Just finished a draft of my IPS, critiques?

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Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Wed May 22, 2013 7:12 pm

Rather than posting my IPS here for anyone to see, I was curious if there are any people on the forums who wouldn't mind reading my IPS and providing comments or suggestions. Is there a list of users who volunteer their time doing this?
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Re: Just finished a draft of my IPS, critiques?

Postby Grt2bOutdoors » Wed May 22, 2013 7:14 pm

brokemedstudent wrote:Rather than posting my IPS here for anyone to see, I was curious if there are any people on the forums who wouldn't mind reading my IPS and providing comments or suggestions. Is there a list of users who volunteer their time doing this?


Post the IPS - we'll critique it for you. We are a motley crue of folks, no one is tasked specifically to provide IPS pointers or critiques.
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Re: Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Wed May 22, 2013 7:25 pm

Ok, here goes nothing I guess. Just to set it up for you, I'm a 26 year-old med school graduate starting residency next month. I hope this plan isn't too aggressive/ambitious.

Investment Goals & Objectives:
1) Be financially independent by age 65.
2) Strive to allocate funds in a way that minimizes my tax liabilities.
3) Save at least 25% of my income while in residency and fellowship training.
4) Save at least 30% of my income when I become a new attending physician, and aim to save 50% or more of my income once I am established.
5) Always contribute the maximum to tax-sheltered and tax-deferred accounts.
6) Pay off all my student loans by age 40 if the Public Service Loan Forgiveness (PSLF) program is not solvent and my remaining loans aren’t forgiven after 10 years in training.
7) Be able to contribute a $50,000 down payment for a house in 10 years.
8) Start college funds for my children (I have none currently) that will be sufficient for paying off their tuitions.

I anticipate working past age 65 because I love my profession, but I want to attain that benchmark of financial independence such that if I wanted to cut down on my hours I may do so without concern. I imagine in my retirement years working as a professor emeritus teaching medical students and other trainees in an academic medical center.

Risk Tolerance & Investment Assumptions:

I consider myself to have an above-average risk tolerance due to my current age, availability of discretionary income after living expenses due to my own frugal spending habits, current lack of dependents, current employment and job security, and prospects of salary increases in my profession as a physician.

In putting together this investment policy statement, I am making a couple general assumptions that, should they prove false, will only improve my future financial situation:
1) There is uncertainty in the PSLF program’s solvency, and it is very possible that I will not qualify once I’ve contributed the minimum required loan payments.
2) Social Security and Medicare will not exist as they currently do when I retire.

Each year I will calculate my savings rate, real return, and total return on my portfolio. I have the goal of at least 6% of real return each year averaged over my investment lifetime.

I won’t panic and sell due to market corrections. Rather, I may consider new stock positions or adding to current positions when discounts to the market present themselves.


Home Ownership:

I will not spend more than 20% of my income on mortgage payments and property taxes. I will carefully research both my home purchase and mortgage options to ensure I obtain the least expensive options available. The mortgage of the home will be paid off by the time of retirement.

Spending:

I will keep a budget where I will project estimated cash flow each year and make budget adjustments prudently where needed. Any positive cash flow on the balance sheet at the end of each year will be invested.

I won’t take out loans or use credit for purchasing automobiles, or use credit to make rent/mortgage payments. Credit is for convenience and will be paid off fully each month.

Emergency Fund:

I will maintain an emergency fund equal to at least 12 months of living expenses in my Capital One 360 savings account.

Asset Allocation:

My asset allocation will be 80% equities and 20% fixed income investments. Once my portfolio is stabilized, my emergency fund will be included as fixed income. The ratio will decrease gradually to at least 60/40 by retirement.

1) Equity (80%)
• Large Cap U.S. Equities 25%
• Mid Cap U.S. Equities 15%
• Small Cap U.S. Equities 20%
• Foreign Developed Equity 15%
• Emerging Market Equity 5%

2) Fixed Income (20%)
• TIPS 10%
• High-Grade Corporate Bonds 5%
• Cash 5%

I will re-evaluate and rebalance my asset allocation every 6 months, with each asset class staying within 5% of its target allocation. Early in my career, this rebalancing will come primarily from new contributions to my retirement accounts. Overall, I will strive to minimize tax liability by selling investments to rebalance if held for longer than 12 months to ensure I am not being taxed at a short-term capital gains rate.

Any change to these percentages or change in funds used will require a 3-month waiting period.

Any significant changes to this IPS require a 3-month waiting period for reconsideration.
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Re: Just finished a draft of my IPS, critiques?

