1. Employer Match (401K or 403B)
If your employer offers a match, get it. An employer match is essentially free money. The specifics of matching contributions can vary, but a common arrangement is a 100% match on the first 3-6% of your salary that you contribute. Contribute enough to get any matching money available to you, then move on to your HSA or Roth IRA.
Make sure you understand your employer’s vesting requirements. If your employer has a 5-year vesting period, but your residency is only 3 years, you will not be vested when you finish training and will forfeit any matching funds.
You can contribute up to $22,500 into a 401K or 403B in 2023.
Any money you contribute is deducted from your adjusted gross income (AGI). If you are in an income-driven repayment (IDR) plan, contributions to a pre-tax retirement account will lower your student loan payments.
2. Health Savings Account (HSA)
Although not traditional retirement accounts, HSAs allow you to save money for the future and have better tax benefits than any retirement account. HSAs are triple-tax advantaged: contributions are made using pre-tax money, investment gains are untaxed, and distributions are untaxed if you use them for qualified medical expenses.
Unfortunately, you can only contribute to an HSA if you are enrolled in a high-deductible health plan. Contributions to an HSA reduce your AGI, so they will also lower your IDR student loan payments.
In 2023, you can contribute $3,850 (single coverage) or $7,750 (family coverage).
3. Roth IRA
Most residents are not offered an employer match, and many are not eligible for an HSA. That’s ok. If that’s you, start with a Roth IRA.
Roth accounts are best for people who expect to move into higher tax brackets in the future (like residents). With a Roth account, you pay taxes on the money you contribute but investment gains or distributions are tax-free.
In 2023, you can contribute $6,500 to a Roth IRA. However, you can only make the full contribution if your modified AGI is less than $138,000 (single) or $218,000 (married, filing a joint tax return).
Since Roth contributions are made with after-tax money, they do not reduce your AGI and therefore do not lower your IDR student loan payments.
4. 401K or 403B non-matching contribution
If you have money left over after contributing to your Roth IRA, then continue (or begin) contributing to your 401(k)/403(b). Remember, you can contribute up to $22,500 and contributions will decrease your student loan payments if you’re in an IDR plan.