401a during residency

[Madhatter]

Could anyone advise me if investing in a 401a is worth it during residency? It seems like there is no benefit if there is no employer contribution because it appears to be better to just get taxed now at 15% rather than waiting till we are in a higher tax bracket later. Is my logic sound?

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[edmadison]

Could anyone advise me if investing in a 401a is worth it during residency? It seems like there is no benefit if there is no employer contribution because it appears to be better to just get taxed now at 15% rather than waiting till we are in a higher tax bracket later. Is my logic sound?

Very true. We've discussed this issue at length before. The general consesus is that if the 401k has no match, then max out your Roth IRA for you and your spouse (if you have one) before doing any other savings. If you have excess money, there may be benefit to saving with a 401K because you get 40 years of tax deferred compound interest, this could outweight the benefit of paying the taxes now and putting it in a regular investment account -- you'd have to run the numbers.

Ed

 

[schwab]

Very true. We've discussed this issue at length before. The general consesus is that if the 401k has no match, then max out your Roth IRA for you and your spouse (if you have one) before doing any other savings. If you have excess money, there may be benefit to saving with a 401K because you get 40 years of tax deferred compound interest, this could outweight the benefit of paying the taxes now and putting it in a regular investment account -- you'd have to run the numbers.

Ed

Agreed. Without a match, there isn't a compelling reason for you to contribute to a 401(k) or 403(b) plan yet.

Contributing to a Roth is something that you'll likely only be able to do as a resident/fellow - when you take your first real job, you'll likely be earning a salary above the limit for Roth contributions. Take advantage of the opportunity while you can!

 

[Roy7]

This is a super basic question - but, a Roth IRA is similar to a savings account with a lower interest rate (correct pls if I'm wrong). What is the minimum amount of money required to open one?

I know it varies from bank to bank, but I wanted to open a savings account (at this point I've only got a checking account), and have 200-300 direct deposited into that savings account each pay period.

If a Roth IRA works the same as a savings, could I just direct deposit that 200-300 in there instead of the savings?

Sorry for hijacking the thread.

 

[John Deere Gree]

This is a super basic question - but, a Roth IRA is similar to a savings account with a lower interest rate (correct pls if I'm wrong). What is the minimum amount of money required to open one?

I know it varies from bank to bank, but I wanted to open a savings account (at this point I've only got a checking account), and have 200-300 direct deposited into that savings account each pay period.

If a Roth IRA works the same as a savings, could I just direct deposit that 200-300 in there instead of the savings?

Sorry for hijacking the thread.

A Roth IRA is a type of Individual Retirement Account. Once you put money into it, you can't withdraw it without penalty until age 59.5 (I think).

 

[The Sonoran]

You are allowed to withdraw Roth IRA contributions at anytime without penalty. It's only withdrawals on "earnings" that will trigger a penalty.