Postby RNJ » Wed May 22, 2013 7:53 pm

As I am new on the forum I will refrain from commenting on the specifics of your IPS. I will, however, congratulate you on finding your way to the Bogleheads at such a young age, and to what I feel is a very sensible way to go about managing this very important aspect of your life. If I may paraphrase something I've read here (I can't remember the exact quote or the specific source): while it may be possible to do a little better, it is also possible to do infinitely worse.

You might want to check out http://whitecoatinvestor.com , an investment resource for physicians. The site was established by a forum member.

One question: As you have chosen to "slice and dice" your equity holdings and "tilt" towards small caps on the US side (rather than use a Total Stock Market approach), why the decision not to tilt towards small cap value? To be clear, this is meant neither as a criticism of your portfolio, nor as an encouragement to tilt towards value. Rather, I'm interested in your thought process and in the comments of others on the board. Are you sure you want to go with five equity funds when two (TSM and TISM) might do the trick, be more tax-efficient, and easier to manage?

Ok - so maybe that is a comment on the specifics :)


Good luck
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Re: Just finished a draft of my IPS, critiques?

Postby Grt2bOutdoors » Wed May 22, 2013 8:03 pm

brokemedstudent wrote:Rather than posting my IPS here for anyone to see, I was curious if there are any people on the forums who wouldn't mind reading my IPS and providing comments or suggestions. Is there a list of users who volunteer their time doing this?


Well done, for a first crack! :wink: A bit lengthy, but that's fine if it will help you chart the course and stick with it.
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Re: Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Wed May 22, 2013 8:13 pm

RNJ wrote:As I am new on the forum I will refrain from commenting on the specifics of your IPS. I will, however, congratulate you on finding your way to the Bogleheads at such a young age, and to what I feel is a very sensible way to go about managing this very important aspect of your life. If I may paraphrase something I've read here (I can't remember the exact quote or the specific source): while it may be possible to do a little better, it is also possible to do infinitely worse.

You might want to check out http://whitecoatinvestor.com , an investment resource for physicians. The site was established by a forum member.

One question: As you have chosen to "slice and dice" your equity holdings and "tilt" towards small caps on the US side (rather than use a Total Stock Market approach), why the decision not to tilt towards small cap value? To be clear, this is meant neither as a criticism of your portfolio, nor as an encouragement to tilt towards value. Rather, I'm interested in your thought process and in the comments of others on the board. Are you sure you want to go with five equity funds when two (TSM and TISM) might do the trick, be more tax-efficient, and easier to manage?

Ok - so maybe that is a comment on the specifics :)


Good luck



I just started reading White Coat Investor, and his IPS was actually an inspiration for mine in terms of the length and such. The AA is something I'm still working on, but I figured as part of my allocation I can afford to be a little tilted towards small caps (whether value or growth) because they are slightly riskier for the chance of higher returns.

I think one thing that's been bothering me is that I currently have shares of two dividend growth stocks in a taxable account (gifted to me by grandparents) that I would like to hold onto at this point. I initially had a 5-10% AA to Dividend Growth U.S. equity and Small Caps U.S. equity was 5-10% lower.
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Re: Just finished a draft of my IPS, critiques?

Postby Grt2bOutdoors » Wed May 22, 2013 8:21 pm

It's better not to be emotional about your holdings. Obviously since there is that familial connection and you desire to hold them, then do so. Overtime, it's important not to let them grow to an unwieldy size.
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Re: Just finished a draft of my IPS, critiques?

Postby Peter Foley » Wed May 22, 2013 9:12 pm

You have covered the basics quite well. Putting some of your life's goals into the IPS is helpful in terms of motivation to stay the course. If you intend to use low cost index funds to reach your goals I would specify that that is indeed your approach. You could add something about trying to have savings balanced between deferred accounts, Roth and taxable. Being aware of your marginal tax bracket can be helpful in terms of where to direct savings. I would be inclined to go with the Total Bond Fund instead of High Grade Corporate. Since you are going to slice and dice a bit on the equity side you might want to keep the bond side as broad and simple as possible. I agree with your use of TIPs by the way.

While not necessary, you might also consider including some of Fidelity's milestones:

While every individual’s situation will differ greatly based on desired lifestyle in retirement, the average worker may replace 85 percent of his pre-retirement income by saving at least 8 times his ending salary. In order to reach the 8X level by age 67, Fidelity suggests workers have saved about 1 times their salary at age 35, 3 times at age 45, and 5 times at age 55.

