Say what? 5 million dollars in 36 years?? on an intern’s income???

I met with Damond Petersen, a Workplace Planning and Guidance Consultant from Fidelity Brokerage Services LLC today and learned some awesome things.

I am not retiring tomorrow, but I’m certainly planning for retirement today 🙂 

#1

If i continue to save at my current rate (5.5k ROTH IRA + 18k ROTH 403b), in 36 years, I will have accumulated $2,699,103 to $5,652,232 for retirement. $2,699,103 is based on poor market performance;  $5,652,232 is based on average market performance. This also means what fidelity wrote in my report, “We estimate that you’re currently on track to cover $6,364 to $11,688 in monthly retirement expenses, depending on how the market performs, which is 118-216% of your pre-retirement income [assuming you fund 23.5k annually towards retirement for 36 years].”

#2

While it is quite hard to squeeze out 23.5k to put in ROTH accounts this next 5 years while I’m still in residency/fellowship (where my income ranges from 50k to 100k with moonlighting/tutoring), it’d be amazingly easy to do so on an attending’s income of 250k. ROTH 403b does not have income limit as long as it’s offered by an employer. 5.5k ROTH IRA is totally doable through a back-door. Damond says for back door ROTH, just be meticulous and demonstrate solid PAPER trail and IRS will be satisfied in auditing.

#3

My residency hospital is recently bought by a private entity, which will provide 4% match into pre-tax account while currently there’s no match for ROTH or traditional 403b offered  by the university hospital. I was told there is no match when I first started internship. Very happy that there will be match in the near future!

#4

Since my kid is already 7 years old, my next post-tax contribution to savings can go towards 529. 529 funds have post-tax, tax-free-growth just like ROTH dollars. 529 needs to be used for educational purposes. When used for non-educational expenses, will come with a penalty and taxes on growth. A nice caveat is if there is a scholarship in lieu of the 529 funds, the same amount of 529 can be taken out and used for non-educational purposes without penalty and with just taxes on growth.

You can read more about 529 here by Bo, who’s a pgy2 radiology resident determined to help educate medical professionals on personal finances 🙂

#5

For the purpose of saving money for a down payment for a 2nd home/ 1st home for my parents, I can put money into a brokerage account with index funds. Damond showed me some brokerage options from fidelity with awesome expense ratios, several under 10 basis points. For a few indices, the expense ratio is down to 0.05 when the fund reaches 10k!

#6

I need to contact our HR to find out if I am eligible for the state retirement system vs. the alternative to the state retirement system, as the latter currently offers 7% matching from the university hospital. I just emailed HR. I’m definitely going to take advantage of employer matching as it is indeed part of my pay, that I should not leave on the table.  But Damond also mentioned that one needs to contribute under this plan for 5 years to get the 7% each year as a lump sum at the end the 5 years. This is an important point to clarify as I may only be able to contribute to this for 2 years as the privatization of the hospital completes.

Update from HR, “Appointed clinical assistants are not eligible to participate in the Mandatory Retirement Plan (ORP or ASRS). You are, however, eligible to participate in the Voluntary Supplemental Retirement Plans, which include the 403(b) as well as the 457(b) deferred compensation plans.”

Time to learn more about 457!

#7

I should contact an accountant about setting up a side business, so that I can pay my retired father money for baby-sitting my kid. This way, I can help him catch up contribute to a ROTH IRA, which he can use himself later or pass onto heirs.

#8

We should also try to max out my partner’s ROTH IRA as long as he has a paying job (1099 or W2/contractor or employee). This is doable even if my partner continues to be a 2/3 time home-maker. 5.5k annual income will constitute a mere 700 work hrs (assuming minimum wage), and he has had opportunities to work much above minimum wage. A mere 13.2hrs/week of work will NOT detract much from his role as stay at home dad or his focus towards developing his ideal profession/dream career. Yet, maxing out this additional 5.5k of ROTH will have incredible impact on our future.

#9

The sum is NOT greater than its parts. Damond said confidently, “consolidating retirement accounts does NOT provide higher compounding power. It does streamline retirement funding and make it easier to manage.” One of my concerns about the privatization of my residency hospital was fragmentation of my retirement funds. (IE I contribute to a ROTH 403b now with the university, but when the private business takes over, I have to START over in another retirement account under the new administration.) Damond says I can roll over my current ROTH 403b into a ROTH IRA with fidelity without paying any fee if I so desire.

#10

ROTH ROTH ROTH. This is music to my ear and why residency/fellowship is really a sweet spot for doctors in training. Damond said so wisely, “Why not LOCK in a low tax rate [that will not be available to you at your peak earning years as an attending out of residency training or during your retirement years] and put away tax-free retirement money now?”

Prior to meeting Damond, I was a total retirement-saving-illiterate as I have spent all of my time and energy thus far in preventing and paying off debt. Debts of others and debts of my own. Having paid off my student loan completely last month has freed my mind and effort towards this new adventure: retirement planning.

In our 45 minute in person meeting, Damond was able to teach me many amazing financial pearls. I am super grateful to have met him and will request meetings with him at least once a year in the future. His awesome advice is free for hospital employees at the moment. But if I had to pay him, I would; as our meeting has been the best investment towards my retirement so far!

• have you started thinking about retirement?
• who do you turn to for retirement planning advice?
• what are your vehicles (accounts) for retirement saving?
• are you maxing out retirement contribution available to you?
• what are your retirement goals?
• given with the knowledge you now have, would you have done anything differently?

Comment below!