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  • Need Help Getting Started with High Income

    31 y.o. dental specialist in low cost of living area, married with no kids (but planning on kids in near future). Average spending per year is roughly 150K in all living expenses.

    I am Half way through the Fire Your Financial Advisor Course, but would love any advice on where to go next as I begin my financial plan.

    I currently have a financial advisor who is also advising me to use a LIRP program (similar to bank on yourself). I honestly do not know currently how my money is invested, I am just getting started in all of this.

    Below are my current assets and debts.

    Bought single doc practice in 06/17, turn key, selling doc retired day I bought (no associates). Came out with 733K in student debt at 6.8% interest and paid it off in full last September.

    I am extremely fortunate in my situation and my annual income is expected to be between 900K-1Mil.

    Debts....

    Practice Loan (Remaining) - $366,000 at 4.05%, 10 yr fixed loan with ability to pay of 15% in additional principal each year without penalty. Can pay 62.5K and another 62.5K on 8/1/19 in toward principle.

    Home Loan (Remaining) -  $150,000 @ 3.375%, 15 yr fixed. Home large enough for family, plan to stay for roughly 5 years then purchase dream home.

    Auto Loan (Remaining) - $37,000 @ 2.99%, 7 yr fixed. Our primary vehicle. We paid cash for my wife's vehicle.

    Assets...

    25K in checking. Haven't really established an emergency fund yet

    98K in Roths, fully funded for 2019 (Backdoor)

    122K in 401Ks through business, fully funded for 2019. I am considering a profit sharing program

    200K in business account (not including 40K we keep as working capital).

    My main question is what should I do with my 200k currently and then where I should be investing my 30k a month.  I am considering paying off my debts or investing in a taxable account. My advisor advised me to meet with a LIRP specialist so that I can have more tax free income in retirement.   I would really appreciate any help and advice that you may have!

  • #2
    holy crap, are my glasses working right?

    733k in student loans!  and even more impressive, already gone?  even though your income is stratospheric, that's strong work.

     

    Comment


    • #3
      Please please please don't do the LIRP.  Be done with this advisor salesman.

      With the extra money, I'd pad the emergency fund a little bit, pay off the car loan, and start hammering away at the practice loan.

      Comment


      • #4
        FA, LIRP, $1mm income.

        The combination of the three leads me to think you are asking the right questions. The way to get started is not to bite at the "bait". Time to pay for some professional advice.

        You need to pay a CFP for helping you develop a financial plan. (not one that is mixing insurance with retirement planning, I suspect a nice commission is involved).

        You need to make sure your businesses legal structure is efficient for asset protection and taxation. At the end of the day, a personal brokerage account is the default. That means open up one at Vanguard or Fidelity and park investments in world or S&P 500 index mutual funds or ETF's. Who is doing your taxes? I would let others suggest structures and different plans. But, you need a CPA and possibly an estate planning attorney.

        I certainly hope you have all the business and personal insurance buckets covered. You are asking a 12 mo question, what to do with the cash. More important is the cash next year and the years after. You need to have that figured out.Yes, you will run out of debts and tax advantaged accounts. Figure that out because you are going to need it anyway!

        Comment


        • #5
          Yes to firing your financial advisor. No to the LIRP. Figure out how much you need for an emergency fund, max out all available pre-tax retirement accounts. Continue to do backdoor Roth. Pay off your car loan (mainly because a 7 year car loan is embarrassing). Pay as much as you can towards the practice loan (sucks you can only pay so much a year). Put the rest in taxable.

          Comment


          • #6


            I currently have a financial advisor who is also advising me to use a LIRP program (similar to bank on yourself). I honestly do not know currently how my money is invested, I am just getting started in all of this.
            Click to expand...


            nope


            paid it off in full last September
            Click to expand...


            !!!


            annual income is expected to be between 900K-1Mil.
            Click to expand...


            !!!!


            Auto Loan (Remaining) – $37,000 @ 2.99%, 7 yr fixed. Our primary vehicle.
            Click to expand...


            is this through the business....otherwise...really?


            25K in checking. Haven’t really established an emergency fund yet
            Click to expand...


            do that first. although this totally counts.


            122K in 401Ks through business, fully funded for 2019. I am considering a profit sharing program
            Click to expand...


            yea that sounds like a good plan.


            I am considering paying off my debts or investing in a taxable account.
            Click to expand...


            PS, taxable. wouldnt go fast on the home. i guess business first.

            taxable, taxable taxable taxable.

            estate attorny

            living trust

            will

            insurance. lots of insurance.

             

            Comment


            • #7


              Came out with 733K in student debt at 6.8% interest and paid it off in full last September.
              Click to expand...


              First off, congratulations on knocking out your student loans so quickly. You're obviously killing it!


              Practice Loan (Remaining) – $366,000 at 4.05%, 10 yr fixed loan with ability to pay of 15% in additional principal each year without penalty. Can pay 62.5K and another 62.5K on 8/1/19 in toward principle.
              Click to expand...


              Continue knocking down the practice loan as quickly as possible. You're on the right track.


              Haven’t really established an emergency fund yet
              Click to expand...


              Get an emergency fund established. If for no other reason that it will give your spouse peace of mind!


              122K in 401Ks through business, fully funded for 2019. I am considering a profit sharing program
              Click to expand...


              Good job with the 401(k).


              My main question is what should I do with my 200k currently and then where I should be investing my 30k a month.  I am considering paying off my debts or investing in a taxable account. My advisor advised me to meet with a LIRP specialist so that I can have more tax free income in retirement.   I would really appreciate any help and advice that you may have!
              Click to expand...