“We believe these savings targets offer a rule of thumb to help employees get engaged in retirement planning by making it simpler and more achievable, but we recognize many individuals may need more than 8X their ending salary in retirement based on their lifestyle,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments.


I am reminded of when I first wrote mine. The first draft was written in an hour or so. The discussion with my wife was considerably longer. :wink:
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Re: Just finished a draft of my IPS, critiques?

Postby flipflopliving » Wed May 22, 2013 9:38 pm

brokemedstudent wrote:Ok, here goes nothing I guess. Just to set it up for you, I'm a 26 year-old med school graduate starting residency next month. I hope this plan isn't too aggressive/ambitious.

Investment Goals & Objectives:
1) Be financially independent by age 65.
2) Strive to allocate funds in a way that minimizes my tax liabilities.
3) Save at least 25% of my income while in residency and fellowship training.
4) Save at least 30% of my income when I become a new attending physician, and aim to save 50% or more of my income once I am established.
5) Always contribute the maximum to tax-sheltered and tax-deferred accounts.
6) Pay off all my student loans by age 40 if the Public Service Loan Forgiveness (PSLF) program is not solvent and my remaining loans aren’t forgiven after 10 years in training.
7) Be able to contribute a $50,000 down payment for a house in 10 years.
8) Start college funds for my children (I have none currently) that will be sufficient for paying off their tuitions.

In putting together this investment policy statement, I am making a couple general assumptions that, should they prove false, will only improve my future financial situation:
1) There is uncertainty in the PSLF program’s solvency, and it is very possible that I will not qualify once I’ve contributed the minimum required loan payments.

I won’t take out loans or use credit for purchasing automobiles, or use credit to make rent/mortgage payments. Credit is for convenience and will be paid off fully each month.

Emergency Fund:

I will maintain an emergency fund equal to at least 12 months of living expenses in my Capital One 360 savings account.



Wow, first off what an outstanding plan. I am sure many folks wish they had the foresight that you do.

Only in the spirit of having to look really hard for something to add in value... how will you prioritize your goals, emergency fund, cash to buy a vehicle if needed etc.? By adding a hierarchy it will help you in the event that this is overly aggressive in some years (life does happen) and keep you focused to hit your most pressing needs first.

All the best,
FFL
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Re: Just finished a draft of my IPS, critiques?

Postby texasdiver » Wed May 22, 2013 9:38 pm

Excellent start. You are WAY ahead of most of us at your age. I do have a couple of general points of advice.

1. You don't say so but judging from your language it sounds that you are not married. If you get married, ease your spouse into your way of thinking. This can be a lot to take in.

2. Try to simplify your IPS. Since you are obviously putting a lot of thought into this, try to edit it down to 1/2 or 1/3 the size and see if you really lose anything. Stuff like "I will carefully research my home purchase and mortgage options to ensure I obtain the least expensive options available" should pretty much go without saying. It's not like you would ever contemplate doing anything different.

3. I think your investment AA is a bit complex for someone starting out. On the other hand when I was in my 20s I probably had a portfolio in the mid 5-digits spread across 10 funds. Now that I'm closer to 7 digits I'd be down to just 4 funds were I not prevented from doing so by limited options in my and my wife's various retirement accounts. Look hard at the 3-fund portfolio. Total Stock Market, Total Int'l Stock Market, and Total Bond. Maybe TIPS and REIT if you want too. You will pretty much own all the same equities that you get from your asset allocation, just in proportion to the market. You aren't adding any additional diversification by slicing things up into smaller funds, all you are adding is tilt towards specific sectors, in your case small caps and emerging markets. With fewer funds you have less rebalancing to deal with and less stress about your sector plays.

4. If you have the option of a high deductible medical plan take it and open an HSA and document all of your medical expenses. This is another excellent tax free savings vehicle that can be even better than an IRA in that it is tax deductible when you contribute and tax free when you withdraw as long as your withdraw amounts are covered by medical expenditures you've made in the past.

5. Get some disability insurance when you are a resident and it is cheap. White Coat Investor is your go-to source for this research. You might plan to be working as a professor emeritus into your 70s. Make sure you also plan for the unforeseen.

6. Load up on term life if/when you get a spouse and dependents.

7. Your biggest battle will probably be budgeting. I'd suggest checking out software such as YNAB (You Need a Budget) to help with this. This is especially important once you get married.
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Re: Just finished a draft of my IPS, critiques?

