Incoming M1; advice for small 403b

[FindingNismo]

Trying to come up with some rough numbers before I start school, looking for some advice for what to do with my 403b. Balance is really small ($8k) so I don't know if it makes much of a difference what I do with it, but still interested in opinions.

Does it make more sense to use the money to pay tuition expenses (rolling over to a traditional ira, withdrawing the money next calendar year when i have no income and paying no income tax on it, i believe) or to roll over into a roth ira and leave the money there until retirement? I believe the conversion from 403b to roth ira would also be minimally taxed because i'd have no income as a student.

my gut tells me to convert to a roth ira since i have a chance of out-earning the interest rate on my loan, and because there won't be another time in my life when i have no income and can do the conversion tax-free. not sure if i'm missing something. also, i have no other debts.

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[mvenus929]

I had a small traditional IRA from before Med school that I wish I had converted to a Roth during. I was still advised during residency to convert before I became an attending. That's the choice I'd recommend.

 

[abolt18]

I actually just rolled my 401k to a Roth IRA last year (my 3rd year of med school) because I had no income and knew I'd pay no taxes on the rollover. It was super easy. Just went to vanguard, selected to rollover into a Roth IRA, they got it started. Then I called the company holding my 401k and they immediately sent a check to me that I had to forward to vanguard. Easy peasy. Also mine was about $7.5K.

 

[ThoracicGuy]

Trying to come up with some rough numbers before I start school, looking for some advice for what to do with my 403b. Balance is really small ($8k) so I don't know if it makes much of a difference what I do with it, but still interested in opinions.

Does it make more sense to use the money to pay tuition expenses (rolling over to a traditional ira, withdrawing the money next calendar year when i have no income and paying no income tax on it, i believe) or to roll over into a roth ira and leave the money there until retirement? I believe the conversion from 403b to roth ira would also be minimally taxed because i'd have no income as a student.

my gut tells me to convert to a roth ira since i have a chance of out-earning the interest rate on my loan, and because there won't be another time in my life when i have no income and can do the conversion tax-free. not sure if i'm missing something. also, i have no other debts.

I would not spend this money. Either keep it in the 403b if you are able and they have low cost funds or roll it over to an IRA. With no income during med school you could do they conversion to Roth easily.

 

[The White Coat Investor]

Convert it during medical school tax-free. Awesome opportunity. Cashing it out and using it for school is also a good option, but I don't think it's the best one.