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  • First year attending plan

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

    Social Situation: Married, spouse PRN Physical therapist, one child (1.5yr) and another on the way!

    Annual Income: ~$475k

    Net worth: - $320k

    Tax Bracket: 43% (35% Federal, 8% state)

    State of residence: Iowa

    Insurance Policies:
    Employee 450k life insurance + 1ml Whole Life Ohio National(funded thru relatives)
    Me: ~60% employee disability policy plus $16600 supplemental term policy thru Principal (total disability, extended partial disability, catastrophic, own occupation, CoL riders)
    High deductible health plan (HSA through employer)
    Adequate auto and home insurance
    Malpractice w/ tail coverage policies through employer
    No umbrella policy

    Debts:
    · Home mortgage: $184k @ 3.75%
    · My student loans: Federal 420K at 6.8%
    · Her student loans: Private 20k at 0% (via parents)
    · 16k Car loan (2018 Ford Explorer; own our 2nd car 2013 Ford F150)
    · No credit card debt (statement paid in full each month)
    · Total debt: ~$640K (including mortgage)

    Assets:
    · House: Accepted offer to sell $238k, closing in next few weeks
    · My ROTH IRA: $32K
    · Her ROTH IRA: $17K (rolled over her 401k in 2019)
    · 1st Child – 529 Target Date fund: $2500 ($500/mo contribution)
    · Taxable: 14K
    · Cash/Emergency Fund: 4 month's expenses ($35K)

    Portfolio Size: $65k
    · My 401(k) – my current elections below
    · Vanguard Institutional Index Fund 60%, Expense Ratio 0.02%
    · Vanguard Total International Stock Index Fund 30%, Expense Ratio 0.08%
    · Vanguard Total Bond Market Index Fund 10%, Expense Ratio 0.03%
    · My Roth
    · American 2055 Target Date A Fund (59% US stock, 27% International stock, 7% US bond, 5% cash)
    · Her Roth
    · American 2055 Target Date A Fund
    · Taxable
    · American Cap World Grw & Inc A 30%,American Growth Fd of Amer A 50%, American New World A 20%
    · 529
    · My529 Age based Fund( Vanguard Total stock market 66%, Vanguard Developed market index 25%, Vanguard Emerging markets stock index 9%)

    Questions:

    1) To pay off my student loans in 5 years it would be $7700/month and my wives in 3 years it would be $500/month. What are your thoughts regarding this method?

    2) My 401k investment options were limited about 30 funds available, should I simply and just do 1 or 2 funds in my 401k?

    3)I believe my new employer qualifies for PSLF. I have 40 payments already counted during residency so 1/3 way there. If they don’t quality, I feel refinance is likely smartest option but with talk of student loan forgiveness in the news it gives me pause to do so.

    4) Currently we are renting a home and are unable to extend the lease past March 2021 thus we plan to buy a home in next 3-6 months. We are expecting $35K from our house sale. What should I put that money towards? Down payment or pay off debts?

    5) Our Retirement plan includes max out 401k, my Backdoor Roth and Spousal backdoor roth, Taxable 32k/year. That’s 63k/yr into retirement which is a savings rate of 16%. Are there other retirement accounts I should look into?

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

    Thanks for your help and insight! Looking forward to your responses.

  • #2
    There's a lot here and I'm sure others will chime in.

    1) Clarify what you mean that you have a Whole Life policy funded via relatives? You most likely need to get rid of that. If your relatives are paying all of the premiums for you, ask them to stop and give you the money instead. You need more term insurance.

    2) Your wife has student loans from her parents who are charging 0% interest? That's not legal...I think they must charge reasonable interest

    3) Keep renting...you are in Iowa....I'm sure there are other places to rent after March 2021. If you are renting what do you mean you expect $35k from your house sale? Did you have this from residency? Rent rent rent. You can rent a house...just don't buy a house.

    4) You really need to get clarity on whether your employer is PSLF-eligible.