Postby texasdiver » Wed May 22, 2013 9:50 pm

Peter Foley wrote:While not necessary, you might also consider including some of Fidelity's milestones:

While every individual’s situation will differ greatly based on desired lifestyle in retirement, the average worker may replace 85 percent of his pre-retirement income by saving at least 8 times his ending salary. In order to reach the 8X level by age 67, Fidelity suggests workers have saved about 1 times their salary at age 35, 3 times at age 45, and 5 times at age 55.

“We believe these savings targets offer a rule of thumb to help employees get engaged in retirement planning by making it simpler and more achievable, but we recognize many individuals may need more than 8X their ending salary in retirement based on their lifestyle,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments.


Unless my math is wrong it appears that Fidelity is suggesting a 10.6% withdrawal rate whereas the discussion here is generally along the lines of 4% or less.

For the sake of argument, assume a final salary of $100,000
8x final salary comes to $800,000
85% of $100,000 comes to $85,000 per year.
$85,000 divided by $800,000 equals 0.10625 which equates to an annual withdrawal rate of 10.625%

A more realistic 4% withdrawal rate would require retirement savings of 2.125 million in order to generate $85,000 in annual withdrawals or retirement savings of over 21x final salary.
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Re: Just finished a draft of my IPS, critiques?

Postby Peter Foley » Wed May 22, 2013 11:39 pm

texas driver

Good point, I had read the article but had not done the math on the basic premise. I think SS income is assumed, but the withdrawal rate would still be too high to be sustainable. Including SS I estimate that $60,000/year needed, about 1.5M. About double their 8X final income.

here is a link to the article http://www.fidelity.com/inside-fidelity/employer-services/age-based-savings-guidelines
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Re: Just finished a draft of my IPS, critiques?

Postby letsgobobby » Thu May 23, 2013 12:56 am

I would not count on steadily increasing salary as a physician. More like the opposite. It will go up after residency of course and then likely stabilize or decline in real terms for the rest of your life, unless there is an unusual business aspect to your speciality (patents, consulting, etc).

Otherwise it looks very good, maybe heavy on the trees and light on the forest but definitely a wonderful IPS.

Disability insurance ASAP. And get a 20-30 year term life insurance policy soon unless you are very sure you will never have dependents.
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Re: Just finished a draft of my IPS, critiques?

Postby spotty_dog » Thu May 23, 2013 1:17 am

Start smaller. Focus on the now, not the later; get your savings habits in line with your residency income, for starters. Live like a resident.

Also get your investment options in line with your assets. If you're talking about a 4- or 5-figure portfolio right now, adding all those asset classes is needless complication (especially when you are going to be busy with your postgraduate work!) Bernstein recommends starting to slice-n-dice at about a $250-500k portfolio.

I'd be detailed in your IPS about how you plan to handle your money in THIS phase of life. Then maybe sketch out a few notes for the next phase, to be elaborated on when you are evaluating job offers.

But as you do start to look into the future...what specialty are you pursuing? Your plans to save 50% of your income, yet to take until age 65 to be financially independent and to take 10 years to save a $50K downpayment, sound pessimistic, even taking into account any student loans you'll be paying off and your high rate of taxation.

Otherwise, congrats on wrapping your head around all this, and good luck!!
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Re: Just finished a draft of my IPS, critiques?

Postby DaleMaley » Thu May 23, 2013 5:17 am

4) Save at least 30% of my income when I become a new attending physician, and aim to save 50% or more of my income once I am established.


My financial modeling work has shown that for non-doctors, a 15% to 20% savings rate (savings as a percent of gross income) is required for retirement. The 20% savings rate assumes zero Social Security income.

For medical doctors, the required savings rate rises to 25% to 35%. This larger savings rate is driven by two main factors. The first is 10 years of less work and income because of additional schooling. The second factor is the larger amount of student loans required.

Based upon my research, your 50% target should be fine since it is above my modeling results of 25% to 35%.

As others have said, you may have chopped down too many trees on your IPS, but nice job over-all given your age :D
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Re: Just finished a draft of my IPS, critiques?

Postby IlliniDave » Thu May 23, 2013 5:40 am

First off, your miles ahead of the game just having thought this much about your financial future at your stage in life. I expect you'll find that you hit the point of financial independence well before 65!

Right now the two things that I see as the key to your plan are time (you have a lot of it) and your aggressive savings goals. My advice would be, as much as you can, put a lot of your energy into sticking to them. Your asset allocations and methodology seem reasonable. Over time asset allocations are what will drive most of your incremental returns percentage-wise, but maximizing capital invested early in the game could easily increase the order of magnitude of your final accumulations.

