Retirement

[MarissaNicole]

So I guess I was thinking of purchasing life insurance during residency and disability if we can afford it and then worrying about retirement AFTER residency... but my sister-in-law is telling me that is a big mistake.

I guess I figured residency won't allow us to put much into retirement (I have to even look to see if his program offers anythng) and we will need most of his salary to live on.

What did or are you planning on doing for retirement planning during residency?

[SuzySunshine]

I'm sure she is saying that because of compounding interest and a few years really does make a huge difference but that is what we've done. When I was working I put enough in my 401 to have it matched by my employer. We also put a small amount into DH's but when I stopped working and the kids came along we stopped putting money in his because his employer doesn't match. Its a double edged sword but we did it for the exact same reason, we need to money more now then we will in a few years.

[oceanchild]

If either of you have an employer match, use the whole employer match. We didn't with my last job... totally throwing away free money.

We have a Roth IRA for each of us. Apparently the Roth is good for residency because it's taxable now rather than at withdrawal, and our tax rate is presumably lower now than it will be. I think we just put the maximum contribution for the year in each at the beginning of the year, rather than a monthly contribution. We had the savings that we could just do that. Plus we rolled over my meager federal retirement (that would have been much more substantial had I taken the match) into my Roth IRA.

I also have a pension with my current job that I have to pay into monthly, but I'm not counting on that ever being worth much.

So that's all we're doing for now. We'll reevaluate post-training. I'm financially clueless, but maybe that's a little bit useful.

[migirl]

DH's residency program did not offer a retirement plan to the residents, so we maxed out our Roth IRA accounts (for the reasons Julia mentioned ... we were in a lower tax bracket then than we are now) UNTIL I quit working and we started having children. Once we had kids, it became much more important to us to provide for them in case something happened to either of us so we did not contribute to our retirement accounts for the last two years of training and used (some of) that money toward life and disability insurance instead.

I don't know your specific financial circumstances so I can't say if your strategy (putting off retirement savings until after residency) is a "mistake," but our financial planner was comfortable with our plan to skip contributing to our IRAs the last couple of years knowing that we'd be able to make it up quickly once training was over.

[radwife]

I have a 401K and contribute up to the employer's match percentage. I also have a measly Roth IRA that I've contributed more to over the years than it's worth. DH doesn't have anything for retirement savings. Instead he decided to pay off his medical school loans in a 10 yr plan rather than push them off an have them accumulate interest. We won't have to pay a bunch of additional interest on his student loans, but we're not making any interest on money saved either. I'm not sure what the financial experts would say about that strategy.

ETA: I think it's unfortunate that a lot of residency programs don't offer retirement savings plans. I really wish they did.

[Vanquisher]

Retirement? I am unfamiliar with this word.

[NYCHoosier]

Retirement

Go to the library and check out David Bach's Smart Couples Finish Rich.

Then max out every retirement fund option available to you.*

*This is a do as I say not as I do moment as DH and I each only contribute 20% of our salaries (maxing out would be around 30% for our current salaries). But, it is what we feel we can do now while still building an emergency savings fund with the uncertainty of what our budget will be like next year if I go back to school.
But seriously, retirement is uber important to tackle asap. Start contributing at least as much as you feel comfortable like, yesterday. You're not just losing the amount you'd be saving, but all the interest and the interest on that interest, etc.

[Auspicious]

We did not contribute significantly to retirement during training. My husband's program did offer a 401K that matched at . . . I think 1%? So we did contribute what they would match, but at the end of the four years that totals like a couple thousand dollars--a token amount.

In my 20s before I met/married my husband I did contribute to my 401Ks aggressively, well above matching, with an eye toward my lonely old spinster years. When we moved for residency and I was no longer a full-time employee, under the behest of our financial advisor, those got rolled over to an IRA that's been riding the waves for the past four+ years. (I think the plan is to convert it to a Roth this final year before our tax rate goes up? Don't quote me on that part, I'd have to look it up to be sure.)

We do have life and disability insurance.

Our financial advisor commented that our retirement will basically be earned between 40 and 50. (Husband will start attendinghood right after turning 40.) We're planning major heavy catch-up, with a lot of money passing through to retirement funds and college funds and mortgage and loan repayment without ever touching our hot little hands. Financial advisor is on board with this plan. Good luck to us all!

[GrayMatterWife]

When residency began, I left my private practice job and switched to a position with the US Courts. I rolled by 401K over into a traditional IRA, then this year, converted that traditional IRA into a Roth IRA (the first year you could do this without being subject to AGI ceiling. However, the conversion is a taxable event, although the tax implications can be stretched out over two tax years, if you don't want to take the hit all next April).

In my employment with the US Courts, I get a small match. I max out my TSP contributions (just like a 401K, with same yearly maxes) every year.