    5) you have a ton of debt that you need to get rid of before you move on and buy a house. And stop funding college for your kids for now. Pay off those cars and probably those student loans (I suspect you aren't PSLF-eligible but confirm with your employer)

    6) your 401k looks good. Your roth and her roth though....need work. No bonds or cash in a Roth Account. decide what your asset allocation is and do that for all your retirement accounts. If you want bonds, do all the bonds in your 401k. Your Roth should be more aggressive/risky and contain only equities. For you probably should just go Vanguard total stock market index fund and vanguard total international stock market index fund.

    7) Where do you have these roth accounts? and your taxable account? your taxable account also likely isn't ideal. I suspect those funds have pretty high expense ratios and are tax-inefficient. You should go Vanguard total stock market index fund and vanguard total international stock market index fund.

    8) Does your wife work?

    9) You should save 20% for retirement today (including any match) and all the rest should go to paying off those loans...car loan first and then the student loans. Likely don't contribute anymore to taxable for now.

    Now to answer your specific questions:
    1) sounds like a plan. be even more aggresive if you can.
    2) the funds you picked in there are great. don't change.
    3) you really need to figure that out ASAP. Your interest rate is high and rates today are low so yes refinance and pay off ASAP. Student loan forgiveness isn't going to happen for you for a variety of reasons. let's not get into it here...just plan for today and pay them off. You have quite a burden/financial anchor there.
    4) don't buy a home. put the $35k you expect to get towards your car loans. tsk tsk..never do a car loan again for the rest of your life. Any remainder should go towards your student loans, assuming you don't do PSLF
    5) actually from this it sounds like your wife doesn't work. So she took out an education loan to not work? great....look into a 457 plan or a mega backdoor Roth IRA option. google around.
    6) do a lot differently. I think you have a ton of reading to do on this site but the good news is you found this site early in your career and in the end if you follow the paths set out on this site, you're going to be just fine. Since you're an anesthesiologist, you may identify with PoF: https://www.physicianonfire.com/

    Since you are just starting, this post could really resonate with you: https://www.physicianonfire.com/a-ta...-of-lifestyle/
    Last edited by JBME; 07-16-2020, 05:22 PM.

    Comment


    • #3
      I agree with most of what JBME said though not sure how a $20k loan is illegal. My understanding is the federal limit of family loans is just north of $100k before the lender must charge interest but he probably knows something I don't.

      Here's my two cents.
      • Commit to paying off loans in 5 years. Trust me, you will find other ways to spend that money if you don't. Our NW / income was quite similar to yours. Two years later it's +$250k. A situation in which prudent financial decisions is more rewarding than spending.
      • Bump your retirement savings rate up 20%
      • Use that $35k to pay off the car loan
      • Take the remainder of the profits from your home sale and use that as the start of your home downpayment fund. Rent until you have ballpark 20% downpayment.
      It's unclear to me if you're moving or staying at your training institution but use us as an example. My spouse stayed for residency, fellowship, and the job. 2 years later we are still living in a LOVELY rental and it is STILL the best choice we could have made. Pandemic aside, relationships and departmental dynamics change after graduation. For us right at the 1 year mark there was some major upheaval in the department and our biggest asset was not being tied to the area. This can't be done forever but worked in our favor. Likewise, the homes we're considering now are complete unlike the ones we considered towards the end of fellowship. No starter home for us, the hope is this purchase will be for long term habitation. It takes time to settle into the new income. Your expenses will increase and then stabilize. You'll start experiencing the joys of being on the right side of compound interest. Fill in your shoes financially first then your entire perspective on what kind of home you want to purchase will change.

      Comment


      • #4
        How much of your 475 income is from your spouse?

        Comment


        • #5
          Read the WCI books and take the Fire your financial advisor course

          Comment


          • #6
            First off, you were able to put together all of your information into one place so you're on the right path.

            Tomorrow: get a plan for your loans to be gone in 5 years. They aren't getting forgiven unless you're eligible for PSLF. Figure that out by close of business tomorrow. If you refinance to 3% then that's $7500/month for 5 years.