The other thing I'd say is make every effort to cling to your frugal spending habits. It's easy to get lazy in that regard once your income is suddenly 10x or so what you're used to living on. I'd suggest trying for a goal of being debt-free. You didn't mention anything about student loans so maybe you're starting out that way. You could consider having a more aggressive goal regarding a house in 10 years, possibly even being in position to purchase one outright around that time.

I wish I'd had your foresight when I was your age. Good luck!
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Re: Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Thu May 23, 2013 6:17 am

Thanks for the advice everyone! I'll mull over a lot of these comments and make revisions where I can.

letsgobobby wrote:Disability insurance ASAP. And get a 20-30 year term life insurance policy soon unless you are very sure you will never have dependents.


I just applied for disability insurance with Guardian and I'm now just waiting for the underwriters to get their act together. I've thought about a term life insurance policy and umbrella policy, but I don't know if it's worth it at my current stage of life.

For those of you who asked about it before, I am engaged (wedding currently aimed for 2015) and have no children.
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Re: Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Thu May 23, 2013 6:31 am

IlliniDave wrote: I'd suggest trying for a goal of being debt-free. You didn't mention anything about student loans so maybe you're starting out that way. You could consider having a more aggressive goal regarding a house in 10 years, possibly even being in position to purchase one outright around that time.


Of course, with my high-interest school loans I want to pay it down ASAP. I'm taking a slight risk of having the PSLF forgive the remainder of my loans after 10 years of loan repayment under the income-based repayment plan. During that time though - and not to sound morbid - but I anticipate a couple small windfalls from inheritances that will go a long way towards paying down my medical school debt.
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Re: Just finished a draft of my IPS, critiques?

Postby IlliniDave » Thu May 23, 2013 6:51 am

brokemedstudent wrote:
IlliniDave wrote: I'd suggest trying for a goal of being debt-free. You didn't mention anything about student loans so maybe you're starting out that way. You could consider having a more aggressive goal regarding a house in 10 years, possibly even being in position to purchase one outright around that time.


Of course, with my high-interest school loans I want to pay it down ASAP. I'm taking a slight risk of having the PSLF forgive the remainder of my loans after 10 years of loan repayment under the income-based repayment plan. During that time though - and not to sound morbid - but I anticipate a couple small windfalls from inheritances that will go a long way towards paying down my medical school debt.


Sounds like you have a good handle on that too. I don't see dragging out the loan debt hoping some of it is forgiven eventually as a particularly productive strategy overall, so conversely I think the "risk" of paying it off ASAP is negligible (plus, you did borrow and spend the money, so should pay it all back). Good luck!
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Re: Just finished a draft of my IPS, critiques?

Postby spotty_dog » Thu May 23, 2013 9:18 am

brokemedstudent wrote:For those of you who asked about it before, I am engaged (wedding currently aimed for 2015) and have no children.


Congrats on your engagement!

Since you will soon be married so you expect there might be someone at some point along the line who will be financially impacted by your passing, now is as good a time as any to purchase term life. You will lock in your coverage at a time when your health is at its peak (residency does a number on your health, from the inability to eat and sleep well to the high stress levels...I swear my husband's 3-year residency aged him at least 5.)
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Re: Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Thu May 23, 2013 2:24 pm

spotty_dog wrote:
brokemedstudent wrote:For those of you who asked about it before, I am engaged (wedding currently aimed for 2015) and have no children.


Congrats on your engagement!

Since you will soon be married so you expect there might be someone at some point along the line who will be financially impacted by your passing, now is as good a time as any to purchase term life. You will lock in your coverage at a time when your health is at its peak (residency does a number on your health, from the inability to eat and sleep well to the high stress levels...I swear my husband's 3-year residency aged him at least 5.)


I think I'll wait until I'm actually married, which will be during residency. Plus I'm going into pediatrics, so my stress level (while high) during residency will be much different than someone going into, say, neurosurgery :P
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Re: Just finished a draft of my IPS, critiques?

Postby letsgobobby » Thu May 23, 2013 2:44 pm

I think it is a mistake to wait. Within 24 months you will be married; it is not indefinitely in the future that you will have a dependent (you didn't say if your wife is financially independent or not). A lot can change about your health in 24 months. You can at least get $500,000 for twenty years for probably $250-300 per year. That's worth it. Then you can get more or longer coverage later.
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Re: Just finished a draft of my IPS, critiques?

Postby tadamsmar » Thu May 23, 2013 2:59 pm

Generally a good job.

