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How do I begin my journey to retirement?

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  • How do I begin my journey to retirement?

    I just finished reading the White Coat investor book and am now interested in getting down to the nitty-gritty details.

    I’d greatly appreciate any help. I am a complete newbie to investing and would like to know where to get started. I’ll give a little background info about myself.

    -28 year old dentist
    -Living/working in Southern California. Family and friends are here and I am a minority working in a clinic that caters to fellow minorities. I enjoy this area (although it is expensive).
    -No student debt
    -Married with no kids. Wife is a stay-at-home at the moment. I am supporting her financially.
    -I make about 150k/year pre-tax
    -I am an employee at a private clinic that offers no 401k and no benefits.
    -I have about 90k in savings. None is invested.
    -I own no assets. Renting a 1br apartment in a nice area for 1.7k/month (this is cheaper than I’d be paying if I had a mortgage in this city).
    -after taxes, I earn about 8k monthly, which around half (or slightly more) goes into savings. Other half goes to rent/groceries/car payment/fun, etc... (is this considered OK?)

    Now, as to the future and my goals, I am planning on becoming a practice owner soon (income will probably increase). I also am thinking about buying a house, but they are very expensive here. A 1 bedroom apartment can cost around 350k, which already breaks WCI 2x your income rule. On a 30 year mortgage, my monthly payment will still be a a couple of hundred bucks higher than what i’m currently paying for rent (1.7k). If I’m planning on staying in this area, I imagine it’s still worth it to go for the mortgage?

    I also just opened a vanguard account and am planning on putting money from my savings into index funds but not even sure how much or to which ones. Should I just put a big chunk into Vanguard?

    Am I saving an acceptable amount? My dream goal is to retire before i’m 50. I just need to strategize a plan for knowing where exactly to put my saved money into. Any recommended readings/books for the details on this? Any advice is much appreciated. Thank you..



    Last edited by Aapl; 03-08-2020, 12:31 AM.

  • #2
    Welcome.
    Think of journey in the present and build a plan.
    Gross - taxes - retirement savings (20%+) = spending
    Spending is what is left for building wealth, housing, consumption or that independent practice.
    To see how the interrelate, read this:
    https://www.physicianonfire.com/a-ta...-of-lifestyle/

    Develop your plan, Investment Policy Statement
    https://www.whitecoatinvestor.com/ho...nal-statement/

    Read the blog and prior Forum categories (search works for a lot of questions.
    Good luck on your journey.

    Comment


    • #3
      If you sign up for the White Coat Investor emails, I believe that you will get a 12 week introductory course in personal finance for docs. Also, you should consider reading both of the WCI books and probably a handful of other recommended books on personal finance and investing.

      As to the question of retiring at age 50, a lot will depend on if/when you have kids and how much your income will grow over the years (in addition to your saving rate). All will be impacted by where you live (cost of living) and how you live. In other words, if you stay in Southern California, have three kids, spouse stays home, income grows with inflation, etc., I do not see it being realistic to retire at age 50.

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      • #4
        Welcome to the forum. You have to make decisions. Aiming to retire at 50 requires a different mindset and savings plan than retiring at 60+. I would recommend reading Physician on Fire if you really want early retirement. For help getting started You need to start a solo-k and dump as much money as possible into it as you can as an employee. I might keep a 6 month emergency fund. You need to figure out expenses to figure out the amount. Do you have life and disability insurance? I think buying a practice is a great idea. All your goals will be easier to achieve if you move to a low cola area.

        Comment


        • #5
          No loans is a plus. The expensive area is a negative.

          If you find personal finance and investing interesting and have the time and patience I would go to the blog and read basically everything you can get your hands on.
          I would recommend bogleheads guide on investing and The millionaire next door. However being a high-income professional you'll get the most tailored advice here at the white coat investor site. But 90% of the materials all the same.

          If you have less time or less interest the white coat investor course can speed along your journey for a price.

          and if you want an even more hands-off approach you can look for a recommended advisor.

          most of us here that followed on the form are the do-it-yourself type and self learned and would be happy to help you along the way if you have specific questions. But a good base of knowledge goes a long way.

          If you are really interested in retiring early consider living a frugal life and it might be worth reading the mr. Money mustache blog. not all of his opinions and ideas are that great but he does offer some ways of thinking to help cut expenses and spend intentionally. And it is reasonably enjoyable to read. I found that the physician on fire offers a more moderate approach that is more palatable to most. So if you have not been over to his sight yet it is definitely worth checking out.

