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    Loan repayment vs. investment for young physicians

    For newly-minted physicians, a big financial decision is: Do I pay off my loans or invest for retirement? Here's help.

    You're a newly-minted physician — congratulations. If you're anything like my young physician clients, you're trying to balance paying off your student loans with saving for retirement and potentially making big purchases, such as a home. So what should you do with your money?

    The question comes down to two main issues: your attitude towards having debt, and the interest rate on your student loans.

    If having debt keeps you up at night:

    Peace of mind is priceless. If having debt stresses you out and keeps you up at night, then throw every spare dollar you have towards the loans until they are completely paid off — regardless of the interest rate.

    If having debt doesn't keep you up at night, and your interest rate is high:

    If your interest rate is over 4 percent, look first into refinancing. I recommend using studentloanhero.com. It is a wonderful (and free) tool you can use to keep track of loans, organize loans, and compare refinancing options. If you have multiple student loans from multiple loan services, this site could be your best friend.

    Related: How young physicians can master leadership roles

    If after refinancing, your interest rate is still high, then put all of your extra money towards paying down the loans rather than towards investing. The return on money invested in the stock market may not be higher than the interest rate you are paying on your student loan debt.

    If having debt doesn't keep you up at night, and your interest rate is low:

    If your interest rate is low and having debt doesn't keep you up at night, then it makes sense to make your monthly loan payments and invest any extra money you have in a retirement account for long-term growth.

    Your first priority in this regard should be maxing out your allowable salary deferral to your employer-sponsored retirement plan —especially if they match contributions — that's free money. If you do that and would like to save more, you can make a contribution of up to $5,500 to a traditional IRA. As a physician, it's likely that your income will be too high for you to make a tax-deductible IRA contribution or a Roth IRA contribution. The caveat here is that you can make a tax-deductible IRA contribution regardless of your income level if you are not covered by a qualified retirement plan through your employer.


    NEXT: Think carefully about additional debt


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