These clauses seem a bit vague, they imply unspecified considerations and re-evaluations:

Rather, I may consider new stock positions or adding to current positions when discounts to the market present themselves.


I will re-evaluate and rebalance my asset allocation every 6 months, with each asset class staying within 5% of its target allocation.


An alternative it so simply commit to an asset allocation and a clearly specified rebalancing procedure. Or, as an alternative, commit to an asset allocation schedule that moves you toward lower risk over time.

6 months seems too often to be re-evaluating your asset allocation.

This is not true:

I am making a couple general assumptions that, should they prove false, will only improve my future financial situation:


because incorrectly assuming that Social Security will not be there can hurt your results at least during the period when you are deciding when to start taking it. I but I think this will be relatively small potatoes for you, and such decisions are a long way off. I think you are correct this assumption will only improve your financial situation before you are able to make that decision, at least.
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Re: Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Thu May 23, 2013 4:20 pm

tadamsmar wrote:
I will re-evaluate and rebalance my asset allocation every 6 months, with each asset class staying within 5% of its target allocation.


An alternative it so simply commit to an asset allocation and a clearly specified rebalancing procedure. Or, as an alternative, commit to an asset allocation schedule that moves you toward lower risk over time.

6 months seems too often to be re-evaluating your asset allocation.


What do you mean by asset allocation schedule? Just how frequently I re-evaluate and make adjustments?

When I meant each asset class staying within 5% of target, it's just to provide an acceptable range for the asset class within my portfolio. If a desired allocation of U.S. large caps is 25% of the portfolio, for example, I would only make changes if it is less than 20% or greater than 30% of my portfolio.
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Re: Just finished a draft of my IPS, critiques?

Postby tadamsmar » Thu May 23, 2013 7:55 pm

brokemedstudent wrote:
tadamsmar wrote:
I will re-evaluate and rebalance my asset allocation every 6 months, with each asset class staying within 5% of its target allocation.


An alternative it so simply commit to an asset allocation and a clearly specified rebalancing procedure. Or, as an alternative, commit to an asset allocation schedule that moves you toward lower risk over time.

6 months seems too often to be re-evaluating your asset allocation.


What do you mean by asset allocation schedule? Just how frequently I re-evaluate and make adjustments?

When I meant each asset class staying within 5% of target, it's just to provide an acceptable range for the asset class within my portfolio. If a desired allocation of U.S. large caps is 25% of the portfolio, for example, I would only make changes if it is less than 20% or greater than 30% of my portfolio.


"Age in bonds" would be an example of an asset allocation schedule. You have an age-based schedule for changing your allocation when you reach a certain age.

Here is another example of a life-cycle schedule:

http://books.google.com/books?id=fAsZGQ ... ng&f=false

(But the book preview only shows part of the schedule)

Following the schedule does not require any re-evaluation. Re-evaluation is a separate issue.
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Re: Just finished a draft of my IPS, critiques?

Postby Calm Man » Thu May 23, 2013 8:05 pm

OP, having been there myself and with a daughter one year ahead of you, there are a few non-starters here. As a resident and fellow, the goal is to pay your bills, it is not possible to save 25% unless you live in the slums, don't eat and don't socialize. Second I think the 50% type savings goals is not realistic especially as you say that you want children, a family and a house. But you also say you would like loan forgiveness with public service. Well they don't give loan forgiveness and maximum type pay so the savings goals are even more constrained. Last, to say when just graduating medical school that you love your work and plan to work until 65 sounds good, but you have not yet done one day of what your job will be and won't until your training is over. So I suggest you take a breath, focus on learning your craft and going slow with gigantic and financial life goals. I don't want to be a downer but I thought I'd share. The goal of life is to lie and you don;t need to save quite that much and need to enjoy.Feel free to ignore me.
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Re: Just finished a draft of my IPS, critiques?

Postby tadamsmar » Fri May 24, 2013 4:41 am

brokemedstudent wrote:
tadamsmar wrote:Just how frequently I re-evaluate and make adjustments?


The wiki suggest comparing your plan with its objectives once per year, and says that investment program changes must be small:

http://www.bogleheads.org/wiki/Investme ... _Statement

But, frankly, small changes have small effects, and it's all fuzzy math relative to objectives, so they tend to be not necessary and do nothing. They often amount to a psychological trick to allow one to satisfy the urge to do something without really doing anything.
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Re: Just finished a draft of my IPS, critiques?

Postby frugaltype » Fri May 24, 2013 5:41 am

You may want to aim for financial independence before 65. Young people do not realize the extent to which (some) older people wear down.

