• I think the reinforcement that this is an acceptable move to make it the worst part. The psychology behind that would torment you if performed over and over in your career.

    And to say, “I’ll only do it once!” Well, I would believe that as readily as I’d believe it from my drug seeking patient with a history of polysubstance abuse.

    It is addictive to spend money. Just use the minimal expenses you need for moving and transitioning from fellowship. Assuming that doesn’t involve buying a new house, new car, and moving expenses… It shouldn’t cost that much.

  • Subscribe to get more great content like this, an awesome spreadsheet, and more!
  • hatton1

    Dont do it. Analyze your spending and figure out the problem.

  • Catherine T

    Don’t do it. We cashed out a 401k to buy his first practice from the hospital. Then 6 years later had to cash out in part of another 401k to buy ourselves out of what turned out to be an awful partnership. My family medicine husband (now 50) is working for a very large group and is finally maxing out his 401k again, but will have to work until he is 63 to make up in a pension (thank God for it) what he never will be able to make up for at this late date in those lost 401ks.
    Just don’t do it. Compounding is your friend!

  • I agree with the author, The Physician Philosopher, and hatton1, Catherine T: let the money grow, and don’t take it out. The price is too high in the long run. I feel there might be two exceptions:

    1) Unless there is some big financial emergency, and you have exhausted all other means. One example could be a sudden and huge medical bill.

    2) If you plan to move outside of US permanently, and decide to live your rest of life there. This may apply to some foreign students, who finished their school and choose to go back to their home country.

  • I also vote for not taking out the money. One of the few good financial decisions that I made in medical school/residency was to not cash in any of my retirement savings and to use a line of credit (and eventually my salary) to pay my way. I got a slightly better return on my savings than I was paying in interest on my LOC, but most importantly it was a lot harder for me to spend LOC money than money I had saved, because I didn’t like to go further into debt. It is also easier to repay debt once you’re working than it is to save, because you’re forced to do it by the banks! If you can’t be frugal and make ends meet with your current income, I would advocate going a bit further into debt over cashing in retirement savings.

  • Mitochondria

    Don’t do it. Don’t let any family member, friend or so called financial advisor talk you into tapping into your retirement account. If there was no such thing as “compound growth”, then we would not need to have this discussion. There is simply no reasonable way to make up for the loss of growth down the road by picking up extra shifts, moonlighting or taking up locum tenens assignments on your vacation time. It simply doesn’t work.

    Treat your retirement account like your first born. Protect it with your life!

  • DAK

    PoF may want to double check the tax on early Roth IRA earnings. I could be wrong, but my understanding is that non-qualified early withdrawal of Roth earnings is subject to ordinary income tax AND a 10% penalty.

    I read the above as stating only the 10% penalty applies. Given that fact, and that it will add 10 percentage points to the effective marginal tax rate on that money withdrawal, I do not think that it should be taken out. Instead, take a bit more (student?) loan while the interest is still tax deductible, and then pay it off ASAP while an attending.

    Or even better, do not take it at all, suck it up and spend less, and still live better than the average american, who already lives very well.

Leave a Reply

Your email address will not be published. Required fields are marked *