DH's 401K through his employment with the hospital does not match. Sucky. We've maxed him out every year as well, except from July of last year through June of this year. During that time, he moved from being an employee of the hospital to a fellow with the University during his research/Ireland time, and was ineligible to participate in the 401K. Suck again. Oh, yeah--and it got even SUCKIER. I wanted to roll over his 401K when he switched employment from the hospital to the University, but he couldn't! Why? Because he was kept on by the hospital as a noncompensated employee for purposes of obtaining per diem med-mal insurance when he had to cover at the hospital (which happened maybe five times). SUPER-SUCKY.

There are two other things we've done to try and continue to save while in residency. First, when DH went to Ireland, he drew two paychecks: one from them, one from the University here. And they pay residents ("registrars," over there) really well compared to here. DH lived VERY VERY meagerly (dumpy, one-room residence and no car) in Ireland and pull a LOT of overtime (which they get paid well for), and he was able to save up a good amount, which we've tucked away as our emergency funds (you know how they say that you should always have 6 months' worth of expenses in cash). Second, we are on a 15-fixed mortgage, rather than a 30-fixed or an ARM. We have been able to build up a nice amount of equity--his residency is six years.

But, look, the reality is: DH didn't start his NSG residency until he was 31. And he'd spent 9 years in med/grad school before that (nine years during which he could not participate in a 401K). Plus, we knew he wanted to go into academics--there's no "big ka-ching" in our future after he finishes residency. We couldn't wait around for him to grow-up-and-get-a-real-job before we started saving for retirement. Starting residency in your twenties is a lot different. Try to avoid taking out debt if you can. Lots of people can't, especially if you have kids! If I had stayed home with our kids, we'd either have had to move or we would have had to take out debt, no question. But we made a mistake in waiting to have kids until we were in our 30s, just because I was so afraid of debt. I'm not saying to go off the deep end, but don't let debt prevent you from living your life. Make smart, conservative decisions with your money during residency, but continue to live. If I had to quit work tomorrow and drain all our retirement savings because my kids needed me to for some reason (education, medical), I would do it in a second and not think twice. It's just money. I can make more of it.

[scrub-jay]

I'm not saying to go off the deep end, but don't let debt prevent you from living your life. Make smart, conservative decisions with your money during residency, but continue to live. If I had to quit work tomorrow and drain all our retirement savings because my kids needed me to for some reason (education, medical), I would do it in a second and not think twice. It's just money. I can make more of it.

I don't know if I've ever really told you this, but I really respect your perspective and find it motivating. I often look forward to hear what you have to say. Thanks.

[ladymoreta]

Me too, Crystal! GMW, I can't tell you enough how much I respect you!

As far as what we're doing for retirement, not really anything at the moment. I contributed some while I was working, but it's very little. Now we're not saving back any. DH will be finished with residency in 2012, and we'll work on catching up then. It's not the smartest strategy, but it allows me to have my dream job of SAHM, so we think of the lost retirement for these couple of years as our "debt", like his medical school debt. We still owe that money (to ourselves), so we'll pay it back when we can.

We're hoping to stay in this home for a couple years after residency (or rent something that costs about this much, if we have to move), and that should help us get caught up a little. We also don't have undergrad debt, and his medical school debt isn't very much, so we kind of justify our decisions that way.

[OrionGrad]

Right now DH is contributing up to the match into a 401k, and I have a Roth IRA that I've been contributing to since I started working at 22. After reading this thread, though, I'm going to start a Roth IRA for DH, as well.
As much as it sucks to have less money in your paycheck each month, it's just silly not to contribute to a 401k if his employer is indeed offering some type of match.

We're trying to follow the conventional wisdom to "pay yourself first" and maxing out my 401(k) and our Roth contributions. We may have to cut back on our contributions when kids change our financial picture, but I'm not that concerned about catching up. I hear all these good things about the joys of compound interest, but for the last few years we've been seeing about a 1-2% return. Not exactly inspiring.

I do wonder how this will play out. The financial planners who advise associates in our firm recommend (very generally) putting aside at least 10% of your income for retirement if you begin in your late 20s, but that assumes returns of 7-8% yearly on investment accounts. I am not sure that we will see those kinds of numbers again for a long time. Will no one in our generation be able to retire at a reasonable age? Similarly, as we've been looking into setting up a college fund for a baby, we've been lamenting with friends that with between tuition inflation and investment stagnation, private college seems increasingly out of reach for professional couples.

It seems disheartening to me that my doctor and lawyer friends are not sure they're going to be able to make tuition payments or spend some extra time gardening or golfing at 65. First world problem, I know. But I've been thinking about this in connection with the recent thread re: the fabulousness of attending paychecks (or lack thereof) and what it means to be "comfortable" vs. rich. I guess I did not anticipate that saving "enough" would be quite as big a challenge as it seems it will be for us.

[Chrisada]

Wait, doctors retire? Just kidding. We'll kind of...

[ladymoreta]

I'd focus on saving for retirement before college funds. Your kids will appreciate not having to support you later in life, and they can get scholarships, grants, and federal loans. We'd like to be able to pay for at least some of our kid(s) college, but it's a lower priority than our retirement.