Income and wealth are two entirely different entities. One can have a high income but make horrible financial decisions that focus more on pursuing “wants” rather than making sound decisions for the future. Here’s how I’m diversifying my contributions to retirement.
As a resident and fellow, I contributed the $5,500 yearly maximum to a Roth IRA. This type of retirement account allows me to invest in stocks, bonds, mutual funds, etc. At 59.5 years old, I can withdraw everything I’ve made (hopefully a lot of growth) TAX-FREE. Now as an attending physician, my income is too high to invest directly into a Roth IRA. Instead, each year I’ll be contributing to a traditional IRA and “rolling it over” into my existing Roth IRA. This is known as a Backdoor Roth IRA.
I have three pre-tax retirement accounts which are deducted directly from my paycheck. The whole point of “maxing out” these accounts each year is that I’d be paying a lot more tax on the money now than I will later in life when I withdraw funds. These funds will also be invested in various, conservative portfolios.
I have a 6.65% contribution to my optional retirement program (ORP) which is matched with an 8.5% contribution by my employer. Second, I have another 403(b) account which combines with my ORP but offers a Roth option separate from the IRA above. Finally, I have a 457(b) which allows a max, pre-tax contribution of $19,000 at the time of this writing. In the near future, I may expand to include a health savings account (HSA) too.
Above all else, there’s no substitute for conscientious expenses. Even as an attending, I’m living in the same apartment complex I did as a resident and taking public transportation to work with no plans of purchasing a house for at least the next few years. I’m using this time to catapult my savings, establish my career, tap into promising investments, expand charitable donations, and secure my parents retirement (while spoiling them in the process). 🙂
Drop me a comment with any financial pointers you have!