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Semi-ADHD Dentist in need of some financial focus… Portfolio Allocation

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  • Avatar Flapper 
    Participant
    Status: Dentist
    Posts: 17
    Joined: 12/13/2018

    I am embarrassed to admit that I have not been very smart with how to invest money, but I have listened to hours of the WCI podcast and am beginning to change my life around.

    I’m 35, been working as a contract general dentist for 5 years, make about $200K/year, have wife and 2 kids under 3, have a $525K home/farm that I owe $210K mortgage at 2.875%, am otherwise debt free, and tend to be a conservative saver.

    I have about $150K in money market making 2.25%, but want to bring this down to about $50-$60K emergency fund (6 months expenses) by putting more of it in tax advantaged ways using stocks/bonds, etc.  I was planning to do this transfer over slowly the next year or two to help with dollar cost averaging.  I also have $50K split up in various smaller business and personal bank accounts at different banks.   I have several random investments over the years in different places.  So I got an “adviser” to help me organize it all into one spot online with a living balance sheet. She is a salesman, commission based, so she has managed to sell me a $1million whole life (ouch, shame I know) and 3 years into it with $11K annual premium, and also sold me into a taxable managed fund with Brinker Capital at $10K.  I do not trust her, so I am doing it all on my own now, trying to find out how to invest myself.  Being very conservative in the past, I am ok right now to keep it even though I would not make the same choice over from the beginning.  Now I am most concerned about letting my other investment money work hard for me.

    I have the lifestyle thing down I am pretty sure as we are not spenders.  I have no student debt, grow most of my own food, fix my house and cars, do not go out to eat, or fancy vacations, and my wife is a stay at home mom.  So we save about $2K per month, but for years have just been putting it in the money market.

    For investments and retirement I have:

    $50K in Roth IRA with Growth Fund of America in American Funds.

    $30K in Roth IRA with Vanguard VIP Growth Fund

    $10K in Managed Taxable Account (33% Large Cap Equity, 24% Muni fixed income, 14% International, 9% Small cap)… This was my adviser’s idea.

    $10K in Fidelity Deferred Annuity in Fidelity VIP Growth Fund

    Other misc small investments totaling under $10K in various accounts.

    I have an S-corp LLC where I am the sole employee of the company.  A private office has hired me as a contract dentist where I see a lot of Medicaid.  So I am in the process of setting up a Solo 401k Roth by the end of the year to divert $18,500 into it using Ray Dalio’s All Weather portfolio through low cost ETF’s at TD Ameritrade.  I wanted to do an HSA, but since I have Medishare, a health cost sharing program, it seems like I am not eligible.  I have pretty much always done the Roth IRA each year and just recharacterized it if I made too much (I hear I need to do the Back Door Roth IRA new for this year, but my tax adviser said it got recharacterized fine and they accepted it, so I hope I am good???)  Thoughts on this?

    So I am wondering what your thoughts on what to do next.  Should I consolidate?  How do I know my overall portfolio allocation and percentages of bonds etc if I have so many different accounts?  Anyone else ever found themselves in a similar situation?  Trying to retire early by 55, but not sure if my plan will make that happen. Thank you for your help!

    #173978 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2043
    Joined: 05/01/2017

    few general points:

    nice work on debt, house would seem like a bit of a stretch but with no other debt it looks pretty good

    others are going to weigh in with more detail here but you are definitely behind on retirement. saving 20% for 5 years should put you at $200k just in principal. if you move $100k over from your MM you’ll be in better shape but probably not currently on pace for early retirement esp w/ relatively large house expense and kid’s college coming down the pipe. caveat here is that reading between the lines you might be able to really live on very little money.

    make sure you formally fire that adviser and get out of the WLI policy.

    i’m a little confused about your roth space, you have been directly contributing to Roth making $200k? Without doing back door Roth how did you end up with $80k in roth funds?

    #173982 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4191
    Joined: 05/13/2011

    few general points:

    nice work on debt, house would seem like a bit of a stretch but with no other debt it looks pretty good

    others are going to weigh in with more detail here but you are definitely behind on retirement. saving 20% for 5 years should put you at $200k just in principal. if you move $100k over from your MM you’ll be in better shape but probably not currently on pace for early retirement esp w/ relatively large house expense and kid’s college coming down the pipe. caveat here is that reading between the lines you might be able to really live on very little money.

    make sure you formally fire that adviser and get out of the WLI policy.

    i’m a little confused about your roth space, you have been directly contributing to Roth making $200k? Without doing back door Roth how did you end up with $80k in roth funds?

