Help me plan retirement account for this year

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Topic Author
sgadlin
Posts: 12
Joined: Tue Jun 16, 2015 10:32 pm

Help me plan retirement account for this year

Post by sgadlin » Tue Jun 16, 2015 11:05 pm

Hello everyone,

I have been reading the forums for a little while now and really would appreciate some advice.
This is an exciting transition year for myself and my wife. We are both physicians coming out of training. I finished residency last year and she is finishing this month. While we were residents we maxed out our roth IRAs and used a "financial advisor" to help us. I am in the process of taking over control of everything, here is our situation as my wife begins her new job next month

Debt 215K student loans (refinanced fom 6.8% to 3.5% fixed 5 yr)
Roth IRA (mine) 25K (in process of transfering from american funds to vanguard)
Roth IRA (hers) 37K (in process of transfering from american funds to vanguard)
401k(hers) 14K )
Taxable investments 44K
Emergency fund- 43K

Gross combined salary (375k)
-------------------------------------------------------------

Our goals are simple
1)Pay off student loans in five years
2)Fully fund retirement accounts
3)Save for a down payment (20%) on house in 3-5 years
4)Invest the rest in taxable account (3 fund "lazy portfolio)

I am not eligible until another year for 401k at my job, I believe my wife is eligible for 401k at her new job. My question is what should I be doing for my retirement account this year. Should I do a personal IRA? I assume we will fully fund my wife's 401 k. Is there anything else we should be doing? Thanks

mhalley
Posts: 7781
Joined: Tue Nov 20, 2007 6:02 am

Re: Help me plan retirement account for this year

Post by mhalley » Wed Jun 17, 2015 3:10 am

The main 3 tax advantaged plans are 401k, IRA (Traditional and Roth) and Health Savings account. I would opt for Roths in additon to the wifes 401k, and HSA if you have a high deductable insurance policy.
Mike

JW-Retired
Posts: 7156
Joined: Sun Dec 16, 2007 12:25 pm

Re: Help me plan retirement account for this year

Post by JW-Retired » Wed Jun 17, 2015 7:18 am

You will need to use the "backdoor" Roth work-around because with $370k income you make too much for a direct Roth contribution. This means you must avoid rolling any of your 401k money to a personal tIRA. See the wiki on it.
https://www.bogleheads.org/wiki/Backdoor_Roth_IRA
JW
Retired at Last

Topic Author
sgadlin
Posts: 12
Joined: Tue Jun 16, 2015 10:32 pm

Re: Help me plan retirement account for this year

Post by sgadlin » Wed Jun 17, 2015 7:29 am

JW Nearly Retired wrote:You will need to use the "backdoor" Roth work-around because with $370k income you make too much for a direct Roth contribution. This means you must avoid rolling any of your 401k money to a personal tIRA. See the wiki on it.
https://www.bogleheads.org/wiki/Backdoor_Roth_IRA
JW
This is what I was thinking as well. Just to clarify I would be eligible for a traditional IRA but not a roth IRA due to gross income. I plan on rolling 401k to new 401 k plan. So we could max out 401k (hers) and both set up a traditional IRA and back door it to a Roth IRA?

JW-Retired
Posts: 7156
Joined: Sun Dec 16, 2007 12:25 pm

Re: Help me plan retirement account for this year

Post by JW-Retired » Wed Jun 17, 2015 7:32 am

sgadlin wrote:
JW Nearly Retired wrote:You will need to use the "backdoor" Roth work-around because with $370k income you make too much for a direct Roth contribution. This means you must avoid rolling any of your 401k money to a personal tIRA. See the wiki on it.
https://www.bogleheads.org/wiki/Backdoor_Roth_IRA
JW
This is what I was thinking as well. Just to clarify I would be eligible for a traditional IRA but not a roth IRA due to gross income. I plan on rolling 401k to new 401 k plan. So we could max out 401k (hers) and both set up a traditional IRA and back door it to a Roth IRA?
Yes...... exactly. Dry run filling out the two 8606 forms to see how it all works.
JW
Retired at Last

Grt2bOutdoors
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Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Help me plan retirement account for this year

Post by Grt2bOutdoors » Wed Jun 17, 2015 7:35 am

Your goals may be simple, but that is one TALL order. Perhaps you forsee your salaries doubling in the next 5 years as well, to accomplish accumulating $500K between loan payoff, fully funding retirement for both you and her ($50K each per year) and accumulating a 20% down payment on home. Don't forget you will be paying HEFTY taxes along the way, you are in the 33% tax bracket and don't be surprised if AMT doesn't put a crimp in your plans.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Topic Author
sgadlin
Posts: 12
Joined: Tue Jun 16, 2015 10:32 pm

Re: Help me plan retirement account for this year

Post by sgadlin » Wed Jun 17, 2015 7:38 am

JW Nearly Retired wrote:
sgadlin wrote:
JW Nearly Retired wrote:You will need to use the "backdoor" Roth work-around because with $370k income you make too much for a direct Roth contribution. This means you must avoid rolling any of your 401k money to a personal tIRA. See the wiki on it.
https://www.bogleheads.org/wiki/Backdoor_Roth_IRA
JW
This is what I was thinking as well. Just to clarify I would be eligible for a traditional IRA but not a roth IRA due to gross income. I plan on rolling 401k to new 401 k plan. So we could max out 401k (hers) and both set up a traditional IRA and back door it to a Roth IRA?
Yes...... exactly. Dry run filling out the two 8606 forms to see how it all works.
JW

Great, Thanks

Topic Author
sgadlin
Posts: 12
Joined: Tue Jun 16, 2015 10:32 pm

Re: Help me plan retirement account for this year

Post by sgadlin » Wed Jun 17, 2015 7:43 am

Grt2bOutdoors wrote:Your goals may be simple, but that is one TALL order. Perhaps you forsee your salaries doubling in the next 5 years as well, to accomplish accumulating $500K between loan payoff, fully funding retirement for both you and her ($50K each per year) and accumulating a 20% down payment on home. Don't forget you will be paying HEFTY taxes along the way, you are in the 33% tax bracket and don't be surprised if AMT doesn't put a crimp in your plans.

I know this may be a Tall order, that is why they are ranked in terms of importance. Luckily we live in a area with low cost of living, and our lifestyles will remain similar to when we were making 55-60K combined, for a few years). It will take alot of discipline, but will be nice to get out of student loan debt. Should have about 13k a month take home after taxes and expenses (rent,food, shopping etc). 4k of that to student loans, leaves about 9k to save/invest a month.
Thanks for your response

bloom2708
Posts: 7103
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Help me plan retirement account for this year

Post by bloom2708 » Wed Jun 17, 2015 7:46 am

Grab a copy of "The Total Money Makeover" by Dave Ramsey. With that income you should be able to hammer those student loans in 18 months or less. Plan the work, work the plan.

There will be great pressure to be "income affluent". This means you will spend like you have a huge salary. Your goal is to use that income to become "balance sheet affluent". Thomas J. Stanley has written a series of books about the differences between Income and Balance Sheet "rich" people. "Stop Acting Rich" is worth a read.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words: Whole food, plant based

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