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Advice for two new physicians

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  • #16
    Originally posted by White.Beard.Doc View Post
    To summarize, you have around 300k in assets and 900k in debt. Your assets are divided between retirement accounts and taxable accounts, with around 243k liquid, and 80% safely in FDIC insured bank accounts.

    In theory, putting more into taxable investments and less into cash could potentially yield higher growth in the long run, but that decision comes with greater risk. My personal feeling is that in these times of covid things are more unstable economically than more normal times, so in your shoes I would lean conservative and continue to hold a significant cash position as you are currently doing.

    As far as the biggest current risks:
    Income: What areas of medicine do you practice? Is there any unemployment risk for either of you? Many hospitals and groups are anticipating more layoffs in the near future. Are you at risk?

    Markets: The market has been propped up by massive government stimulus in the form of extremely low interest rates and massive financial spending. This stimulus money has to dry up at some point. The next few years are very likely to be highly volatile. While no one knows the direction of the market over the next few years, that direction is just as likely to be down as up.

    In your shoes I would not invest in the market in a major way. I would:

    1. Continue to maintain a significant cash position
    2. Spend perhaps 50k from your current cash position,half to early loan pay down, and half to VTSAX, maybe even a monthly amount that is on autopilot.
    3. Balance in all things is good, by paying down loans a bit, that is a guaranteed return. By investing regularly in taxable, you establish good investment habits, and a higher potential investment return. By conserving a good chunk of cash, you are prepared for the worst if one of you gets laid off, you can continue to pay the mortgage.

    Others may be less conservative than me, but that is how I see it.
    Hey thanks for the advice, have followed your post for awhile and has helped to get in a decent position thus far!

    Zillow value at 570K so a little better than your first sentence which made me barf a little when seeing the numbers on paper.
    We both feel secure in our jobs at this current time, she is FP and I am surgical specialty. Our system has been fortunate and no recent lay offs thus far but obviously its always the unknown which is a risk.

    I posted this also to someone else's reply as well but is there ever to much of an investment in taxable like VTSAX or other ETF/MF?

    Thanks again for your advice!

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    • #17
      Originally posted by Baseball Fan View Post
      Hey everyone, thank you in advance. I have been reading your comments and thoughts since graduating fellowship last year and this is my first post. Hopefully I have been doing this right thus far.

      Wife and I new physicians (34 and 33 yo) in Florida, 1 year into our first hospital employed job. No children but plan for the near future. We live in a MCOL and just bought our first home after making sure this is the job/area we hope to stay at for next few years. Cars were bought in cash and we do not carry credit card debt ever.

      Annual income: $650K base with potential for bonus. Realistically should be earning around $700K including bonus until wifes salary decreases in 2 years.

      Debt:
      Student loans refinanced after fellowship last year. They are on autopay with goal to both be payed off in 5 years. We pay ~8500K each month into this.
      • $73,600 @ 3.47 fixed
      • $318K @ 3.239 fixed
      Mortgage
      • $477K @ 3.125 set for 15 years
      Savings/Investing:
      • 401K from employer 31K for me, 19K with 6% match for each of us (VTRLX)
      • Wife has 3K from 403b during residency in another account
      • I have a Roth IRA: 28K which I was funding during residency
      • VTSAX 50K
      • Emergency savings: 60K in HYSA with Ally (if 1% is considered HY)
      • Checking/Savings: 133K
      Insurance:
      • I have own occupation DI privately and short term provided by employer. She only has what is offered through employer
      • Malpractice through employer
      • Auto and home
      Goals:
      Eventually would like the option to scale back to part time. Her prob in 5-10 years, myself realistically 20 years. At this time we do not want to be very active in trading and would like to be on a more set it and forget it plan as we are still learning how to invest. We are conservative spenders but do enjoy vacationing and going to nice dinners once in awhile. We are hoping to have children and would like to set them up with an educational fund. We will both likely need new cars in the next 3-4 years.


      Questions:
      1. Are we doing this right at all? I feel we have excess in low yield checking/savings but not sure what to do whether dump all into loans vs more in taxable accounts? Our loan rates are decent, but it seems would be doing better by investing with a higher return in ETF’s.
      2. HSA is not available to us, any value starting a 529 or wait till kids are around?
      3. Any recommendations for her 403b account? We both need to do backdoor Roth for this year should we fund through that?
      4. Insurance wise I know we need to make some moves. We just started looking at term life which seems easy enough at this time. We are considering a 2-3 million for me and 1 million for wife, likely for 20 year coverage. Do we need umbrella coverage? If so what should I be looking for in a policy?
      5. Should we look for diversification outlet via real estate at this time or wait till loans are payed off completely?
      6. Any other advice or criticism is appreciated!

      Why will your spouses income drop the longer she is employed?...

      Comment


      • #18
        OP- No. After filling up tax-advantaged space, the rest goes in taxable. The only time too much is going to taxable is if you ignored filling up your roth or tax advantaged space first

        Comment


        • #19
          Originally posted by billy View Post
          OP- No. After filling up tax-advantaged space, the rest goes in taxable. The only time too much is going to taxable is if you ignored filling up your roth or tax advantaged space first
          Thanks

          Comment


          • #20
            Welcome! You're in a good spot already. No right answers, just depends on your desire to kill off debt or build up retirement with excess funds.

            #1: Debt
            Bad debt - none -- great job!
            Good debt - good mortgage; decent rates on student loans -- larger one maybe able to refi into lower within the next 6-12 months -- so keep an eye out on that.

            #2: Insurance - Term
            Yes, need term now with least the person with the 318k debt to cover. Would do 30 years for that person now since no kids yet. For the other, can either wait and then 20year with kids or 30 year now. You essentially want to really cover the need until they are out of dependency and coverage while the other spouse works.

            #3: Emergency Fund
            3months typical expense; you may want to extend to 6m, but you both appear to be W2 hospital so 3m ; perhaps a 3m bond buffer.

            #4: 529
            I don't think you can unless you have a generation neice/nephew to ID, then transfer once kids.

            #5: Savings:
            A: At least 20% of earnings off the top - to retirement. Adjust your expenses if you cannot reach this.
            B: Optimize all tax-advantaged space possible with that 20% I would argue for Roth regardless as future taxes will be higher IMHO
            C: Kill off the small student debt as first line just to simplify management
            D: After all that; determine how aggressive savings vs paying down that larger student loan earlier. I you manage a refi to lower rates, consider plowing everything into retirement funds as compounding over 20 years will outpace the debt payoff

            #6: Live like a resident
            -Watch out for lifestyle creep
            -Keep those expenses down until you flip get to broke


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            • #21
              OP in answer to your question, you cannot have too much in a taxable account. For high earners expect to accumulate most of your money in a taxable account. My taxable account is 3X the size of my tax protected accounts.

              Comment


              • #22
                Originally posted by Hatton View Post
                OP in answer to your question, you cannot have too much in a taxable account. For high earners expect to accumulate most of your money in a taxable account. My taxable account is 3X the size of my tax protected accounts.
                Many talk about burnout and work/life balance. Highly personal decisions. I tried to find a translation. Wealth/Life balance is the closest. You can have too much in taxable if you sacrifice aspects of your life. Some people wish they would have had different priorities. YOLO. Choose wisely.

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