            The next day: start saving 20% (that's $95k/year) for retirement. 19.5k for 401k, 12k to his and her backdoor roth, 7k to HSA, 56.5k to taxable. Do you have access to a 457?

            Within the next year: I wouldn't wait too long to pay back your wife's $20,000 loan from her parents - ideally she would pay them back with her income? Interest free loan isn't illegal but interest not charged is considered gift is my understanding.

            After you do all of the above and pay total taxes of $169,000 you will be left with (drum roll): $101,000 to spend on whatever you want in the next year + proceeds from your house sale. You get to live off of that and save for house downpayment and go on trips and grocery store and buy clothes and pay rent. Prioritize however you want. Actually, I'd probably use $16k to get rid of that car loan within the next year. OK, so actually you have $85k to spend in next year. You're rich!

            Comment


            • #7
              “4) Currently we are renting a home and are unable to extend the lease past March 2021 thus we plan to buy a home in next 3-6 months.”
              Change your thinking from want to need. The above doesn’t qualify as a “need” . Resist the temptation to inflate your housing costs because your income means you can “afford it”, that is a “want” that will lead to a lower savings rate.
              Another point, hold off buying a house until 2 years in any new job. At least until a second contract is in hand. This is simply an indication of increasing spending because you can afford it.

              Gross -taxes-20% retirement = spending.
              Spending is consumption, debt payment, savings.
              The priority is the debt.
              SL < 1 probably means refi and pay it off as fast as reasonable. $420k “needs” to be paid, buying a house is a “want” that can wait.
              Kill the car loan, the parent loan., the whole life and retirement savings rate.

              Comment


              • #8
                Originally posted by SD Nitrous View Post
                Stage of Life: New attending (Anesthesiology), first year in practice
                -- welcome and ty for the format.
                Social Situation: Married, spouse PRN Physical therapist, one child (1.5yr) and another on the way!

                Annual Income: ~$475k

                Net worth: - $320k

                Tax Bracket: 43% (35% Federal, 8% state)

                State of residence: Iowa

                Insurance Policies:
                Employee 450k life insurance + 1ml Whole Life Ohio National(funded thru relatives)
                -- depending on actual data, they might be better off gifting you the payments instead of lighting part of it on fire...
                Me: ~60% employee disability policy plus $16600 supplemental term policy thru Principal (total disability, extended partial disability, catastrophic, own occupation, CoL riders)
                High deductible health plan (HSA through employer)
                Adequate auto and home insurance
                Malpractice w/ tail coverage policies through employer
                No umbrella policy
                -- add one on. 1MM is <200/year. no brainer.

                Debts:
                · Home mortgage: $184k @ 3.75%
                · My student loans: Federal 420K at 6.8%
                - PSLF? otherwise refinance once they are no longer 0%.
                · Her student loans: Private 20k at 0% (via parents)
                · 16k Car loan (2018 Ford Explorer; own our 2nd car 2013 Ford F150)
                -- bad habit. stop it.
                · No credit card debt (statement paid in full each month)
                · Total debt: ~$640K (including mortgage)

                Assets:
                · House: Accepted offer to sell $238k, closing in next few weeks
                · My ROTH IRA: $32K
                · Her ROTH IRA: $17K (rolled over her 401k in 2019)
                · 1st Child – 529 Target Date fund: $2500 ($500/mo contribution)
                · Taxable: 14K
                · Cash/Emergency Fund: 4 month's expenses ($35K)

                Portfolio Size: $65k
                · My 401(k) – my current elections below
                · Vanguard Institutional Index Fund 60%, Expense Ratio 0.02%
                · Vanguard Total International Stock Index Fund 30%, Expense Ratio 0.08%
                · Vanguard Total Bond Market Index Fund 10%, Expense Ratio 0.03%
                -- youve got it made if those are your options
                · My Roth
                · American 2055 Target Date A Fund (59% US stock, 27% International stock, 7% US bond, 5% cash)
                · Her Roth
                · American 2055 Target Date A Fund
                -- you were doing so well.....
                -- move these away from wherever they are and off to Vanguard, Fidelity, etcetcetc
                -- stop picking TDF in Roth (no FI), and increase your bond portion in your 401k to compensate.

