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  • Another first year attending financial plan

    Stage of Life: New attending (oncology), first year in practice

    Social Situation: Married, spouse in residency for surgical sub-specialty (2 years remaining), one child (< 1 yo) and another on the way!

    Annual Income: ~$400K

    Net Worth: - $120K

    Tax Bracket: 38% (32% Federal, 6% state)

    State of residence: Louisiana

    Insurance Policies:
    15 year term life $1M each, 2nd laddered policy 20 year term life $1M each
    Me: ~60% group disability policy plus $7500 supplemental term policy thru Mass Mutual (total disability, extended partial disability, future insurability, own occupation, CoL riders)
    Her: $5000 supplemental term disability policy thru Mass Mutual (t
    otal disability, extended partial disability, future insurability, own occupation, CoL riders) during residency; will increase once she's an attending
    High deductible health plan (for HSA eligibility)
    Adequate auto and home insurance
    No umbrella policy
    Malpractice policies through our hospital-based employers

    Debts:
    • Home mortgage: $112K at 5.6%
    • My student loans: Private 250K at 2.3% variable rate
    • Her student loans: Private $120K at 6.5% (current plans to re-finance this year)
    • No car payments (own a 2006 Volvo and 2006 Toyota Corolla, both paid)
    • No credit card debt (statement paid in full each month)
    • Total debt: ~$500K (including mortgage)
    Assets:
    • House: Zillow value $250K
    • My 401(k): $35K (planning to max for 2020 with 2% match thru employer)
    • Her 401(a) $30K (planning to max for 2020)
    • My ROTH IRA: $6K, Her ROTH IRA: $6K (both funded thru traditional IRA backdoor, started in 2019), planning to max for 2020
    • HSA - $5000, planning to max for 2020
    • Son's Vanguard (Louisiana 90:10 stock bond mix) 529: $3500 ($50 monthly)
    • Taxable: $0
    • Emergency Fund: 4 month's expenses ($20K)

    Portfolio Size: $82K
    • My 401(k) 43%
      • Vanguard Target date retirement 2040 index fund (50% Total US stocks, 33% Total International stocks, 12% Total Bonds, 5% Total international bonds)
    • Her 401(a): 37%
      • Vanguard Target date retirement 2040 index fund (50% Total US stocks, 33% Total International stocks, 12% Total Bonds, 5% Total international bonds)
    • Both ROTH IRAs: 15%
      • Vanguard Target date retirement 2045 index fund (55% Total US stocks, 36% Total International stocks, 7% Total Bonds, 3% Total international bonds)
    • HSA (BoA): 5%
      • Vanguard Target date retirement 2045 index fund (55% Total US stocks, 36% Total International stocks, 7% Total Bonds, 3% Total international bonds)

    Questions:

    1) At this point, we're paying ~$3K monthly with our loans, with plans to fully pay them off by 2024 (5 years out for me, two for wife) as we should be making 7 figures in salary, hopefully. What are your thoughts regarding this method? We plan to use this extra money to instead save for a house downpayment and open taxable accounts (see below).

    2) What are the groups' thoughts regarding the use of overall similar Target date funds throughout our accounts? I plan to open taxable index fund accounts thru Vanguard (AA - 50% US stocks, 30% International stocks, 10% bonds, and 10% REITs) this year but am hesitant to modify our tax-sheltered accounts (at least prior to my wife finishing residency)

    3) Anything I'm missing that I should be doing differently?

    Thanks for your help and insight! I'm very new at this and looking forward to your responses.

  • #2
    1.) I think paying off student loans as fast as possible is a great idea. I've yet to ever hear of anyone (in person or on the internets) that has regretted it.

    2.) What are your ultimate goals for investing and saving? Are you a 'set it and forget it' couple or do you eventually want more control? You could certainly have some more efficiency with regards to putting different investments in different accounts but your current plan is better than most and will easily get you to your financial goals.

    3.) Buy umbrella insurance.

    Comment


    • #3
      Originally posted by CordMcNally View Post
      1.) I think paying off student loans as fast as possible is a great idea. I've yet to ever hear of anyone (in person or on the internets) that has regretted it.
      Thanks! We're thankful to be in this boat and plan to accelerate our loan payments once my wife finishes training.

      2.) What are your ultimate goals for investing and saving? Are you a 'set it and forget it' couple or do you eventually want more control? You could certainly have some more efficiency with regards to putting different investments in different accounts but your current plan is better than most and will easily get you to your financial goals.
      At this time, I consider myself a set it and forget it guy as I'm really just trying to set up a good financial foundation for myself and family (20% of effort to get 80% of results). I do have an interest in learning more about asset allocation and achieving better control of my accounts in the next year or two and may eventually switch to a more independent model of investing.

      3.) Buy umbrella insurance.
      This is something that's weighed on my mind, as we would need to significant increase our auto insurance. I'll bite the bullet and do this as the benefits of having an umbrella plan surely outweigh the costs of increasing auto policies if something were to happen in our home. I appreciate your feedback!

      Comment


      • #4
        Couple little points......

        Mortgage at 5.6% is kind of crazy right now with rates the way they are. I hope that was a typo but if not refinance it.

        When you start using taxable accounts you should pay attention to where you put the various components of your asset allocation. There is no need to have the same allocation in each account. Look into putting tax inefficient items (reits and bonds) into Roth or 401k/403b

        Comment


        • #5
          ^^ that looks good to me. I think set it and forget it is a good model. You can always tinker as you have more time/interest - and if not, that's OK!

