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  • Avatar JBME 
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    I also vote for Roth. Once you get into the 24% bracket (or even higher) in 3-5 years then move to traditional. I hope you are doing backdoor Roth IRA too (x2). If your employer is doing a match, it’s pre-tax. You’re going for tax diversification here. If the opinions are too varied, just split the difference, and put $9500 in Roth 401k and $9500 in traditional 401k

    in reply to: Traditional 401k or roth 401k #253771 Reply
    Avatar JBME 
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    1) Yes, how do you think Transamerica makes their money? 401k plans take time to set up and maintain, and therefore cost money. If you want to be angry at someone, be angry at your employer. My employer pays those fees. Sounds like yours does not. Either way, it’s not a lot. keep it simple-this isn’t a deal breaker

    in reply to: Retirement Account Question #253667 Reply
    Liked by jfoxcpacfp
    Avatar JBME 
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    pay attention to the expense ratios rather than performance. You’ll see for every fund that past performance doesn’t predict future performance. It’ll be a taxable event only on the gains (if any), and I’m guessing by your salary post your capital gains rate will be 15%+ 3.8% (NIIT) = 18.3%. Still a lot lower than your marginal rate.

    Anything you do in your Roth IRA isn’t a taxable event, so yes do that if it fits with your asset allocation. However, you should really keep bond funds in your tax-deferred 403/401/457 account and not in your Roth IRA. Roth IRA should be your most aggressive investments. The Target Date Fund has some bonds so while it will work, it’s not ideal

    Avatar JBME 
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    sounds like you are doing better. the only thing you said that jumped out as me as concerning is you saying you have friends in finance making $200k/yr and buying homes and cars and providing for their families. They may be making that amount but the real question you need to ask yourself is are they spending almost all of that? If so, they are at least as poor as you. High salary doesn’t mean you are wealthy. If you make $1m this year and spend $1m and the guy next to you makes $30k and spends $25k, who do you think is richer at the end of the year? Stop comparing yourself to others, especially since I’m 99% sure you don’t know the full story.

    in reply to: Where do I go from here? #253336 Reply
    Liked by artemis
    Avatar JBME 
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    1

    in reply to: Best place to keep cash for upcoming house downpayment #253186 Reply
    Avatar JBME 
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    well those are two breeds that are specifically called out by home insurers as “high risk” for biting and attacking people and other dogs. In total I think only 5 breeds are called out. So yeah get a dog but not a german shepard and a rottweiller. Especially if you’re a physician, your dog does something bad you better hope you got that umbrella insurance

    in reply to: Dog Ownership and Living Longer #253174 Reply
    Liked by octopus85
    Avatar JBME 
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    from a dollar standpoint you’re doing great. Make sure you’re putting at least 20% towards retirement (from those balances I don’t see how you’re NOT doing that). 2 critiques:

    1) Don’t do Roth 401k contributions…do that pre-tax (the only exception is if you live in a low (under 5%) or no income tax state and you plan to retire to a high-state income tax state like CA or HI)

    2) Your accounts are really complicated. Roll everything together into whichever current account has the lowest odds ratios. Why have two taxable accounts? The one not at Vanguard seems so necessarily complex. It also at a glance doesn’t seem tax efficient.

    in reply to: Critique My Financial State- How can I do better? #253096 Reply
    Avatar JBME 
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    oh yes, didn’t mention HSA because I don’t have one but yes the OP should do that, absolutely, if in good health. I’d do that between step 3 and 4 in what I listed above. I still think the 529 idea is good….I’m not suggesting one put that much in there. If you end up not having kids, just gift it to a niece or nephew, or yourself when you are retired and want to maybe take classes to learn new things

    Avatar JBME 
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    1) Go to https://www.savingforcollege.com/ to learn more. What wonka31 said…reduces taxable income on your state form. It’s NOT a tax credit, it’s a deduction. All states have their own plans. I actually live in a state where I get the deduction no matter what state’s plan I use, but the max I can count off my income is $3k instead of $10k like for you. I have my 529 plan with Vangauard, which is based in Nevada. I don’t live in Nevada but I get the deduction. As I said, the fine print is all state-specific

    2) You are confusing several things. First, you are eligible for the backdoor Roth IRA based on what you’ve already said. The MEGA backdoor Roth IRA is a totally separate thing. Research it/search for it on the Search WCI forum. You also need to clearly read up how to do the backdoor Roth IRA as you question suggestions confusion with that. Jim and physicianonfire.com have great tutorials for how to do it. Finally, your question was more about the investments within the Roth IRA, which is also totally separate from contributing money or converting/rolling money over into a Roth IRA. First you need to put money in a Roth IRA by contributing or converting. Then, with that money, you invest it. Sounds like your investment in the Roth IRA isn’t ideal. Sell, and since it’s in a retirement account, there are no tax consequences/capital gains due to that sale. Sell and invest in what you want it in (as you said, total stock market and the international fund are fine funds).