                · Taxable
                · American Cap World Grw & Inc A 30%,American Growth Fd of Amer A 50%, American New World A 20%
                -- again, this is bad. hope you arnt paying the load.....
                -- stop adding money. sell if loss. move to anywhere else.


                · 529
                · My529 Age based Fund( Vanguard Total stock market 66%, Vanguard Developed market index 25%, Vanguard Emerging markets stock index 9%)

                Questions:

                1) To pay off my student loans in 5 years it would be $7700/month and my wives in 3 years it would be $500/month. What are your thoughts regarding this method?
                -- depends what you refinance them to. 5 yrs is a little long......but if you get < 1%, then make it 10.
                -- i would not drag out 20K to my inlaws for 3 years......

                2) My 401k investment options were limited about 30 funds available, should I simply and just do 1 or 2 funds in my 401k?
                -- you listed 3 of the best in the world.....so i dont know what you want......
                3)I believe my new employer qualifies for PSLF. I have 40 payments already counted during residency so 1/3 way there. If they don’t quality, I feel refinance is likely smartest option but with talk of student loan forgiveness in the news it gives me pause to do so.
                -- you think? you better ---- well know.
                -- you think someone making 1/2 mil/year is going to qualify for any pipe dream of forgiveness? ok....wouldnt be my plan.

                4) Currently we are renting a home and are unable to extend the lease past March 2021 thus we plan to buy a home in next 3-6 months. We are expecting $35K from our house sale. What should I put that money towards? Down payment or pay off debts?
                -- maybe. or neither.
                5) Our Retirement plan includes max out 401k, my Backdoor Roth and Spousal backdoor Roth, Taxable 32k/year. That’s 63k/yr into retirement which is a savings rate of 16%. Are there other retirement accounts I should look into?
                - 20% to retirement. thats 95K, so lets just call it 100K cause that sounds better.
                -- so 100-19.5-12= 68.5 to taxable.
                -- then you save for car/vacation/house/loans/etc

                6) Anything I'm missing that I should be doing differently?
                -- thats a big shovel.....make sure you know what its doing.
                Thanks for your help and insight! Looking forward to your responses.
                time to start saving.

                Comment


                • #9
                  Wow, thank you everybody for your responses and input. Going to clarify questions that JBME asked first.

                  1) Whole Life insurance started age 20, premiums paid by father.

                  3) Understand, currently we love our rental its unfortunate its no available longer. But have a lot of time to find a different rental. We are expecting $35K from the sale of our home from residency. We moved many states away from our residency and our residency home is under contract and a closing date is set. We just have not officially signed so that's why Im calling it expected or potential $35K.

                  4) & 5) I suspected I am not eligible for PSLF but found the Hospital listed as a 501(c)(3) online and this has caused me to hold on refinancing. However I have had difficulty clarifying with anybody at my job as no one even has even heard of PSLF and many have no clue if its a 501(c)(3). Only way I know how to confirm is to submit a PSLF employee certification form but I have to wait until after my start date to do so.

                  6) My asset allocation is US Stock 60%, US International 30%, and Bond 10% down on paper. I set my 401k this way as well, but I probably should increase my bond distribution in my 401k If I should put do all stocks in our Roths. I know I can adjust later but want to keep it simple starting out.

                  7) Edward Jones Account through Financial Advisor. Same advisor my family uses, was set up years ago. Unsure on the tax efficiency, the funds expense ratio are 0.78% + flat $40/yearly management fee.

                  8) She did first 5 years out of school. Past year has been stay at home mom. Starting a new job(part time) in September now that we moved back close to family to help with little one.

                  Comment


                  • #10
                    Peds Taxable
                    · American Cap World Grw & Inc A 30%,American Growth Fd of Amer A 50%, American New World A 20%
                    -- again, this is bad. hope you arnt paying the load.....
                    -- stop adding money. sell if loss. move to anywhere else.