    Click to expand…

    A bit of a stretch? A $210K mortgage on a $200K income seems more than reasonable. I wouldn’t have blinked at a $400K mortgage. And this doc could pretty much pay the mortgage off now with all the cash he’s got sitting around.

    I don’t know that anyone who is only 35 can be behind on retirement either. I didn’t have much more in retirement accounts at 35 than this doc does. Who are you comparing this doc to?

    I do agree with your advice about the advisor and the whole life policy though. That’s malpractice in my opinion to put someone in a whole life policy when they have an i401(k) available to them.

     

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #173987 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4191
    Joined: 05/13/2011

    I am embarrassed to admit that I have not been very smart with how to invest money, but I have listened to hours of the WCI podcast and am beginning to change my life around.

    I’m 35, been working as a contract general dentist for 5 years, make about $200K/year, have wife and 2 kids under 3, have a $525K home/farm that I owe $210K mortgage at 2.875%, am otherwise debt free, and tend to be a conservative saver.

    I have about $150K in money market making 2.25%, but want to bring this down to about $50-$60K emergency fund (6 months expenses) by putting more of it in tax advantaged ways using stocks/bonds, etc.  I was planning to do this transfer over slowly the next year or two to help with dollar cost averaging.  I also have $50K split up in various smaller business and personal bank accounts at different banks.   I have several random investments over the years in different places.  So I got an “adviser” to help me organize it all into one spot online with a living balance sheet. She is a salesman, commission based, so she has managed to sell me a $1million whole life (ouch, shame I know) and 3 years into it with $11K annual premium, and also sold me into a taxable managed fund with Brinker Capital at $10K.  I do not trust her, so I am doing it all on my own now, trying to find out how to invest myself.  Being very conservative in the past, I am ok right now to keep it even though I would not make the same choice over from the beginning.  Now I am most concerned about letting my other investment money work hard for me.

    I have the lifestyle thing down I am pretty sure as we are not spenders.  I have no student debt, grow most of my own food, fix my house and cars, do not go out to eat, or fancy vacations, and my wife is a stay at home mom.  So we save about $2K per month, but for years have just been putting it in the money market.

    For investments and retirement I have:

    $50K in Roth IRA with Growth Fund of America in American Funds.

    $30K in Roth IRA with Vanguard VIP Growth Fund

    $10K in Managed Taxable Account (33% Large Cap Equity, 24% Muni fixed income, 14% International, 9% Small cap)… This was my adviser’s idea.

    $10K in Fidelity Deferred Annuity in Fidelity VIP Growth Fund

    Other misc small investments totaling under $10K in various accounts.

    I have an S-corp LLC where I am the sole employee of the company.  A private office has hired me as a contract dentist where I see a lot of Medicaid.  So I am in the process of setting up a Solo 401k Roth by the end of the year to divert $18,500 into it using Ray Dalio’s All Weather portfolio through low cost ETF’s at TD Ameritrade.  I wanted to do an HSA, but since I have Medishare, a health cost sharing program, it seems like I am not eligible.  I have pretty much always done the Roth IRA each year and just recharacterized it if I made too much (I hear I need to do the Back Door Roth IRA new for this year, but my tax adviser said it got recharacterized fine and they accepted it, so I hope I am good???)  Thoughts on this?

    So I am wondering what your thoughts on what to do next.  Should I consolidate?  How do I know my overall portfolio allocation and percentages of bonds etc if I have so many different accounts?  Anyone else ever found themselves in a similar situation?  Trying to retire early by 55, but not sure if my plan will make that happen. Thank you for your help!

    Click to expand…

    Why Roth 401(k)? You seem a better candidate for tax-deferred contributions to me. Also, you know you can put $56K in there for 2019, right? Not just $19K.

    You aren’t eligible for an HSA with medishare.

    Not a huge fan of the Ray Dalio portfolio, too much in gold, commodities, and long bonds for my taste. It’s like a variation on the permanent portfolio. 30% stocks might not be enough risk to reach your goals, but given your ability to save, it very well might be.

