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How Should Doctors Balance Student Loans and Saving for Retirement?

Paydown Loans or Save for Retirement? 

After wrapping up residency and moving into the next stage of your professional career, most physicians confront two realities: 

  1. You have a lot of student loan debt
  2. You don't have much or anything saved in retirement accounts

At the same time, though your income has likely increased dramatically, there are still tradeoffs involved in deciding which goals to prioritize. So, should you more aggressively paydown your student loans or prioritize saving for retirement? 

First, You Need a Student Loan Repayment Plan

First, maek sure you have a student loan repayment strategy that fits cohesively within y our financial plan (discussed below). For example, if you qualify for Public Service Loan Forgiveness (PSLF), it may make sense to pay as little as possible on your student loans with the attention of achieving full loan forgiveness after ten years of service and qualified payments.

New Physicians Should Favor Saving For Retirement

After residency, many new attendees want to go straight to aggressively paying down their student loans. Though we completely understand this impulse and the existential pain that is student loan payments, we point you first toward maxing out your retirement savings. Ultimately, investing in your retirement accounts is generally more beneficial over the long-term than aggressively paying down your student loans. 

Here's Why: 

  • Given the late start to your earning years, you must aggressively save for retirement
  • Most doctors are in high marginal tax brackets. The tax savings for contributing to your 401k and any other tax-deferred retirement accounts, like a 457b, can be powerful. 
  • Though stocks are volatile over the short-term, the stock market will likely out-perform (or out-compound) the interest rate on your student loans. 

Once you've boosted your retirement savings to an appropriate level according to your long-term goals, then may be the time to start more aggressively paying down student loans with excess cash flow. 

What's best for your situation? Paying down student loans or saving for retirement? 

Interested in creating a student loan repayment strategy or discussing your retirement savings goals? Setup a free introductory call below: 

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