Advice for what to do with my small excess income? Roth IRA? Start saving for house?

[sliceofbread136]

Some details: finishing residency and going to fellowship, will make typical ~65k per year and plan to go to a low cost area

Current checking account is at $25k, and I figure I should leave 20k as emergency funds. What should I do with my current $5000?

Should I start saving for a house where I do fellowship? Start an ira?

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[tartesos]

Roth IRA all the way. You could buy a house 0 down with a physician loan , but 3-4 years of tax free growth are gone forever.

 

[southerndoc]

Put your 20k in a Fidelity Cash Management Account. You can invest in a money market fund and get 2% on it. You'll get an ATM card and check book, and when you use at ATM, use the debit card, or write a check, Fidelity will automatically sell from the money market fund to cover it. Also, Fidelity doesn't charge an ATM fee and will reimburse ATM expenses.

An excellent way to have easy access to an emergency fund and still make the most you can with it. Online bank accounts that pay 2%+ in savings accounts don't have easy access because you have to transfer money to a regular checking account before you can use it. That takes 3-4 days for an EFT to settle. You're not going to get much interest in a regular checking account.

Regarding your original question, a Roth is the way to go. If you're 30, invest the $5000, and have a 7% return, you'll have $55,000 when you reach 65. All of that money is tax free. That's not even including additional contributions to it.

 

[sliceofbread136]

And what do I put the money in? All stocks with index fund? 80% stocks and 20% bonds?

If I have more money after doing 6k each year what is next best to put it in? A regular market index stock?

If it’s not obvious I’m new to this

 

[TMP-SMX]

Read the White Coat Investor book (or financial bootcamp). Join the facebook pages. Read the forums for WCI or google the three fund portfolio. Consider making it a four fund portfolio for some real estate index funds depending on which company you chose for your IRA. This all depends on your age and risk tolerance. Pick low expense ratio index funds. The beauty of a Roth IRA is you can change it as often as you want with no taxable sales. Do you have a 403b/401k available at your fellowship? If so certainly use it especially if it has a match. If you are married you can do 6000 for yourself to Roth IRA and 6000 for your spouse.

 

[sliceofbread136]

Read the White Coat Investor book (or financial bootcamp). Join the facebook pages. Read the forums for WCI or google the three fund portfolio. Consider making it a four fund portfolio for some real estate index funds depending on which company you chose for your IRA. This all depends on your age and risk tolerance. Pick low expense ratio index funds. The beauty of a Roth IRA is you can change it as often as you want with no taxable sales. Do you have a 403b/401k available at your fellowship? If so certainly use it especially if it has a match. If you are married you can do 6000 for yourself to Roth IRA and 6000 for your spouse.

Thank you for the help. I am considering fidelity and vanguard, fidelity seems to have lower fees but vanguard seems to have a very good reputation for the buy and hold strategy. Does one seem like a better option than another?

 

[TMP-SMX]

Thank you for the help. I am considering fidelity and vanguard, fidelity seems to have lower fees but vanguard seems to have a very good reputation for the buy and hold strategy. Does one seem like a better option than another?

Both are very similar. They will both meet your needs depending on where you'd like to invest.

 

[Billyrmd]

Roth IRA all the way. You could buy a house 0 down with a physician loan , but 3-4 years of tax free growth are gone forever.

I never knew about a physician loan, it seems the rate is the only downside

 

[tartesos]

I never knew about a physician loan, it seems the rate is the only downside

If you ask a room of 10 people you will get many view in favor or against them.
Do your own diligence

 

[dpmd]

The rate downside only hurts you if you have the money to do a regular loan and don't. Otherwise it is a better option than the alternatives. As for whether it is a worse option than taking your down payment and investing it instead, that depends on a lot of things