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  • New attending, Loans/budget/retirement advice

    First time posting, looking for some general loan/budget/investing advice
    Me: 34 yo Married LCOL, Expecting 1st child next month (Took 4 years off between undergrad/medical school with no significant income/savings)
    Started out as an attending 9/18
    Combined Salary: 380K (Wife 90k)

    After residency my wife and I decided that our goal was to 1) payoff loans ASAP 2) contribute enough to get the match from each of our companies. Outside of that we didn't have much of a plan. I've read the WCI book and have been following some blogs/recommendations. Now I'm thinking we might need to change our strategy a bit which is making my wife nervous. Here is where we are:

    Debt
    Mortgage: 338K
    Car: 21K, other is paid
    Student loan debt: Currently 177K (my loans started at 320K and paid 155K, wife loans 22k that we paid off)
    No credit card debt

    Savings
    Savings account 36 K
    Checking 3K

    Retirement
    Wife retirement - salary 90k
    5% personal pretax contribution, company 2:1 match contribution 10% = 15%
    Current totals
    401a – 26k
    403b – 55k


    My retirement - salary 290k
    6% pretax contribution (increased it last month to get to the 19k max), company match 1.5%, core contribution 3% = 10.5%
    Current total
    403b – 43K

    Roth IRA (started in residency)
    11K

    Annual 3,550 contribution
    HSA – 2k

    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

    1) Currently paying 10k monthly toward student loans, going down this current rate estimate will have paid off in 19 months.

    60k at 6.55%
    42k at 5.96%
    75k at 5.16%

    - Was thinking about refinancing with earnest, 3.45% 5 year. The numbers make sense to refinance, I roughly figure it would save 5k, would you recommend it at this point?

    2) I want to increase my retirement contribution to max an optional 457b. I roughly figure this would be an additional 1500 pretax per month which would be about 1000 net less to put toward our 10k per month loan payment. So then I figure 9 k toward loans per month would get us at 20-21 months. Does that math seem correct? Would you recommend it?

    3) With a baby on the way, when to start the 529 plan? 10k deductible state


    Any general recommendations much appreciated!

  • #2
    I would definitely refinance at those listed rates. No reason not to, and you’ll save money in the process. It won’t be a ton, but would make the time spent doing it worthwhile.

    Do you have a governmental or non-governmental 457? I couldn’t tell from your post (or didn’t read closely enough). If it’s governmental then I would definitely contribute up to the max for that yearly. If it’s non-governmental then you’ll have to do some pondering on whether it’s worth the risk. Personally I contribute to a non-governmental 457 and have done so for almost 5 years now. I would max this by slowing down the repayment of loans to accommodate for this. With how much you’re already putting into loan repayment it won’t make much difference in your timeline, and you’ll have more time with money in your retirement accounts.

    Backdoor Roth IRA annually for both you and your wife should definitely be a priority.

    If you can afford the $10k for the 529 I would definitely do it. The tax free growth starting early will be huge. We couldn’t afford to start that early for all of our kids since I was still in residency when the youngest was born. We missed out on a lot of growth. You may be able to contribute for 8-10 years and then not anymore.

    Comment


    • #3
      •Definitely refinance, sooner the better. Use the links and you will get cash back.
      • gross-taxes-retirement savings=spending
      (Personal+Match)/(gross+match)= 20% goal
      Without your paystubs, can’t calculate. Don’t short retirement for student loans.
      Use every option available(Backdoor Roths included) and then use a taxable account if needed.
      • 457 plans have two issues
      -government or private (risk)
      -portability (might be forced to IRA)
      Rollovers. You can roll over funds in your governmental 457(b) plan to a traditional IRA, 401(k), 403(b), or another 457 governmental plan. The rules for 457(b) plans at a private tax-exempt organization are much more restrictive. Your funds in such a plan can only be rolled over into another non-governmental 457 plan.

      The only fundamental change from your initial plan is the retirement savings goal. Rather that company match, the goal is 20%.
      You are already watching the spending. With the tax benefits and compound growth of those retirement funds, better off even if you have refinanced the student loans.
      • The 529 is squishy. Recency bias and time in the market say do it. I don’t know if the next two year will be positive. I do know those loans are certain. Both those are spending decisions. I would payoff the loans. Personal choice.
      • The loans were a necessary evil and will take time, but are a priority below the retirement savings.
      •You are on the right track. Your retirement will be on track if you target 20% +. That target will serve you well.

      Congrats on the new addition.

      Comment


      • #4
        I like your original plan, but I’m pretty debt averse. I also like simple plans.

        I’d refinance the loans if that makes mathematical sense. Then I would continue to slay those bastards aggressively. You made great progress with this already.

        I would maximize tax sheltered retirement savings for now. Then after 19 months I would start saving $10K per month into a Vanguard account. At that point, then I’d start to think about where else to shovel all the money into. And I’d kill that car loan, and maybe pay a little extra on the mortgage as a hedge. And increase the emergency fund a bit perhaps.

        After a bunch more years I would dig a swimming pool in the back yard, and fill it with gold coins, and splash around in there every day or two.

        But that’s just like, my opinion, man.

        Also, make sure you have good insurance for the wife and kid.



        Comment


        • #5
          You seem to be doing great. I concur with the others about refinancing the loan. I would prioritize retirement savings (both tax deferred and later a taxable account) over mortgage payoff and educational funding. You will be amazed at the growth later in your life.

          Comment


          • #6
            Originally posted by Cisco12 View Post
            Combined Salary: 380K (Wife 90k)

            Debt
            Mortgage: 338K
            Car: 21K, other is paid
            Student loan debt: Currently 177K (my loans started at 320K and paid 155K, wife loans 22k that we paid off)
            No credit card debt
            great start.

            Originally posted by Cisco12 View Post
            60k at 6.55%
            42k at 5.96%
            75k at 5.16%

            - Was thinking about refinancing with earnest, 3.45% 5 year. The numbers make sense to refinance, I roughly figure it would save 5k, would you recommend it at this point?
            you should have refinanced a year ago. whats taking so long? move it.


            Originally posted by Cisco12 View Post
            2) I want to increase my retirement contribution to max an optional 457b. I roughly figure this would be an additional 1500 pretax per month which would be about 1000 net less to put toward our 10k per month loan payment. So then I figure 9 k toward loans per month would get us at 20-21 months. Does that math seem correct? Would you recommend it?
            goal is 20% gross to retirement. thats ~76K for you.
            19K wife
            19K you
            12K bdrIRA
            457- depnds on what kind and what distribution options.
            so either 19K 457 and 7K taxable. or some combo of that


            Originally posted by Cisco12 View Post
            3) With a baby on the way, when to start the 529 plan? 10k deductible state
            - after you save 20% for retirement.

            Comment

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