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Author: jerrtiff Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Do I need to invest for retirement? Date: 10/21/2001 12:57 PM
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Ok, here's my story: I'm 25 y.o. male, married, with an 11 month old son. I'm in medical school and will graduate in May. My residency after school will last from 3-5 years, in which I will be making 30-40 K per year. After residency, I will be making anywhere from 150-250 K per year.

My questions are: Do I need to start investing for retirement (IRA) now? I will be able to open a Roth IRA for my wife and I this year, but do I really need to? Or would I be better off waiting until my residency if over? Is is silly to cough up 4 K now when I will be making very good money starting 3-5 years from now? I know the earlier I start, the more my interest will grow (hopefully), but with my future income, does it matter?

I thank you for any suggestions and comments.

J.C.
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Author: JWR1120 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32261 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/21/2001 1:22 PM
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Start now so that you will learn how to invest. The real world is different from theory.

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32262 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/21/2001 1:29 PM
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In the future, if your income pans out as expected, you won't be eligible for a Roth IRA.
If you get into the habit now of spending everything you make and not saving for the future, for your kids' education, for your retirement, for an emergency fund, etc., it will be much more difficult to get started later.
Yes, your income will increase. So will your taxes and your expenses. If you are in private practice, you will have to pay salaries for your office staff, and you may need quite a lot of expensive equipment to start that office--computer, billing programs, letterheads, stationery. Commonly if you work in a smaller town the hospital will guarantee your income for the first couple years. After that do you make the guarantee? Depends on your specialty, and how well accepted you are in the community. You get pressured to take board exams ($1000 plus), join the county medical association as well as the state and national. You are expected to make hefty contributions to the new hospital fund, and every other charitable drive in town.
If instead of private practice, you are an employee of an HMO or a state group, the salary may not be what you expect. You'll have to learn the inticracies of Medicare and Medicaid billing, and that commonly the amount paid doesn't cover your office expense for performing the service.
It ain't all roses. Start now to save.
Best wishes, Chris

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32263 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/21/2001 1:31 PM
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jerrtiff: <<<<<Ok, here's my story: I'm 25 y.o. male, married, with an 11 month old son. I'm in medical school and will graduate in May. My residency after school will last from 3-5 years, in which I will be making 30-40 K per year. After residency, I will be making anywhere from 150-250 K per year.

My questions are: Do I need to start investing for retirement (IRA) now? I will be able to open a Roth IRA for my wife and I this year, but do I really need to? Or would I be better off waiting until my residency if over? Is is silly to cough up 4 K now when I will be making very good money starting 3-5 years from now? I know the earlier I start, the more my interest will grow (hopefully), but with my future income, does it matter?>>>>

JWR1120: "Start now so that you will learn how to invest. The real world is different from theory."

Sound response. Also, start now to establish the discipline that money gets invested for retirement.

There is a corallary to Murphy's Law that indicates that spending increases to match revenue. If you and your spouse get accustomed to spending all of your income, that trend will likley continue even when your income is substantially larger.

Regards, JAFO




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Author: jerrtiff Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32266 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/21/2001 5:40 PM
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Thanks for the advice.

Quick follow-up question: Education IRA for my 11 month old -Yeah or Neah?

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32268 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/21/2001 7:29 PM
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<<<My questions are: Do I need to start investing for retirement (IRA) now? I will be able to open a Roth IRA for my wife and I this year, but do I really need to? Or would I be better off waiting until my residency if over? Is is silly to cough up 4 K now when I will be making very good money starting 3-5 years from now? I know the earlier I start, the more my interest will grow (hopefully), but with my future income, does it matter?>>>

Some advice from some one who's "been there, done that", only ten years ago.

Yes, start investing now, especially while you can still qualify for the Roth IRA. Over the next 5 years with the increase in funding limits, you could have 30k+ between you and your spouse. By the time you retire it could easily be 250k+, all tax free. That's some serious change no matter how you slice and dice it. You should also check into residency retirement programs. When I was a resident we could invest about 5% of our pay tax deffered. That smattering over my 4 years has now compounded to 40k+ (even with last year's unpleasentness). Again, not a whole lot, but it's 40k less I have to save.

You should three important goals to achieve over the next 3 years. Number one, pay off debt. That includes student loans. Interest on debt, even if it's tax deductable, is money lost that could be better spent elsewhere. Number two, get six months living expenses stashed into an emergency fund. When you hit private practice, it means you are your own boss, but you are also your own retirement/disability package as well. I consider disability insurance part of the emergency fund. Most residency programs offer this or is included in the "employment" terms. Check into it, be careful, many will just slough you off into Medicare/Medicaid which isn't worth crap when you consider how much you've invested into yourself. Also, make sure your that turning HIV positive or becoming a Hepatitis carrier is considered a disability, some do not. An interesting statistic, when I was a resident (anesthesia), it was more likely that I would contract HIV or Hepatitis than die in a car wreck, which was amazing because that is the #1 killer in that age group in the general population. Let's you know about the dangers of our profession. And finally, number three, definitley live below your means now so you will be used to it when the "big money" rolls in. Many people see physicians driving their BMWs, living in 5000 sq ft. homes and think they have it made. All those trappings, for the most part, are still owned by the bank. Many of my friends are slaves to debt and appearances. I know it's tempting after denying yourself material pleasures for so long, but be smarter than that. If you get used to living on 80-90% of your income now, you can still do it later when you have bigger money. Think about it, you've been disiplined enough to survive the riggors of med school, why not budgeting?

JLC (LSUMC-Shreveport, class of '91)
PS, if you have any more questions, feel free to e-mail or continue to post.


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Author: jerrtiff Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32274 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/22/2001 9:50 AM
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Thanks JLC, we're trying to live below our means now (you know the saying "If you live like a doc now you'll live like a student later...).

We're also not too materialistic- don't get me wrong, we don't save our tin foil and reuse our toilet paper, but we are trying to buy reasonable cars and not go crazy with the loan money we've received.

This attack has even had me thinking of joining the Air Force. I'd lose 4 years of pretty good income, but there are more important things in life than money...like freedom.

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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32275 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/22/2001 10:20 AM
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<<<This attack has even had me thinking of joining the Air Force. I'd lose 4 years of pretty good income, but there are more important things in life than money...like freedom.>>>

Instead of joining the service full time, you might consider the reserves. Of course that might mean getting called up at an inopportune time, but it could also be the best of both worlds. I did have one friend join the service after med school. He wound up quitting after his initial commitment because he felt like he was too much of a desk jockey instead of treating patients. Definitely talk to people in the service in the specialty you are looking at to try and get an idea of what it's like.

JLC

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Author: bigcaat Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32320 of 75340
Subject: Re: Do I need to invest for retirement? Date: 10/24/2001 1:52 AM
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Start now. You never know what the future holds.

Caat

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Author: Anjanettea Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 32770 of 75340
Subject: Re: Do I need to invest for retirement? Date: 12/7/2001 2:55 PM
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Start investing now. I am a 27yr old first year law school student. I was making $50K before I graduated undergrade, then kepy my job until this summer when I was accepted to law school. When I first started at my job, I had the option to invest in the company's 401K plan, but I didn't. I wanted to spend my hard earned pay check on other foolish things. After my grandmom passed in, and realizing that she didn't have anything, accept for her house (that was paid in full), I decided that I had to invest all of my money. Now that I'm an unemployed law school student, I wish I would have been investing a long time ago.

Anj

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