          Comment


          • #6
            Double check your DI coverage.
            The combo of group DI and Mass Mutual. $7500.
            Depends on the group term ( own occ and offsets) and amounts. Additionally, any portability with a spouse still training. Do this with a good agent. Yours is complicated. Eventually the spouse’s earnings decrease your own needs, but you aren’t there. The intent is to really plan your combined DI plan (now, while she is training, and after she is working). If you were to become DI next month, do you have the desired coverage?
            Umbrella insurance, you need some.

            Comment


            • #7
              Good advice about DI coverage as this will protect your most valuable assets over the next decade when you are high income, low(er) net worth. I would consider getting more aggressive with your investments or paying off student loans. Bond returns are very low right now and more likely you are going to get better return from stocks or paying off your private loans. You can shift to a more conservative AA, heavier on the bond side of things, down the line. Truthfully, you are going to be very wealthy soon with that projected income.

              Comment


              • #8
                Originally posted by noggin82 View Post
                This is something that's weighed on my mind, as we would need to significant increase our auto insurance. I'll bite the bullet and do this as the benefits of having an umbrella plan surely outweigh the costs of increasing auto policies if something were to happen in our home. I appreciate your feedback!
                Your auto insurance limits are likely too low then. There's very few things you'll do on a regular basis with such a high liability like driving. Make sure you're properly insured. The key to financial independence isn't just about building wealth, it's also about keeping your wealth and proper insurance is one way to do that.

                Comment


                • #9
                  Originally posted by goldenchimpy View Post
                  Couple little points......

                  Mortgage at 5.6% is kind of crazy right now with rates the way they are. I hope that was a typo but if not refinance it.

                  When you start using taxable accounts you should pay attention to where you put the various components of your asset allocation. There is no need to have the same allocation in each account. Look into putting tax inefficient items (reits and bonds) into Roth or 401k/403b
                  Thanks! That's not a typo with the mortgage. I'll get on re-financing this year.

                  Appreciate the input regarding asset allocation as well, this is why I'm glad to have shared my plan with the group Thanks again.

                  Comment


                  • #10
                    Originally posted by Tim View Post
                    Double check your DI coverage.
                    The combo of group DI and Mass Mutual. $7500.
                    Depends on the group term ( own occ and offsets) and amounts. Additionally, any portability with a spouse still training. Do this with a good agent. Yours is complicated. Eventually the spouse’s earnings decrease your own needs, but you aren’t there. The intent is to really plan your combined DI plan (now, while she is training, and after she is working). If you were to become DI next month, do you have the desired coverage?
                    Umbrella insurance, you need some.
                    I should have been more specific with my group insurance, it amounts to ~$10,000 post tax with own occupation. With the supplemental ($7500) combined with that, it's slightly above my monthly take home salary.

                    I agree with how quickly our insurance situation will change once my wife starts working, and honestly very thankful. That's why I laddered and overall limited our life insurance policies too.

                    Comment


                    • #11
                      Originally posted by oysterblues View Post
                      Good advice about DI coverage as this will protect your most valuable assets over the next decade when you are high income, low(er) net worth. I would consider getting more aggressive with your investments or paying off student loans. Bond returns are very low right now and more likely you are going to get better return from stocks or paying off your private loans. You can shift to a more conservative AA, heavier on the bond side of things, down the line. Truthfully, you are going to be very wealthy soon with that projected income.
                      Thanks for your input!

                      I was thinking at staying with 90:10 allocation in the majority of our target date funds for this very reason, likely for the next 2-3 years. I'll likely stay with 80:20 AA once I start investing in taxable accounts as well.

                      Comment


                      • #12
                        Originally posted by CordMcNally View Post

                        Your auto insurance limits are likely too low then. There's very few things you'll do on a regular basis with such a high liability like driving. Make sure you're properly insured. The key to financial independence isn't just about building wealth, it's also about keeping your wealth and proper insurance is one way to do that.
                        Along with the mortgage, I feel this is a big issue we need to take care of. We drive beaters but need to increase our policies for self-protection (and also eligibility for umbrella). Thanks!

                        Comment


                        • #13
                          Are you going to stay in your home? If planning on moving (and selling) relatively soon, calculate your break even point before refinancing—may not be worth it. If you are going to be living in a 250k home with a 1 million+ income you will likely have more money than you know what to do with whether you refinance or not (although still a good idea to refinance if you’re planning to keep it).

                          Comment


                          • #14
                            Originally posted by Anne View Post
                            Are you going to stay in your home? If planning on moving (and selling) relatively soon, calculate your break even point before refinancing—may not be worth it. If you are going to be living in a 250k home with a 1 million+ income you will likely have more money than you know what to do with whether you refinance or not (although still a good idea to refinance if you’re planning to keep it).
                            Good point. My wife is going for fellowship for one year after completing residency in 2021 in a different city, so we will likely sell in a little over a year. Are there good web resources to make those calculations? This is of course another thing I need to read up on, ha.

                            Comment


                            • #15
                              Originally posted by noggin82 View Post

                              Good point. My wife is going for fellowship for one year after completing residency in 2021 in a different city, so we will likely sell in a little over a year. Are there good web resources to make those calculations? This is of course another thing I need to read up on, ha.
                              Travel light. As a two physician couple that twin engine jet is hasn’t quite reached cruising altitude.
                              One kid and one job. Another year, another kid, a fellowship in another city and another job are still on the runway. You may have a good flight plan, but some chance you end up with a different flight plan. Don’t refi if you are selling in a year.
                              Not really clear where you both plan to live and work. That makes your employer DI potentially temporary. Two comps, two jobs, one location, a lot of moving pieces coming into play.
                              I would goose the EFund, you may have some moves coming.

                              Comment

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