                    I think I was advised poorly. I just learned that I did pay the front load its 5.75%. Expense ratio 0.78%. I wonder what the best way to transition out of the fund? Or just sell my funds and transfer the money to a different account. Should I expect fees with that option? I have not contributed to my Roth for this year, so If I sell this fund I guess I could take 12000 of it and put into my Roth and my wifes Roth for 2020 as I will need to start doing a back door Roth.

                    Comment


                    • #11
                      thanks for being open to our responses-you have no idea how many people come here and post their situation and our responses are a lot of "tough love" and people either fight back or just totally disappear. Another good sign that you'll be fine in the end is that you did neither of these!

                      Couple more suggestions:

                      1) Is the whole life also through edward jones? Either way listen to what everyone here said and tell your dad to stop doing that. Get rid of the policy altogether. If he ends up keeping the money he gets back just let him do that...it was otherwise just a gift to you. If he gives you the money then use it to get more term insurance. I'd suggest ladder some term insurance.

                      2) interesting that you bought in residency but you didn't buy right after finishing residency...most would have done that and then they'd have made 2 mistakes instead of 1. Good for only making one mistake thanks in advance for finding another rental instead of a house to buy, and put the proceeds from the house you are selling to pay down debt.

                      3) I'm not sure exactly how but there has got to be a resource somewhere on the web that can tell you if who you work for is a 501c. Your human resource office should know. But either way, if this was too big a hill for me to climb I'd just focus on paying off the entire debt within 5 years or less.

                      4) Yes, don't do all retirement accounts at 60/30/10. That's your overall allocation, and the placement matters. Here: https://www.bogleheads.org/wiki/Tax-...fund_placement

                      5) what you've done in taxable is most certainly the wrong thing. just sell everything and eat the fees and if it's a capital gain take the gain and pay the taxes. Long term this is the better move rather than just keeping it as-is. Your aim should be to only go for passive index funds where the expense ratio is .20 or lower. So .78 is almost 4x that. very expensive. get rid of your edward jones rep. move the money to fidelity or vanguard or schwab. sure take the money and put $12k into your roth and your wife's roth.

                      6) awesome that she's going back to work at least a bit. no one here is against stay-at-home moms. They are a godsend. but the rule generally should be that is okay if there's no personal student debt left. If she's going back to work PT find out if she'll be eligible for benefits, and especially retirement benefits. The SECURE Act that was signed at the beginning of the year fortunately made it such that PT workers usually canNOT be excluded from workplace retirement plans. So hopefully she can participate in the 401k/403b plan I presume they have. Hopefully she'll make at least $20k but better if it's $40k or $50k. Use her money to contribute $19.5k into her 401k this year and the rest of her money to pay off that family loan.

                      So now you'll be contributing $19.5k to your 401k and $19.5k to her 401k and $12k to your two Roths. That's $51k. again find out if you have any other tax-advantaged space like 457b or megabackdoor roth. Also find out if you and/or your spouse are getting matched money in your retirement plans because you can add that to the $51k, though be awareof the vesting rules.

                      you'll find some of us will differ on the topic of 20% to retirement. For your specific situation I would refinance loans to get the rate in the 2-3% range. I'd max out any tax-advantaged retirement accounts. But I wouldn't contribute to taxable and certainly not 529 right now. I'd throw all the rest you have at those student loans to get rid of them in less than 5 years. I'd do it this way because you lose the tax-advantaged space for the year once the year is done. you can always contribute to taxable at a later date.

                      Comment


                      • #12
                        https://apps.irs.gov/app/eos/

                        Google your employer's EIN, paste it here. Voila you know if it's a 501c3.

                        Comment


                        • #13
                          Originally posted by wa2106 View Post
                          https://apps.irs.gov/app/eos/

                          Google your employer's EIN, paste it here. Voila you know if it's a 501c3.
                          Thank you very much sending this.

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