    Yes, you need to figure out the Backdoor Roth IRA thing and quit messing around with recharacterizing. Even if you’re below the limit, you can still do a Roth IRA through the backdoor. I did that one year.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #173988 Reply
    Liked by Flapper
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 1807
    Joined: 01/03/2017

    The great news is that you seem like a frugal family so you’re going to win the game. Here are some of my initial thoughts (in no particular order):

     

    Get rid of the whole life and cut ties with the saleswoman. Get yourself a personal investment policy statement so you can put all of your plans and goals down on paper to help guide you. Your asset allocation doesn’t need to be mirrored in each investment account, it just needs to fall in line overall. A simple excel spreadsheet with all of your accounts can be plug and play while giving you accurate information in seconds. I, too, am a little confused at first glance about your Roth and would need more information. If it were me, I would dump the excess cash into funds that supports my asset allocation, however, you aren’t me and I’m not you, so if dollar cost averaging over the next year or so is your plan…go for it! I would really think long and hard about the health sharing ministry, these are not health insurance.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #173998 Reply
    MPMD MPMD 
    Participant
    Status: Physician
    Posts: 2043
    Joined: 05/01/2017

    few general points:

    nice work on debt, house would seem like a bit of a stretch but with no other debt it looks pretty good

    others are going to weigh in with more detail here but you are definitely behind on retirement. saving 20% for 5 years should put you at $200k just in principal. if you move $100k over from your MM you’ll be in better shape but probably not currently on pace for early retirement esp w/ relatively large house expense and kid’s college coming down the pipe. caveat here is that reading between the lines you might be able to really live on very little money.

    make sure you formally fire that adviser and get out of the WLI policy.

    i’m a little confused about your roth space, you have been directly contributing to Roth making $200k? Without doing back door Roth how did you end up with $80k in roth funds?

    Click to expand…

    A bit of a stretch? A $210K mortgage on a $200K income seems more than reasonable. I wouldn’t have blinked at a $400K mortgage. And this doc could pretty much pay the mortgage off now with all the cash he’s got sitting around.

    I don’t know that anyone who is only 35 can be behind on retirement either. I didn’t have much more in retirement accounts at 35 than this doc does. Who are you comparing this doc to?

    I do agree with your advice about the advisor and the whole life policy though. That’s malpractice in my opinion to put someone in a whole life policy when they have an i401(k) available to them.

     

    Click to expand…

    Sorry you’re right about the mortgage. I was looking at purchase price. Curious where the delta between the price and the mortgage came from.

    I think the retirement thing depends on whether we call his big pile of cash retirement. If he actually saves $100k for retirement then he’s right at 20% of his gross earnings right? No growth. Isn’t that behind?

    I don’t think he’s in horrible shape at all, he’s in quite good shape.

    #174006 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4191
    Joined: 05/13/2011
    Disability Insurance

    few general points:

    nice work on debt, house would seem like a bit of a stretch but with no other debt it looks pretty good

    others are going to weigh in with more detail here but you are definitely behind on retirement. saving 20% for 5 years should put you at $200k just in principal. if you move $100k over from your MM you’ll be in better shape but probably not currently on pace for early retirement esp w/ relatively large house expense and kid’s college coming down the pipe. caveat here is that reading between the lines you might be able to really live on very little money.

    make sure you formally fire that adviser and get out of the WLI policy.

    i’m a little confused about your roth space, you have been directly contributing to Roth making $200k? Without doing back door Roth how did you end up with $80k in roth funds?

    Click to expand…

    A bit of a stretch? A $210K mortgage on a $200K income seems more than reasonable. I wouldn’t have blinked at a $400K mortgage. And this doc could pretty much pay the mortgage off now with all the cash he’s got sitting around.

    I don’t know that anyone who is only 35 can be behind on retirement either. I didn’t have much more in retirement accounts at 35 than this doc does. Who are you comparing this doc to?

    I do agree with your advice about the advisor and the whole life policy though. That’s malpractice in my opinion to put someone in a whole life policy when they have an i401(k) available to them.

     

    Click to expand…

    Sorry you’re right about the mortgage. I was looking at purchase price. Curious where the delta between the price and the mortgage came from.