Social Security, which is solvent for decades despite the claims of various individuals, and would continue to be solvent almost permanently if the salary cap is lifted, should continue to exist unless the government goes nuts. Medicare is a whole different ballgame from Social Security financially, despite their being lumped together in political rhetoric.
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Re: Just finished a draft of my IPS, critiques?

Postby Grt2bOutdoors » Fri May 24, 2013 8:15 am

frugaltype wrote:You may want to aim for financial independence before 65. Young people do not realize the extent to which (some) older people wear down.

Social Security, which is solvent for decades despite the claims of various individuals, and would continue to be solvent almost permanently if the salary cap is lifted, should continue to exist unless the government goes nuts. Medicare is a whole different ballgame from Social Security financially.


If Medicare isn't there for me at retirement or subsitute plan, I'm hoping the physican's will accept some of my chickens for payment. :D
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Re: Just finished a draft of my IPS, critiques?

Postby Grt2bOutdoors » Fri May 24, 2013 8:18 am

letsgobobby wrote:I think it is a mistake to wait. Within 24 months you will be married; it is not indefinitely in the future that you will have a dependent (you didn't say if your wife is financially independent or not). A lot can change about your health in 24 months. You can at least get $500,000 for twenty years for probably $250-300 per year. That's worth it. Then you can get more or longer coverage later.


+1 - Get it now, you can revisit the insurance limits later on.
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Re: Just finished a draft of my IPS, critiques?

Postby aida2003 » Fri May 24, 2013 8:54 am

What a great thread :sharebeer . We've been investing for years without an IPS. But this year I started thinking that I must draft one because with age (actually it started occurring two months ago) I began to question a few things and the IPS would have helped me to remember why I was doing this way but not that way. This thread is helpful for me, so thank you.
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Re: Just finished a draft of my IPS, critiques?

Postby letsgobobby » Fri May 24, 2013 9:59 am

Calm Man wrote:OP, having been there myself and with a daughter one year ahead of you, there are a few non-starters here. As a resident and fellow, the goal is to pay your bills, it is not possible to save 25% unless you live in the slums, don't eat and don't socialize. Second I think the 50% type savings goals is not realistic especially as you say that you want children, a family and a house. But you also say you would like loan forgiveness with public service. Well they don't give loan forgiveness and maximum type pay so the savings goals are even more constrained. Last, to say when just graduating medical school that you love your work and plan to work until 65 sounds good, but you have not yet done one day of what your job will be and won't until your training is over. So I suggest you take a breath, focus on learning your craft and going slow with gigantic and financial life goals. I don't want to be a downer but I thought I'd share. The goal of life is to lie and you don;t need to save quite that much and need to enjoy.Feel free to ignore me.


I saved about 25% of my income during residency, it really wasn't hard and I lived two miles from Venice beach (not the slums). You're so busy you really don't have a lot of time to spend money. IMO 25% is a great goal in the short run. In the long run, 50% savings requires a certain combination of income, location, lifestyle choice, etc., and is not necessary to accomplish one's goals. But saving 30-40% as a physician is doable and highly recommended for the first 5-10 years post-residency.
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Re: Just finished a draft of my IPS, critiques?

Postby MindBogler » Fri May 24, 2013 11:49 am

brokemedstudent wrote:I just applied for disability insurance with Guardian and I'm now just waiting for the underwriters to get their act together. I've thought about a term life insurance policy and umbrella policy, but I don't know if it's worth it at my current stage of life.

Term life insurance is cheaper if you buy it now vs later. Get some asap. If something happens to you, it will protect your family in your absence.
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Re: Just finished a draft of my IPS, critiques?

Postby Calm Man » Fri May 24, 2013 11:55 am

letsgobobby wrote:
Calm Man wrote:OP, having been there myself and with a daughter one year ahead of you, there are a few non-starters here. As a resident and fellow, the goal is to pay your bills, it is not possible to save 25% unless you live in the slums, don't eat and don't socialize. Second I think the 50% type savings goals is not realistic especially as you say that you want children, a family and a house. But you also say you would like loan forgiveness with public service. Well they don't give loan forgiveness and maximum type pay so the savings goals are even more constrained. Last, to say when just graduating medical school that you love your work and plan to work until 65 sounds good, but you have not yet done one day of what your job will be and won't until your training is over. So I suggest you take a breath, focus on learning your craft and going slow with gigantic and financial life goals. I don't want to be a downer but I thought I'd share. The goal of life is to lie and you don;t need to save quite that much and need to enjoy.Feel free to ignore me.


