This is a bit of a continuation of viewtopic.php?f=1&t=122293&newpost=1790787
where I asked how to convince my fiancee to switch from a PNC AUM portfolio to a self-run VG 3 fund portfolio.
It was suggested that some of that inheritance money should instead go towards her school loan for tax reasons. This post elaborates on that suggestion and other thoughts I had that deals with our financial future as a couple with potentially big spending and potentially even larger income. Grab some popcorn, It's a long one.
Here are the details:
Her: 27, Doctorate Veterinary Medicine, Employed, Take Home $45K + housing, no 401k offered, no bonuses right now.
Me: 26, BS Mechanical Engineering, Employed, Take Home $30k as an intern, Expecting to go permanent, take home $55K+ 6% match 401k.
State: PA, Small Town, Cheap everything.
Getting Married next spring, have been together for 9+ years attending different schools, currently live together.Debt:
School#1: $154K @ 6.8%
School#2: $33K @ 7.9%
Total monthly payment for both is currently in deferment beginning soon at $1.8k/mo or $.5k/mo on an income based repayment plan (will switch to income when allowed [only allowed to switch to within 30 days of first payment due]).
Owns Vehicle Outright
No Consumer Debt, Credit Score: High Enough to not worry.
School#1: $4.7k @ 6.8%
School#2: $4k @ 6.8%
School#3: $2.7k @ 2.35%
School#4: $2.4k @ 4.5%
School#5: $.6k @ 6.8%
School#6: $4.7k @ 5.6%
School#7: $1.8k @ 6.8%
School#8: $4.7k @ 6%
School#9: $1.8k @ 6.8%
Total monthly payments are $.35k
Own Vehicle Outright
No Consumer Debt, Credit Score: High Enough to not worry.
6 months in mm account, Not part of asset allocation.
Each File single for this year, married next year, not sure if filing jointly or separately yet, need to look into this.
Her 25% Fed Tax Bracket, 3% state
Me 15% Fed Tax Bracket, 3% state
State of Residence: PA
Age: Mid-High 20's
Desired Asset allocation: 80% stocks / 20% bonds, maybe less bonds as I can afford the risk.
Desired International allocation: 20% of stocks
Her Roth IRA $2k VGSTX
Her PNC AUM (soon to VG bogle 3 fund) $28.8k
Her Cash $1.5k in checking
My Roth IRA $8k 50/50 VHCOX and VWNFX
My Cash $1.5k in checking
My Cash $.1k in Savings earning 6% (BECU offers 6% on up to $1000, $500 in checking, $500 in savings, I recently invested this in my Roth IRA to take advantage of the recent dip)Current Annual Contribution Goals:
Her, Max out Roth IRA
Me, Max out Roth IRAOther Details:
Here is where it gets fun, She is the only full time doctor at the veterinary hospital (4k clients for reference) the current owner is part time and looking to retire, he is grooming her to take over and buy the practice. The worst part is the timeline is unknown and so is the value. He is hinting the timeline as being anywhere from within a year to two years, he is not sure himself. The value we estimate based on net income and tangible assets at around $1m, He may sell for much less but we really don't know what he is thinking, he's already got enough to retire very comfortably for a long time. Some things are certain, She will buy it under an LLC for the limited liability aspect, and maybe other reasons asked about below, I can't legally own the hospital without being a doctor in this state. He also will offer seller financing so a big commercial down-payment isn't necessary.
We will both continue to max out our Roth IRA's this year and every year until we are ineligible due to making too much money hopefully. I will then dump every extra cent towards paying off my school loans, highest rate first. She will then dump every last cent into investments as bogleheads suggest based on my questions below. Eventually any employer sponsored tax advantaged accounts when offered will be fully taken advantage of, Total cost of living for both of us is about $1k/mo, split equally between us. No kid plans until this stuff gets sorted. We would like to buy a long term house in the next 1-2 years too, down-payment would come as a wedding gift from our well off parents, expected total cost between $100k-$150k but this isn't terribly relevant except for the added expense unless I'm missing something.Questions:
1. Should she pay this year the maximum she can towards her 7.9% School Loan while coming below the $2500 Tax Refund limit? Next Year? A.
How is this calculated? Is it $2500/.28= $8928 towards her loans of which approximately $1000 over 2 payments this year would go to the normal income based repayment and an additional $7928 would go towards her 7.9% loan? B.
Is .28 the right tax here, it's her combined tax bracket, state and federal; or should it just be federal in this calculation?
2. Should she pay a larger sum than specified in question 1 towards her school loans? possibly wiping out her 7.9% loan, this would not effect the income based repayment amount, the income based repayment also includes a loan forgiveness program after either 20 or 25 years, we are not sure of the timeline as it's supposedly changing in 2014.
3. Does her being a sole proprietor of an LLC effect her Adjusted Gross Income from which Income Based Repayment is calculated?
4. Does her being a sole proprietor of an LLC effect her Student Loan Tax Refund Limit? (<$60k is 2500, >75k is ineligible, between is prorated)
5. What VG tax advantaged investment should she transfer her PNC AUM to if possible? I'm not looking for the funds, more the types, backdoor etc. This question applicable if based on the previous questions that is still advisable.
A. Is plain taxable advisable? This and excess earned money will likely be used towards a down-payment towards the hospital
6. How much do you think she should save up for a down-payment of the hospital on good faith terms?
7. Anything I've missed? Feel Free to comment. I'm an engineer, not an accountant.