Toward the end of residency, I realized I didn’t know a lot about how to manage money. I started looking for information. Like a lot of physicians, I found The White Coat Investor and read through the archives when I had spare time. I quickly learned that I had a lot to learn.
One of the first things I learned was a forehead slapping moment, although it arrived too late to be of much use.
What I learned was a 401(k) or 403(b) has no relation at all to an IRA. Funding the former does not prevent you from funding the latter. They have separate contribution limits. You can max out both. In my ignorance, I thought you could only contribute to the 403(b) and Roth IRA up to the 403(b) contribution limit – whatever you contributed to one account would limit what you could contribute to the other. (For example: if 403(b) contribution limit was $20,000 and I contributed $15,000, I thought I could only contribute $5,000 in my Roth IRA, even if the IRA max was $6,000.) Once, when filling out my taxes, I thought I overcontributed since I had maxed out my Roth IRA and came close to filling up my 403(b) at the same time. Basically, I thought I owed a tax penalty. I don’t know if I actually ended up paying a penalty or not (and I’m not motivated enough to go back through my old tax returns to check) but I did my best to do so!
I was in the dark about the difference between 401(k)s and IRAs while I was a dietitian and as a PGY-1/PGY-2 resident. During those years, I preferentially funded my Roth IRA and didn’t max out my 403(b), even when I could have. Extra dollars went into my taxable account, instead of a tax-advantaged account.
Since I now have a 403(b) and a 457(b), for ease I’m focusing on maxing them out and not worrying about funding a backdoor Roth IRA, at least for now.
SDG