low and last year was the first year we made contributions to out Roth-IRAs through the back door.  We intend to make our second contribution soon.

    I was thinking of just opening either a SEP-IRA or a solo-401k before the year is out and dumping the bonus into that.  It seems like I could contribute more of the bonus into a solo-401k than a SEP.  In addition, the solo-401k would preserve the backdoor Roth option for us.

    I am also seeking guidance on which firm to use.  We have used Vanguard for our Roths but, after doing some reading it seems that they do not allow one to purchase admiral shares in their solo-401k.  I have a hospital sponsored 403b with Fidelity already.  I was thinking that for this reason I'd open the solo-401k with them so that I can easily roll the 403b into it upon graduation.  I have ready that Fidelity allows you to buy Vanguard admiral shares for their 401k.

    Any guidance is very much appreciated!

  • #2
    Just a thought- since you don't need the money for anything right now, do you want to keep it around in case things don't work out with the job?  My sign-on bonus is "forgiven" after 4 years but essentially that's how they keep you at the job.  If you're sure you want to stay there, then I'll leave more financially savvy participants to comment on that, but if there's any chance you'll want to leave the job before the pay-off time is up you might want to keep if more liquid.

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    • #3
      EDDOCMOM has a good point. By "immediate", the implication is that you might need the money in the near future. If so, don't tie it up in a retirement account. However, if that is not the case, you should set up and contribute to a SOLO-k. You are correct that you will be able to contribute more if you earn less than $265k IC income. In addition, having a SEP will prohibit you from being able to do a tax-free backdoor Roth conversion after you become an attending and earn too much to directly contribute to a Roth.

      I am Switzerland when it comes to choice of firm (well, perhaps a slight negative bias toward Vanguard). Just pick the firm that is easiest and least expensive to use. If you don't like the services, it is not exactly difficult to change firms.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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