              Before you go this route, sit down with your advisor and maybe even your accountant and explore every other tax-advantaged saving/investment opportunity. For instance, it's not a huge amount of money, but I don't see where you have funded an HSA. You could establish a HDHP for your practice and fund an HSA.

              While I am very reluctant to recommend a LIRP, you could be one of the 0.50% of physicians where it might make sense. However, you need to make sure that you fully understand the plan and make absolutely sure that - for the amount of premium you feel comfortable committing to this plan every year - you are buying the smallest death benefit possible while overfunding the policy right to the Modified Endowment Conctract (MEC) limit. If your advisor and his specialist aren't buying the smallest death benefit with maximum overfunding, walk away from the deal immediately! Reason being, if they are not overfunding to the maximum, they are more concerned with their commission than your financial future. Buying a small death benefit and overfunding pays the advisor a much smaller commission. So, beware of the advisors out there who pitch this strategy and then pull a bait-and-switch. This strategy can work, in the right circumstances for extremely high-income physicians. Just make sure it's right for your situation and that you fully understand it. Don't be afraid to ask questions, including how much commission they stand to make. For the commission they stand to make - even if they do it the right way - they should be more than willing to answer every question you have.

              Comment


              • #8
                I continued to be amazed at the debt young dentists are graduating with, and the huge variation in incomes where some are making $100k as an associate and others like yourself are clearing 10 times that. Congrats.

                Comment


                • #9


                  insurance. lots of insurance.
                  Click to expand...


                  Not LIRP!

                  Comment


                  • #10




                    I continued to be amazed at the debt young dentists are graduating with, and the huge variation in incomes where some are making $100k as an associate and others like yourself are clearing 10 times that. Congrats.
                    Click to expand...


                    I think it's very dependent on whether it's a general dentist or a dental specialist. Kind of like how we expect a big difference between pediatrics (sorry @peds) and surgical subspecialties.

                    Comment


                    • #11
                      Congrats.  You have options a plenty.  No to LIRP.  Open a taxable account.  Fund it early and often.  This is the account that will let you retire early.  Max out all tax-deferred accounts.  Pay the car off this month.  Take the pledge to never finance another car.  Either become a hobbyist personal finance guru like the forum super-posters or hire someone off WCIs list.  You will be ok whatever path you choose.  Remember not to keep up with the Jones.  Impressive student loan payoff.  Maybe the best I have seen.

                      Comment


                      • #12
                        If you don’t have it already, you need disability insurance. Don’t buy it from the guy / gal trying to sell you whole life insurance through LIRP, Bank on Yourself, LEAP, Gunderson, or any other crap.

                        Way to crush the student loan debt! Seriously impressive. While you’re making a great income, are you limited by operatories, hours, staff, size of local market? Any chance of bringing on an associate and/or opening a second office?

                        Don’t just rush blindly into multiple practice ownership, but if you can reproduce the success you’ve had so far you should get far better returns than the 4.05% and under interest you’re paying.

                        You’re young and hard charging now. Are you taking proactive steps to avoid burnout? Making time for date night at least once per week? Make sure to balance success with career satisfaction, duration, and happiness at home.

                        Comment


                        • #13
                          I intend to move 30K into a savings account as an emergency fund asap. Just curious, why pay down the auto loan if it's the lowest interest at 2.99%.  Also, I miswrote...its a 5 yr note. Otherwise your advice is to pay the 63 toward practice now, another 63 come 8/1/19....and the remaining toward a Vanguard account? Thanks so much!

                          Comment


                          • #14





                            I currently have a financial advisor who is also advising me to use a LIRP program (similar to bank on yourself). I honestly do not know currently how my money is invested, I am just getting started in all of this. 
                            Click to expand…


                            nope


                            paid it off in full last September 
                            Click to expand…


                            !!!


                            annual income is expected to be between 900K-1Mil. 
                            Click to expand…


                            !!!!


                            Auto Loan (Remaining) – $37,000 @ 2.99%, 7 yr fixed. Our primary vehicle. 
                            Click to expand…


                            is this through the business….otherwise…really?


                            25K in checking. Haven’t really established an emergency fund yet 
                            Click to expand…


                            do that first. although this totally counts.


                            122K in 401Ks through business, fully funded for 2019. I am considering a profit sharing program 
                            Click to expand…


                            yea that sounds like a good plan.


                            I am considering paying off my debts or investing in a taxable account. 
                            Click to expand…


                            PS, taxable. wouldnt go fast on the home. i guess business first.

                            taxable, taxable taxable taxable.

                            estate attorny

                            living trust

                            will

                            insurance. lots of insurance.

                             
                            Click to expand...


                            Thanks so much! I can pay the business loan off early, but this year I take 4% penalty, next year would be a 3% penalty and so on until 5 yrs in which I can pay off without penalty. Just pay as much as I can without penalty until year 5 and knock it out then?

                             

                            I will definitely contact a estate attorney and get moving with a living trust and will.

                             

                            I currently have 2/4mil malpractice, 4 mil 20 term life, and 17K/month with disability which I will be upping to 25K/month after my taxes for this year are complete. Is this enough?

                             

                            Thanks for the advice!!!

                            Comment


                            • #15


                              Before you go this route, sit down with your advisor and maybe even your accountant and explore every other tax-advantaged saving/investment opportunity. For instance, it’s not a huge amount of money, but I don’t see where you have funded an HSA. You could establish a HDHP for your practice and fund an HSA.
                              Click to expand...


                              We did look into this, but our monthly rate and deductible was so much higher...it did not make sense for us this year....I will continue to check each year though....thanks!

                              Comment

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