Chacon Diaz & Di Virgilio
When we created the firm, we sought to build an advisory experience that was solely and entirely focused on what was best for our clients. Today, that vision has made us a recognized leader and pioneer in our field. As an independent, fee-only, fiduciary wealth management firm, we do not sell products and we do not accept any commissions, allowing nothing to influence our independence and objectivity. As a result, our advice is always unbiased and free from conflicts of interests.
-Certified Investment Management Analyst®, CIMA® (2% of investors hold this certification)
Successfully demonstrated at least three years’ of acceptable experience in investing and passed two levels of certification exams, each with an average first-time pass rate of less than 60%. In addition, attended and completed the education program, through The Wharton School, University of Pennsylvania.
-Certified Financial Planner™, CFP® (20% of planners hold this certification)
Successfully demonstrated at least three years’ of acceptable experience in financial planning, completed 6 graduate school level courses, and passed a rigorous ten-hour exam certification exam (63% pass rate).
-Adjunct professor and regular lecturer at the University of Florida, working with the College of Pharmacy, the University Athletic Association, the College of Engineering, and the Warrington College of Business, among others.
-2016 University of Florida Outstanding Young Alumni Award Winner (1 of 24 across the entire University) The award is given to those who have distinguished themselves in their profession and community, and have had a significant professional accomplishment on the State, National, or International Level.
-Judge for Entrepreneurial and Business competitions held at UF, and a mentor for Entrepreneurs in the community.
-Past President of the Board of Trustees for the Gainesville Sports Commission, an organization that brings millions in economic benefit to the Gainesville community through sports tourism.
MS, The University of Florida
BSBA, The University of Florida
Assets Under Management:
I am going to give you a few budget guidelines first.
1.) Pay off your student loan debt in 10 years or less by using 30% of your gross income per year to pay down the debt.
2.) Save 10% of your gross income in a 403(b) or 457.
Both the 403(b) and the 457 are very similar, but there are a couple of key differences, and they can vary from employer to employer. Here is a guide that is a solid starting point.
However, the primary answer to your question is to choose the account type that has the best investment options. (Which depends from employer to employer. Here in Florida, the 457 is typically best since you have access to a full range of investment options. But this is not true in every state.) Thus, it's impossible to give you a soundbite answer that is definitive without knowing your specific situation. Also, creating an optimal investment strategy from the choices you have is not simple enough to provide you with an answer in just a few sentences. With that being said, as a general guide, contact your employer and ask for a list of the available companies that offer the 403(b) and the 457 through your employer. Once you have that, you will want to get the list of investment options from each provider. Then, you can evaluate which one is best. (typically, the best one is going to be the one that offers you the most investment choices to pick from, but this is not always the case.) Once you have made that decision, open the account, implement your investment strategy, and then save 10% a year of your gross income into the account.
If we are assuming that you are going to pay back the debt and not declare bankruptcy at some point, the best strategy is to do all that you can to reduce your overall interest rate. Thus, if you can get a fixed loan from the bank for X% that is less than the current rate on your credit card, that is wise. Then, begin paying your highest interest rates off first, as aggressively as you can. (Just pay the monthly minimum on your 0% cards, until they start charging interest.) As a bare bones strategy, always pay at least 2x the monthly minimum on credit card debt with an interest rate because this will cut your time to pay it back in half, as well as your overall interest owed.
As a rule of thumb, it's best to keep your student loan debt less than or equal to what you will make upon graduation. With that being said, here is the answer to your question.
If you earn an income while you are in pharmacy school, you can set aside 10% of what you earn each year and you can start paying the loans back each year, before you graduate. (I am going to assume that you will have unsubsidized loans, which start accruing interest when you get the loan. If you have subsidized loans, wait until after you graduate to start paying them back.) If you aren't going to earn an income while in school, don't worry, you will be able to graduate and pay the loans off within 10 years if you do some proper financial planning. (Put 30% of your gross income towards your loans each year after graduating.) If you are a retail pharmacist, you will be earning around $100K per year, and if you choose to do residency, you will make $50K for a year or two, and then around $80K. (This obviously depends on the state in which you work.) Either one of these incomes will allow you to pay the loan back within 10 years.
As for investing the money to pay for your school, I would advise against it. Since you will start paying back your loans within 3 years or so, you run too great a risk of investing and having a poor result. It's best to save the money and keep it in a safe place, like a money market or cds. Proper growth investing should allow for at least 7 years without having to touch the funds, as this allows for a market cycle which in turn, allows for the best chance of having more money than what you started with. When it comes to investing, the shorter the time period, the more luck that is involved with the result. Thus, it wouldn't be wise to gamble with your Pharmacy school student loan funds.
Given your fact list and assumptions, it would seem simple to say that you should leave your program now. However, It seems that there must be more details which will assist in answering your question. For example, after making $500K per year for the next 5-7 years, what happens? Does your income go away? Does it stay at this level? What is the probability that you don't make $500K during the next 5-7 years?
You can elect to withhold 0%, 10%, or any amount greater than 10%. If you elect to withhold 0%, nothing will be taken out or taxed prior to the check being sent to you. If you withhold any other percentage, that amount will be withheld before the check is sent to you. Whenever you file your taxes, you will recognize the IRA cash out as ordinary income for 2016 (or whichever year you took the money out in), and you will owe the tax when you file your taxes. (If you withheld 10%, but owe more than that, you will pay the difference at this time. If you owe less than 10%, you will get that back in a refund, since you over-withheld.)
As a side note, IRA beneficiary rules differ depending on whether or not you are a spousal beneficiary. Electing to take a lump sum from the IRA may or may not be in your best interest, depending on several factors. Here is a good resource on the subject from Charles Schwab. (There are plenty of other resources like this, a simple google search will yield solid results.) https://www.schwab.com/cms/P-1625576