    3) Based on your questions, you have a lot to learn. But take the challenge head on! Tons of great posts on WCI and physician on fire. Get your house in order, develop and IPS, and first invest in retirement accounts/529s/taxable accounts. Once you are comfortable with all of that, then go into real estate, if that’s still something you want to do

    Avatar JBME 
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    So if I understand correctly you have 3 retirement accounts right now: 457, 403b, and Roth IRA. The limits for 457 and 403b are actually $19k, not $20k. The ETFs you wrote about I assume are for a taxable account. Hopefully your funds in the 403b and 457 are reasonable (ER of 0.15 or lower)

    Here is what I’d do as you seem to have a ton of great options:

    0) Decide what you want your asset allocation/risk tolerance to be. 90% stocks/10% bonds? 80/20? 70/30?

    1) Save 3 months’ expenses in a savings accounts (move that money in your checking to a savings account where it’ll get a better interest rate, check out Ally.com). If that’s more than $15k, bumped that $15k up to 3 months’ expenses

    2) Yes you can do the backdoor Roth IRA, that’s $6k

    3) Get the summary plan document of your 403b for your employer. See if the plan allows for after-tax contributions and in-service withdrawals/rollovers to a Roth. If it does, great, you have something called the megabackdoor Roth IRA. That means in addition to the $19k you can put in your 403b, assuming you get no employer match, you can put another $37k in after-tax funds that you then rollover to your Roth IRA so you actually end up putting $43k into your Roth IRA instead of $6k. If there is an employer match in your 403b, then the amount of after-tax funds you can put in is: $56k-$19k-(employer match dollar amount)=Y (after-tax money you can put in)

    4) Assuming you’re in a state with an income tax, even though you don’t have kids it seems like you would consider having them in the future. Open up a 529 account with yourself as the owner and as the beneficiary. Contribute the max you can to get the state tax credit on your contribution but no more than that (since you don’t have kids). Once you have a kid, you just change the beneficiary from yourself to your kid.

    5) Start a taxable account at Vanguard. The two funds you listed are the best to go with. Having the international fund will allow you to take advantage of the foreign tax credit. Don’t put too much into your money market fund. Actually don’t do that. If you need cash using your regular checking/savings account. If you want to put any money in bonds, do that in your 403b plan.

    6) If you expect to buy a house in the next 5 years, slowly build up more funds in a savings account for that. Aim to put at least 20% down.

    7) Wait on charity but I’m not knowledgeable enough on this to suggest what to do at this stage in your life

     

    Assuming you have the megabackdoor, that’s $81k into designated retirement accounts. Assume you need to bump up your emergency fund to $25k, so $10k more. Assume you put $5k into a 529. Assume you put $20k into a house fund. So that leaves ~$35k to put into your taxable account (depending on your AA, some in the international fund and some in the total stock fund)

    Avatar JBME 
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    Larry mentioned the 457 plan. Also read the summary plan document of your 401k plan…request is from your to-be-employer. See if it allows you to deposit “after tax” funds and also allows for in-service withdrawals of the plan. If it does, you have access to the megabackdoor Roth IRA (google that on this site) which should be done before taxable. While you’re at it, does your SI also have access to the 457 plan and/or the megabackdoor Roth?

    You should put at least 20% towards retirement, based on your gross salaries. You said you are $300k. Is your spouse also $300k? Assume SI is. So you need to put $120k away total. If there’s an employer match on either/both 401ks, include that in your numerator and your denominator. If your employer gives you each $10k match then your denominator is now $620k and your numerator should be $124k. Of that $124k, your employers put in $20k so you need to put away an addition $104k.

    Avatar JBME 
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    oh it’s even worse than I let on but yes I’m dedicated. Have to call the 401k plan administrator, make sure they take the funds from the right bucket, make sure they make the check out to VG for the benefit of me, and then they can’t even send VG the check. Instead, they mail it to my house and then I have to put it in a new envelope and send it to VG myself! I tell myself in 5 years this would have been worth it. I’ve exhausted trying to do it any other way. just thankful the plan has these options

    in reply to: Mega Backdoor Roth #252712 Reply
    Avatar JBME 
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    as others have said, you need to make sure you can take those after-tax deposits, and ideally in a short amount of time (a year or less) either do an in-service rollover of the after-tax funds to the Roth 401k portion of your retirement plan OR an in-service rollover/conversion of the funds to your own Roth IRA. My plan allows for unlimited withdrawals of funds, so I get paid twice a month and the day after the money is deposited I get the money out and have the check made out to Vanguard to get into my Roth IRA with them

    in reply to: Mega Backdoor Roth #252702 Reply
    Avatar JBME 
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    I worked briefly at a company that evaluates TV ads before they go to commercial, to see how effective they are. I learned there that all of the focus groups used to evaluate the ads were women-only. When I asked and said how wrong that was, the boss said “men only shop based on price, so TV commercials are meant to appeal to women to get them wedded to the brand and buy more.” I still don’t believe that, but I offer up this antidote to give you an idea of how companies like Proctor and Gamble and GE and Target and Walmart apparently view their customers

    in reply to: frivolous female spending #252559 Reply
    Liked by adventure
    Avatar JBME 
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    thanks spirit, for the correction on that it only applies to pre-tax. Yes, if you roll the 401k over to an IRA when you are 54 then you lock it up until 59 1/2

    in reply to: Mega Backdoor Roth vs. Taxable Account #252525 Reply
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