          Good luck!

          Comment


          • #6
            Originally posted by Hatton View Post
            Welcome to the forum. You have to make decisions. Aiming to retire at 50 requires a different mindset and savings plan than retiring at 60+. I would recommend reading Physician on Fire if you really want early retirement. For help getting started You need to start a solo-k and dump as much money as possible into it as you can as an employee. I might keep a 6 month emergency fund. You need to figure out expenses to figure out the amount. Do you have life and disability insurance? I think buying a practice is a great idea. All your goals will be easier to achieve if you move to a low cola area.
            A solo 401k isn’t an option right now since OP is not self employed. When he owns a practice it may make sense.

            OP, in addition to reading POF, if you want to retire early, read some Mr. Money Mustache material. Specifically “the shockingly simple math of early retirement.” Living in SoCal I suspect will add a decade or more to your working career. Whether that’s worth it is up to you.


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            • #7
              A solo 401(k) won’t be an option. Once the poster buys a practice, he’ll have employees, so no solo 401(k). A 401(k) for the practice still should be a good idea.

              Comment


              • #8
                Thanks for the replies everyone, I greatly appreciate it.

                Lets say that I have decided i’m going to live with the fact i’ll be living in a high cost of living area.

                Is it recommended that I still try owning an apartment/townhouse or such if i’m going to be staying here? If I get lucky, maybe I can resell the house in a few years (if market permits) to put a higher downpayment on a better place. Or maybe I can pay slightly more for a duplex (mortgage will be higher) but could have a tenant helping me pay half of it. If my monthly post-tax income is about 8k, a mortgage here may be about 2.5-3k/month.

                Or.... I can continue paying rent for 1.7k/month on my 1 br apartment.

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                • #9
                  With no kids, it isn’t at all clear why your spouse isn’t working. Seems like a sweet gig if you can get it, if not entirely fair to you...

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                  • #10
                    I'll answer a question you didn't ask, which is you should contribute to your 2019 Roth IRA and HSA (if available) before tax time. I think you are under the direct Roth contribution limit for MFJ but if not do a backdoor Roth.

                    I wouldn't bother with being a landlord at your stage of the game, unless your wife wants to be a real estate professional (google REPS if you want to learn more).

                    Buying usually comes out ahead if you plan to live in the same place for 5+ years, otherwise nothing wrong with renting.

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                    • #11
                      If I were you I would definitely purchase a practice before the house, and atleast practice for a year or so to see what kind of income you will be pulling at the practice.

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                      • #12
                        From someone also fairly new to this personal finance stuff, welcome. Couple of questions/points:

                        1) This isn't one of your questions but...Why is your wife not working? Is she in school? If this is going to be a longterm thing, I worry you're setting the marriage up for unrealistic expectations in the future with no contribution from her. Marriage is a joint commitment. You should be contributing in your way (making the $150k) and she should be contributing in hers (staying home to raise the kids and cut out daycare/nanny costs and provide presence for the kids, or running a part-time home business (Etsy craft store, writing, etc.)). Obviously you can't argue that her job is to stay home and maintain the house as I doubt your 1BR apartment needs more than a few hours of work per week maximum.

                        2) If you're an employee you cannot get a solo 401(k) for tax advantages, so I would recommend setting up a Roth IRA for both you and your spouse. You can directly contribute the full $6,000 until your max adjusted gross income is above $196k for married filing jointly, so you can as of right now just directly contribute and don't need the backdoor method. Do you have a high-deductible health insurance plan? If so, look into setting up an HSA as well.

                        3) I'd recommend getting the new job and holding it for 1-2 years before buying a house, so you ensure stability and know what kind of money you are actually pulling at the practice. Plus this may make a solo 401(k) available to you so you may hold another year on buying a house so you can max that out.

                        4) I just took over my own investments recently. Almost everyone on WCI and almost everyone in the blogs/books he recommends will just say "put the money in index funds." I'm at Vanguard too, so I just threw most of it into VTSAX (I also have VTIAX, some bonds, and a few k in REITs for shits and giggles), but that's my main one. Most would recommend 80/20 or 70/30 stocks/bonds for you. Simple Path to Wealth (JL Collins) would recommend 100% VTSAX for you. Read Boglehead's asset allocation posts (especially the "two-fund portfolio" and "three-fund portfolio") to determine how much you want in bonds, if you want some in an international index fund as well (e.g. VTIAX), etc.
                        Doing dumb things with my money since (at least) 2011.

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