     

    Click to expand…

    I’m not. Look how much they’re saving! They probably had a huge down payment and are making additional payments. Plus appreciation in a housing boom.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #174010 Reply
    Avatar Sergio Estavillo 
    Participant
    Status: Accountant, Other Professional
    Posts: 120
    Joined: 06/16/2016

    All add just a couple of points:

    • Disability insurance – too often I’ve seen dentists without DI.  Hopefully you have a DI own occupation policy.  If not, WCI recommends a few brokers.
    • Whole Life – If you decide to surrender the policy, please have a term policy in place before doing so.

     

    #174159 Reply
    Liked by jfoxcpacfp, Hank
    Avatar fatlittlepig 
    Participant
    Status: Physician
    Posts: 553
    Joined: 01/26/2017

    with the salary and relatively low mortgage, 2K a month does not seem like a lot of savings.

    #174164 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4191
    Joined: 05/13/2011

    with the salary and relatively low mortgage, 2K a month does not seem like a lot of savings.

    Click to expand…

    Says the guy who can’t figure out why every doc doesn’t have an 8 figure net worth in her 40s. 🙂

    $2K a month on $200K is 12%. Yes, it’s not the 20% for retirement I typically recommend, but it’s not like it’s bad. At any rate, I can’t quite tell but I think he’s saying that’s what he saves above and beyond his retirement accounts.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #174169 Reply
    Liked by jfoxcpacfp
    Avatar Flapper 
    Participant
    Status: Dentist
    Posts: 17
    Joined: 12/13/2018

    Wow!  Thank you all for the advise and thoughts.  Sorry it has taken me a while to post back… that ADHD thing again! : )

    The delta between the cost of the house and the mortgage is that I had a previous house I bought at $76K for cash from being a saver all my life, put sweat equity in it fixing it up over two years, then sold it in 2015 for $134K.  So along with that cash and some other cash savings, I put a huge down payment due to my debt aversion.

    As far as the $2k per month savings, that is a low ball number that has averaged out over the last year, and is after I include putting in Roth IRA, whole life, etc.  So I suppose I am saving more than that.  It’s just hard for me to tell as I am ADHD and have so much going on with so many accounts all over the place.  So I like the idea of the excel sheet and put it all in one place to crunch the numbers.  Does anyone have a template that they recommend for this financial analysis application?

    The Roth IRAs have been from contributing to them for much of my life before dental school.  So I never had to do the back door Roth except in the last few years.  I graduated dental school in 2013.

    I do have DI, own occupation.  Pretty covered there and maxed out for what they will give me.

    For the solo 401k, what do you think would be a good asset allocation.  I want to retire early, so how can I get there?  I am fine being as risky as I need to be to get the job done.  Just not sure how to do it.  I am fine with going way more than 30% in stocks.

    Thank you so much!

    #179311 Reply
    Avatar Flapper 
    Participant
    Status: Dentist
    Posts: 17
    Joined: 12/13/2018

    The Roth IRAs have been from contributing to them for much of my life before dental school.  So I never had to do the back door Roth except in the last few years.  I graduated dental school in 2013.  But so far I have only done a conversion for the years 2016 and 2018.  I did not contribute at all in 2017.  I was told if I made too much for the Roth, just do a Traditional and “re-characterize” it to a Roth the same day.  Was never told about needing to do a back door Roth until I heard of WCI a few months ago.  Do I need to go back to 2016, 2018 and fill out that 8606 form? Thanks!

    #179323 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 3344
    Joined: 01/08/2016
    Do I need to go back to 2016, 2018 and fill out that 8606 form? Thanks!

    Click to expand…

    yup.

    #179329 Reply
    Liked by Flapper
    Avatar Flapper 
    Participant
    Status: Dentist
    Posts: 17
    Joined: 12/13/2018

    Is the $56K you are talking about a fixed amount allowed as the employer contribution with the $18,500 being the employee contribution?  Or is it a percentage of the profits that applies to how much I can put in via the employer portion?

    I will go back and do the backdoor via the 8606 form.  What is the whole “re-characterization” I was told about and was able to do?  Can I get in trouble for doing that as opposed to the back door route?

    Thank you!  I will be much more timely in my replies in the future…

    #179594 Reply

Reply To: Semi-ADHD Dentist in need of some financial focus… Portfolio Allocation

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