Roth IRA and future income increase.

[Guest dblakel]

I'm a 26 year old medical school graduate and I begin my residency this summer. My income as a resident will allow me to open a Roth IRA if I choose. My question is what will happen to my Roth IRA if my income makes me ineligible after residency. I plan on maxing out my contributions for the three years of residency but I anticipate that my income when I go out into private practice will make me ineligble. I want to take advantage of being taxed now rather than later as my $3,000/year compounds until retirement.

Will I be able to keep the $9,000 I contributed to my Roth IRA over 3 years? As my income increases I would then consider other retirement options. By the way, my residency program doesn't offer any retirement plans (401K or otherwise).

Thanks.

[John G]

I praise your looking ahead and considering starting a Roth IRA early. You qualify by meeting the combination of income and filing status tests EACH year. However, once any year qualifies and the contributions are made, those funds are "inside" and are not impacted by subsequent income qualification.

So, you should qualify and contribute the $3,000 (or more when the annual max increases) each year until you no longer qualify. Those funds can stay invested in a Roth account until you decide to withdraw them.

Subsequently, you will have a range of retirement investment options available, depending upon which type of structure you choose for your practice. Because these can be more complicated and can involve larger contributions, I suggest that down the road you find a financial advisor who is familiar with physician financial planning.