Completely new [Physician]

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Completely new [Physician]

Postby ladfamily » Fri Feb 01, 2013 9:00 pm

Hi,
I am completely new to this. I only invest in Edward Jones office 401K. I have no other investments. Where to start? Just divorced few weeks ago. ex got half my portfolio of 120K.
Soooooo. I have two boys. I am 38 years old and a doctor.
Do I need to invest if I max out my 401K? I need help putting money away for my boys college about 200K per kid.
My parents have lots of funds in real estate but that will be awhile before I can get that.
Do I have to pay taxes while investing in 401K beyond my allowable amount?
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Re: Completely new [Physician]

Postby BolderBoy » Fri Feb 01, 2013 11:20 pm

Your best bet is to Google "White Coat Investor" which is run by an ER physician (assuming that is the kind of "doctor" you are) and see what is what over there. His advice is pretty physician specific in many ways.

Welcome and good luck.
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Re: Completely new [Physician]

Postby letsgobobby » Fri Feb 01, 2013 11:49 pm

Consider posting in the format linked at the top of the pag for more useful feedback.
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Re: Completely new [Physician]

Postby SGM » Sat Feb 02, 2013 12:14 am

For your children you might want to start a 529 for their education. Sometimes grandparents like to contribute to 529s if they have disposable income. Your state may allow tax deductions for 529 contributions. I do not invest only in 401ks for retirement. I put the maximum in IRAs with Vanguard mutual funds and for you that would be $5500 per year. Read the wiki on this site or buy the Boglehead guide to investing book. The white coat investor is a good website too. I would use low cost Vanguard index funds for outside investing and I would not hire an advisor. I know a lot of busy professionals who pay fees to advisors and they do not do as well. Keep costs low. I never have used and advisor and educated myself about investing as most people on this board have done.
"Let us endeavor, so to live, that when we die, even the undertaker will be sorry." Mark Twain
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Re: Completely new [Physician]

Postby EmergDoc » Sat Feb 02, 2013 1:05 am

Welcome to the forum. You've come to the right place. Many of us arrived here knowing even less about investing than you now know. The posters above are right that you need to start with educating yourself about personal finance and investing. Some of the basic books recommended are a good start. That White Coat Investor guy isn't very smart and he's full of himself (and smells badly), but you just might learn something from his website.

A few tips to get you started.

1) Investing isn't something you do outside of your 401K. It's something you do inside and outside your 401K.

2) Sorry to hear about the divorce. Unfortunately for docs, we're much more likely to lose our money to our spouses than to our patients. Between child support and alimony, your disposable income will now be severely limited. You need to put about 20% of your income toward retirement, whether it is inside a 401K, in another retirement account, or in a regular old taxable account. If you cannot now do this, you probably need to pare back your lifestyle a bit. Either that or you'll be like the old bitter docs you see around the hospital still working all night at age 68.

3) You may or may not be able to get $200K per kid in time for college. That's okay. There was a recent article published saying they get better grades if they have some skin in the game. Community colleges and state schools are also a lot cheaper. The private university I attended still has tuition less than $5K/year. There are plenty of good educations available for less than $200K. Make sure you don't sacrifice your retirement for their education. One of the best gifts my parents gave me was to ensure they would be financially independent in their old age. They didn't give me squat for college though. That said, if you really want to have $200K each, let's take a look at what that means. Let's say you have a 3 year old and a 5 year old. So you want $200K in today's money in 13 years and $200K in today's money in 15 years. How much do you need to be putting into 529s each year if you can get a 5% real (after-inflation) return? About $11K/year for the older one and about $9K/year for the younger. I'd recommend you use a 529 for that. Check with your own state one and if you don't get any significant deduction use the Utah one. You may also want to look into the Private College 529, a pre-paid plan that can be used at any of 270 private colleges. I figure if you plan to spend $200K you probably want one of those schools anyway.

4) A 401K is a tax-protected account. The money grows tax-free. When you pull it out in retirement, you will pay taxes on every dollar at your regular tax rate. Your effective rate later will probably be better than your marginal rate now, so that's a good deal. But you don't pay taxes on it until then.

5) There's nothing wrong with real estate investing, but in many ways it can be like a second job. Many people here invest in REITs, which are a real estate investment that trades on the stock market. It's a lot less hassle and no one calls you to unclog the toilets, which really sucks after a long day at the hospital. By the way, since your parents have lots of funds, why not have them kick in some funds toward those 529s?

Good luck investing. Just by arriving here the battle is half over. Now go read a few books. This stuff is way easier than your neurology course as an MSII.

http://whitecoatinvestor.com/books-4/
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: Completely new [Physician]

Postby Rajsx » Sat Feb 02, 2013 12:06 pm

- YES, you can still do it, if you can keep on top of expenses and be a disciplined every month like a clock investor.

- This is what would I do --
In sequence -
- Max out 401, with 17k or so, choose low expense ratio index funds, Vanguard Target index fund 2035 or equivalent from other MF companies Fidelity etc..
- Stay away from "Hot Tip on a individual Stock" discussions with colleagues in the doctor lounges .
- Not get into real estate, houses, condos, office buildings etc..., no get rich quick schemes, no investment broker free lunches
- Start 529 Plan , which one ?? recommendations are also on http://www.clarkhoward.com in addition to http://www.whitecoatinvester.com
- If still have another $5000/yr left, open a Vanguard.com account for a after tax, non deductible IRA or Roth IRA if income qualified
- Spend 15min. on this board reading relevant threads, every other day or so.
- I am close to being financially independent at 56 after practicing for 20yrs, doing just the above. You will find many of us Docs on this board.

Good Luck, think mostly today and and some about tomorrow
We do not stop laughing because we grow old, we grow old because we stop laughing !!
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Re: Completely new [Physician]

Postby ladfamily » Sat Feb 02, 2013 8:39 pm

Thanks for the great responses.
Due to alimony and child support I don't have much left of my income anymore. I can barely afford a 600 dollar appt. Sucks, my wife who never went to college makes more than me. I don't want to live in regret but I have long life ahead of me and try to find happiness in small things I am thankful for. We lived large during our married life, sense of entitlement. When I asked my ex to stat curbing expenses things back fired and she said I was controlling and demeaning and then everything spiraled out of control. Jealousy crept in followed by mistrust etc etc. Now I divorced to avoid life time alimony. So while this phase will be only for a short time, I still will loose valuable prime earning period!!!!!
Back to investing!!! I am reading six books after which investing will follow.
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Re: Completely new [Physician]

Postby bsteiner » Sat Feb 02, 2013 9:08 pm

If you're a doctor, and your parents have assets, they should leave whatever they were going to leave you in trust rather than outright. That will keep your inheritance out of your estate for estate tax purposes, and will better protect it against potential creditors, including claims by patients or future spouses.
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Re: Completely new [Physician]

Postby ladfamily » Sun Feb 03, 2013 7:52 am

Bsteiner can u explain more about trusts?
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