I am married and will be starting medical school this fall. As I will not have a ton of extra time over the next few years, I am trying to get everything in order now, as well as learn a bit regarding investing. Just wanted to check to see if you all had any recommendations/suggestions regarding our portfolio and future plans.Emergency funds:
Single credit card with balance paid in full every month.
Will be taking out educational loans this fall: Projected to be $42,722 @ 6.8% and $22,404 @ 7.8%. Rinse and repeat three more times for four years total. Interest will accrue but not capitalize until after medical school ends in four years.Tax Filing Status:
Married Filing JointlyTax Rate:
15% Federal, 0% State (Federal tax rate will likely decrease over the next four years, State rate will change after moving to new state)Age:
21Desired Asset allocation:
90% stocks / 10% bonds (but see below)Desired International allocation:
15-25% of stocksCurrent retirement assetsNOTE:
Percentages in [brackets] indicate percentage of overall portfolio, percentages in (parentheses) indicate percentage with respect to the individual account. See below for further information.Her Roth IRA at Vanguard
(Currently at Primerica in loaded funds with high ERs; in the process of transferring)
[40%] (100%) Vanguard Target Retirement 2055 Fund (VFFVX) (0.18%)
Note: This is currently allocated into [25%) (62.8%) Total Stock Market, [~11%] (27.1%) Total International, and [~0.04%] (10.1%) Total Bond II.
Her 401k at Fidelity
(Once she leaves her current job for the move, will likely transfer to IRA at Vanguard and then convert to the above Roth. See below for further information.)
[20%] (50%) Dodge & Cox Stock (DODGX) (0.52%) – Large cap blend (with value tilt?)
[20%] (50%) Fidelity Low-Priced Stock (FLPSX) (0.88%) – Mid cap valueProjected Allocation for Taxable Account at Vanguard
(Note: See Question 3 for further information.)
[0.03%] (15%) Vanguard S&P 500 Value ETF (VOOV) (0.15%)
[0.03%] (15%) Vanguard S&P 500 Growth ETF (VOOG) (0.15%)
[0.03%] (15%) Vanguard Extended Market ETF (VXF) (0.14%)
[0.03%] (15%) Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) (0.25%)
[0.04%] (20%) Vanguard Total Bond Market ETF (BND) (0.10%)
[0.04%] (20%) Vanguard Short-Term Corporate Bond ETF (VCSH) (0.12%) for a slight tilt towards shorter-term bonds, given likelihood of rising interest rates in the next few years.
Current Overall Portfolio AA:
74% Domestic Stocks
14% International Stocks
Not planning on contributing to Taxable Account during medical school.
RE: Her Roth – due to an unfortunate incident with Carpal Tunnel, we may be collecting long-term disability for five years for my wife. If that is the case, we will try to max out her Roth while in school each year. If not we will hold off and will begin maxing out at least one of our Roths during residency. Questions:
1. Right now the accounts are a bit disjointed. My plan is to transfer her 401k into a Traditional IRA with Vanguard once she leaves work. We will likely be in an even lower tax bracket once I am actually in school, so at that point I will plan on converting those funds into her Roth IRA (the TR fund). Thoughts?
2. If I do that, that will essentially leave us with her Roth IRA (which will then have about $27,500 in it), which for simplicity’s sake I’m planning on leaving in the Vanguard TR fund until after residency. We’ll max out my Roth IRA (which will likely also just be in a TR fund at Vanguard) during residency, unless my program offers a matched 401k or 403b, in which case we’d prioritize that up to the match, then max out one Roth, and then use any extra funds to pay off loans (starting with the one @7.9%).
3. I’m sort of treating the taxable account as not necessarily part of the overall portfolio, though I included the relevant percentages above for completeness. I just sold her poorly performing single mutual fund with a high ER and load at Primerica. These funds are now sitting in the Vanguard Prime Money Market Fund [VMMX], but I am planning on splitting it into the AA listed above (unless you all have some better suggestions!). This account will mostly serve as a “playground” for me as I explore/learn more about investing while doubling as a relatively liquid moderate term savings account if absolutely needed in the event that we somehow exhaust our emergency fund (thus the 60/40 split – I can tolerate some risk with this account and want it to have some growth potential, but would like at least some of it to be “there” at all times). The general plan is to hold these funds over the long term, reviewing performance quarterly and rebalancing annually, trying to avoid selling funds unless 1) it has performed poorly for at least 2-3 years or 2) some other major change within the fund and 3) I’ve held it for at least one year (for tax purposes…not that that will really make much of a difference over the next four years. Better to get in the habit now, though, I suppose.
4. Immediately after residency, I would probably roll any 401k/403b funds into my Roth IRA while still in a relatively lower tax bracket. Once I’m an attending, I won’t be eligible for this (but could still potentially to backdoor contributions, if I so desired). For the first 3-4 years, I am currently planning on aggressively paying off the remaining loans (perhaps $50-80k/year), while perhaps contributing $5-8k towards investments. Given the newer high interest rates and high loan burden that I’ll have, I’d rather just get these taken care of ASAP. After they are paid off, I would be able to contribute around $50k/year towards investments. Ultimately, I’d like to be able to retire in my early- to mid-fifties and just continue working because I (hopefully) enjoy it for a few more years.
5. I feel that the Target Retirement funds are a good option during medical school and residency, since I will be busy doing other things. Once I have more time on my hands, though, I wouldn’t be opposed to switching things up a little bit if I feel that the TR AA at that time is no longer appropriate. For example, I don’t know if many of you are familiar with Sound Mind Investing, but it seems like they do well with their Fund Upgrading strategy (see performance here: http://www.soundmindinvesting.com/visit ... istory.htm
). Or I’d just stick with index funds. Thoughts?
6. Also, I know bonds aren't the most tax-efficient vehicle for taxable accounts, but given the relatively small amount of money that will actually be located here, does it really matter all that much?
Sorry for the mega-post. Thanks in advance for any input.