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Hi. I'm attending podiatry school in August. I'll be moving from Texas to Des Moines. I'm curious for a bit of perspective on possible approaches for handling tuition, assets etc. I currently work full time and have every reason to believe I will until I leave in mid-July. No debt of any kind. Paid for car. Its my goal to have somewhere along the lines of $25K in cash when I leave for Des Moines. I have ~$2.5 in a ROTH IRA, $4.7K in a ROTH 401k, $16K in a 401k. I make $47K a year right now. The program lasts for 4 years followed by a 3 years residency (I am hopeful to return to Texas - residencies are paid (poorly 
!) - have reviewed all Texas podiatry residencies and they start as low as $39k and as high as ~$45k). Subsidized borrowing is no more - I'll be able to borrow a mixture of unsubsidized federal loans at fixed 6.8% and fixed 7.9%.
Tuition is ~$28K. I did acquire a small scholarship which will decrease this amount by a few thousands dollars. The school estimates the total budget for the first year to be $50,806. The other ~$22k consists of some school related expenses like books and equipment and personal expenses such as room and board, telephone, car, insurance etc. The amounts budgeted for many of these expenses are significantly larger than what I currently spend in these categories so I see opportunities for significant savings. I'll post a year of expenses if anyone is curious.
Here's my game plan. Maximize cash on hand while I'm employed. Minimize spending and continue to work towards decreased cost of living both before school and during school.
(1) I was accepted to school in November. Up till November I was saving 20% into my ROTH 401k and 10% into my regular 401k. The contribution goes into a plain old Fidelity 2040 plan. When I was accepted I went ahead and stopped my ROTH 401k contribution. I am still contributing 10% to my 401k (pre-tax). I would only need to contribute 4% to receive my full company match. Should I decrease my 401k contribution to 4%? This would result in increased cash on hand (though always less than you would think because of brackets). I expect to be in a higher tax bracket down the road. I don't intend to leave any free money on the table, but I will only be 40% vested in July so the 4% isn't a huge amount.
(2) My ROTH IRA Contribution was initially $2,500. It has grown to $2,550. I opened this account 9/2011. I like the idea of keeping this account, but I see real expenses that are right here and right now and I believe I can touch the primary principle of this account without facing a penalty. Would you use tap this account if you didn't have to pay a penalty?
(3) I don't believe I can touch my ROTH 401k without paying a penalty. I've read a mix of information (ie. I read somewhere that it can be rolled into a ROTH IRA), but I'm curious if this account can be tapped of principle without a penalty. If that were the case would you tap this account (initial deposits into this account were in 2011)?
(4) What happens to a 401k when you leave a company? More specifically - what is the smart thing to do with a 401k when you leave a company? I do not intend to touch this money as tempting as that would be as I know I would pay a large penalty to acquire it.
Once in Des Moines
I spoke to financial aid and unless you are quite wealthy you will qualify for the full budget in loans each year - in short they will loan you $50k. Per the adviser, the majority of students borrow the full amount from the get go. Tuition is paid in each semester so if you agree to borrow the full amount the loan first pays the school ~$14k, then disburses the remainder of the loan while holding back the second ~$14k which is disbursed in the 2nd semester. Should you choose not to accept the full disbursement you may at any time ask the school for more loan money and you will receive it without too much fanfare or delay. Flexible.
Based on the above I am curious how people would suggest I handle the first year assuming I show up with $25k in hand.
(1) Current favored plan. Accept the $14k initial disbursement towards tuition, but do not accept any additional financial aid for personal use. This plan immediately puts me in debt, but puts the onus on me to control my own money and use it frugally. Ideally I'd retain a significant portion of my own money, borrow the second semester, and end year one only $28k in debt while still retaining sufficient funds to cover the majority of year 2's personal expenses.
(2) Another option. Pay the first $14k myself and then approach the personal expenses in a similar manner. Borrow the second 14k.
(3) I'm not particularly creative so I'm willing to hear new ideas. Borrowing the completely amount and then returning unspent money doesn't sound particularly sound/frugal as I'd just be holding money that isn't mine.
I think that's enough questions for now. Thanks for the feedback.
!) - have reviewed all Texas podiatry residencies and they start as low as $39k and as high as ~$45k). Subsidized borrowing is no more - I'll be able to borrow a mixture of unsubsidized federal loans at fixed 6.8% and fixed 7.9%.Tuition is ~$28K. I did acquire a small scholarship which will decrease this amount by a few thousands dollars. The school estimates the total budget for the first year to be $50,806. The other ~$22k consists of some school related expenses like books and equipment and personal expenses such as room and board, telephone, car, insurance etc. The amounts budgeted for many of these expenses are significantly larger than what I currently spend in these categories so I see opportunities for significant savings. I'll post a year of expenses if anyone is curious.
Here's my game plan. Maximize cash on hand while I'm employed. Minimize spending and continue to work towards decreased cost of living both before school and during school.
(1) I was accepted to school in November. Up till November I was saving 20% into my ROTH 401k and 10% into my regular 401k. The contribution goes into a plain old Fidelity 2040 plan. When I was accepted I went ahead and stopped my ROTH 401k contribution. I am still contributing 10% to my 401k (pre-tax). I would only need to contribute 4% to receive my full company match. Should I decrease my 401k contribution to 4%? This would result in increased cash on hand (though always less than you would think because of brackets). I expect to be in a higher tax bracket down the road. I don't intend to leave any free money on the table, but I will only be 40% vested in July so the 4% isn't a huge amount.
(2) My ROTH IRA Contribution was initially $2,500. It has grown to $2,550. I opened this account 9/2011. I like the idea of keeping this account, but I see real expenses that are right here and right now and I believe I can touch the primary principle of this account without facing a penalty. Would you use tap this account if you didn't have to pay a penalty?
(3) I don't believe I can touch my ROTH 401k without paying a penalty. I've read a mix of information (ie. I read somewhere that it can be rolled into a ROTH IRA), but I'm curious if this account can be tapped of principle without a penalty. If that were the case would you tap this account (initial deposits into this account were in 2011)?
(4) What happens to a 401k when you leave a company? More specifically - what is the smart thing to do with a 401k when you leave a company? I do not intend to touch this money as tempting as that would be as I know I would pay a large penalty to acquire it.
Once in Des Moines
I spoke to financial aid and unless you are quite wealthy you will qualify for the full budget in loans each year - in short they will loan you $50k. Per the adviser, the majority of students borrow the full amount from the get go. Tuition is paid in each semester so if you agree to borrow the full amount the loan first pays the school ~$14k, then disburses the remainder of the loan while holding back the second ~$14k which is disbursed in the 2nd semester. Should you choose not to accept the full disbursement you may at any time ask the school for more loan money and you will receive it without too much fanfare or delay. Flexible.
Based on the above I am curious how people would suggest I handle the first year assuming I show up with $25k in hand.
(1) Current favored plan. Accept the $14k initial disbursement towards tuition, but do not accept any additional financial aid for personal use. This plan immediately puts me in debt, but puts the onus on me to control my own money and use it frugally. Ideally I'd retain a significant portion of my own money, borrow the second semester, and end year one only $28k in debt while still retaining sufficient funds to cover the majority of year 2's personal expenses.
(2) Another option. Pay the first $14k myself and then approach the personal expenses in a similar manner. Borrow the second 14k.
(3) I'm not particularly creative so I'm willing to hear new ideas. Borrowing the completely amount and then returning unspent money doesn't sound particularly sound/frugal as I'd just be holding money that isn't mine.
I think that's enough questions for now. Thanks for the feedback.
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