Broker Check


March 15, 2022


Physicians with federal loans in income-driven repayment plans are likely familiar with the annual income reverification process. Your monthly payment is determined by your adjusted gross income, so any qualified retirement contributions made to a traditional 403b/401k/TSP/457b are deducted (up to $22,500/year in 2023) when doing your income calculation. This can decrease both tax liability today and monthly loan payments in the following year for residents and fellows, which can be advantageous while making a resident/fellow salary.

For example: If you are a single PGY3 with an income of $62,000 and you contributed $6,500/year ($540/month) to a Traditional 403b, this would decrease your taxable income to $55,500/year. If you are enrolled in PAYE or REPAYE, it would also save you ≈$54/month in payments the following year by decreasing your payment from $347/month to $294/month based on the lower adjusted income.

Hypothetical example for illustrative purposes only. Please seek guidance from your financial and tax advisors regarding your specific situation.

There is also the option to contribute that same $6,500/year to an Individual Retirement Account (IRA), which can either be pre-tax (Traditional) or post-tax (Roth). While residents & fellows are at a lower income bracket in training compared to in practice, we often recommend prioritizing Roth contributions for retirement early in your career to allow the dollars to grow efficiently long-term.


Every physician’s situation is different, but it’s a good idea to prioritize having a solid debt reduction plan prior to committing dollars to retirement. Before a discussion about sending dollars to a qualified retirement plan, we should assume that you’ve already accounted for what the student loan payment will be. In the example above, the $54 per month savings on your loan repayment due to funding a Traditional 403b over a Roth IRA is a hypothetical benefit of a less efficient strategy. Ultimately, it can be more efficient to send $5,850/year to a Roth IRA while in a lower income tax percentage during residency than $6,500/year to a Traditional IRA. 

This example also assumes you are a single individual, that there is no employer match towards the qualified retirement plan, you do not have access to a Roth 403b, and that you have a few more years of training. Each of these factors significantly changes how a person should prioritize qualified retirement dollars and/or if contributing to these plans is even the best option. 


We encourage early-career physicians to connect with a professional to help navigate the pros/cons of funding a Traditional or Roth retirement plan. There are several factors that go into choosing a strategy and the choice you make can have an impact on both your loan payment in the short-term and retirement savings in the long-term.

To schedule a no-obligation, introductory conversation with our Financial Advisor specializing in Student Loan Guidance, Kyle Flynn, CSLP, use his calendar link here. Kyle provides financial planning services with a focus on your current financial position and debt management.

Some IRA’s have contribution limitations and tax consequences for early withdrawals. For complete details, consult your tax advisor or attorney. For a comprehensive review of your personal situation, always consult your legal advisor. Neither Cetera Advisor Networks LLC, nor any of its representatives may give legal advice.