Asset Allocation · Fellow · Resident · Med Student
Resident Account Funding Waterfall
Where every spare dollar should go on a resident salary, including which retirement accounts to fund before loans and which to skip until attending.
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Who this is for
Med students, residents, and fellows. The chart sits in the years where physician income is unusually low (PGY-1 stipend around $68K, resident bracket 12-22%) but where saving habits and Roth contributions compound for decades. Once the attending contract is signed, switch to the Attending Account Funding Waterfall.
The decision this chart helps you make
This is the most important saving window in a physician's career. Most physicians underuse it. Two facts drive the chart. First, every Roth contribution made at the resident or fellow bracket locks in a tax rate (12-22%) that is permanently lower than the attending bracket. The same dollar contributed at the attending bracket pays 32-37% on the way in. Second, a small Roth IRA contribution in M3 or M4 of med school starts the 5-year Roth clock decades early. That clock gates qualified withdrawals of earnings for the rest of your life. The waterfall has the same structure as the attending version but with different priorities. Tier 0 confirms a smaller foundation: DI in force, minimum loan payments current, and a $3K starter emergency fund. The full 3-6 months target waits until attending. Tier 1 captures the employer match if one is offered (most residency programs do not offer one; ask HR directly). Tier 2 is the headline: max the Roth IRA for each spouse, then add Roth 403(b) or Roth 457(b) deferrals if the program offers them and cash flow allows. Subsequent tiers cover HSA contributions for residents on a qualifying HDHP, a 529 if there is a child in training, and the non-governmental 457(b) creditor-risk warning.
Essentials vs Ultimate
Essentials covers the resident waterfall in its cleanest form: foundation check, match capture, max Roth IRA, then Roth deferrals if available. Ultimate adds the med student section (what counts as earned income for Roth purposes, why even a few hundred dollars in M3 matters), the high-earner spouse case (when household income crosses the MFJ Roth phase-out and forces the backdoor), the 529 timing trick for a child in training (open the account at birth to start the SECURE 2.0 15-year clock for the eventual 529-to-Roth conversion), the non-governmental 457(b) creditor risk, and the rules for fellows transitioning to attending mid-year.
How to read this chart
This is a waterfall, not a decision tree. Read top-to-bottom. Each tier flows to the next only after the previous one is filled. The chart uses five box types: • Dark green diamond boxes are gating questions (e.g., "does your program offer a match?", "med student?") • Pale red boxes with ⚠ are land mines (creditor risk on non-governmental 457(b), missing the foundation) • Pale orange boxes flag reassessment triggers (attending contract signed, marriage to a high-earner spouse, child enters the picture) • Pale cream boxes with green headers are the action steps with contribution limits • Pale parchment boxes are context (what counts as earned income, the 529 clock trick) Most residents and fellows are done after Tier 2. Use the toggle above to switch to Essentials if the Ultimate view is too dense.