I saved about 25% of my income during residency, it really wasn't hard and I lived two miles from Venice beach (not the slums). You're so busy you really don't have a lot of time to spend money. IMO 25% is a great goal in the short run. In the long run, 50% savings requires a certain combination of income, location, lifestyle choice, etc., and is not necessary to accomplish one's goals. But saving 30-40% as a physician is doable and highly recommended for the first 5-10 years post-residency.


Booby, right now, for example, my daughter is an intern in Manhattan. She makes 52K (let's call it 4.3k per month) and after taxes takes home about 3K a month. She is fortunate to have hospital subsidized rent at 1500 so has 1500 left.. It is true that she can't spend much but figure 750. So she could save 750 out of 4.3 which is 17%. So I guess you are right. The OP though seems to have student loans.

Now when OP is an attending and let's forget the student loans, he will be in the federal 28 inimum or 33 and possibly 39.6% base federal brackets. Plus FICA plus medicare plus obamacare. So from the gross taxes could take about half. So yes if you are talking 30 or 40 % on the net, it is possible. On the gross I think it would be a real stretch.

But I guess my main message was that before even doing a day of internship it is hard to say things like he loves his job and wants to work until 65 or more. I was just trying to explain that man plans and sometimes God laughs and to take it a little slow.
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Re: Just finished a draft of my IPS, critiques?

Postby letsgobobby » Fri May 24, 2013 12:44 pm

the marginal tax rates are just that, on the margin. My average tax rate is 18%, my marginal 33%. I did mean 30-40% of gross, but of course that depends on a ton of factors, not all controllable, and again it may not be necessary.

I agree with you on the larger point, it's too early to predict things like "I want to work til I'm 65." Life does throw all kinds of curveballs.
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Re: Just finished a draft of my IPS, critiques?

Postby Fallible » Fri May 24, 2013 1:09 pm

brokemedstudent wrote:Ok, here goes nothing I guess. Just to set it up for you, I'm a 26 year-old med school graduate starting residency next month. I hope this plan isn't too aggressive/ambitious.
...
Risk Tolerance & Investment Assumptions:

I consider myself to have an above-average risk tolerance due to my current age, availability of discretionary income after living expenses due to my own frugal spending habits, current lack of dependents, current employment and job security, and prospects of salary increases in my profession as a physician. ...
I won’t panic and sell due to market corrections. Rather, I may consider new stock positions or adding to current positions when discounts to the market present themselves.


Congratulations on your first IPS at just 26. It is a very good one, the kind I should've had when I first panicked and sold in a market downturn in '02. I believe if I'd had a good one like this and read it before making any move, I would've stayed the course.

You already have good suggestions here, so I'll just suggest that you read this on age investing from Rick Ferri: http://www.rickferri.com/blog/markets/p ... tolerance/
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Re: Just finished a draft of my IPS, critiques?

Postby brokemedstudent » Fri May 24, 2013 3:56 pm

Great discussion guys :)

If I go ahead and get life insurance right now, how much should I aiming for (especially since I have no dependents at the moment)? If I were to get a 30-year term policy, would I have the ability to add more coverage under the same policy as the years go by? I thought I'd go with Guardian again for this, but if there are any other companies you recommend?

letsgobobby wrote:I agree with you on the larger point, it's too early to predict things like "I want to work til I'm 65." Life does throw all kinds of curveballs.


True, I want to work past 65 ;) Seriously though, I chose this career because being a doctor is what I want to do regardless of what I earn. If I cared about money first and early retirement second, I would've gone into investment banking.
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Re: Just finished a draft of my IPS, critiques?

Postby frugaltype » Fri May 24, 2013 5:35 pm

Grt2bOutdoors wrote:If Medicare isn't there for me at retirement or subsitute plan, I'm hoping the physican's will accept some of my chickens for payment. :D


You would sell your chickens?? If I were lucky enough to have chickens, I would never sell them. They would have comfy old ages.
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Re: Just finished a draft of my IPS, critiques?

Postby tadamsmar » Fri May 24, 2013 7:28 pm

I think an umbrella policy would be worth it. After all, having your wages garnished for he rest of your life due to a driving error would kinda take a bit of the fun out of it, no? You can get a policy for less that a dollar a day. You probably could not get one that costs more than three dollars a day without some effort, since the typical underwriter would not insure you for that much.

Of course you might have to beef up your auto insurance. One of the services that a umbrella policy gives you is that you get useful expert feedback on risks you don't even know you are taking. That alone could be worth a dollar a day.
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