Please help physician catch up.. late to the game

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InvestorNewbie2016
Posts: 27
Joined: Thu Dec 22, 2016 1:35 pm

Please help physician catch up.. late to the game

Post by InvestorNewbie2016 » Thu Jan 19, 2017 11:51 pm

Hi Bogleheads,
I am rather new to the group and want to learn from the impressive collective knowledge and smarts of the group.
Having spent >15 years in medical education and little knowledge about finances, I feel I need to learn to do more than just saving.
I am aware of, and reading up on 'white coat investor' and discussions on this forum.

Here is roughly what I have going, appreciate your input as I try to get better at this. I am aware that most of this may be poorly managed, but thats the point...

35, Married
Personal income, recently started job - 190k/yr
Mortgage at 3.7%
No other significant debt
Tax rate: 33% Federal + 6% State
Desired retirement at 60 (possibly in another country)
Savings approx 9 mo worth emergency fund in checking and savings accounts (mostly Ally)

Current retirement assets -50k

- TIRA w/ Betterment - 7k (rolled over from previous employer, no contribution in >3 yr)
US Total Stock Market: 15%; US Large-Cap Value: 15%; Developed Market: 30%

- Taxable account w/ Betterment 90% stocks - 5k (no recent contribution)
US Total Stock Market: 15%; US Large-Cap Value: 15%; Developed Markets: 35%; Emerging Markets 10%

- 403b w/ Metlife - 10k (from previous employment, no contribution in > 3 yrs)
- Roth 403b w/ TIAA Lifecycle 2045- 5k
- 403b TDA retirement plan w/ TIAA lifecycle 2045 - 20k (recently started max contribution in 2016)
- Investments in foreign banks from my previous life - 20k (at 7% interest, no plan to repatriate due to currency conversion losses etc)

Please advise. Appreciate minor to major overhaul suggestions for the above.
Thanks y'all!

brad.clarkston
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Location: Kansas City, MO

Re: Please help physician catch up.. late to the game

Post by brad.clarkston » Fri Jan 20, 2017 12:07 am

.

Welcome to the forum!

First of all if any of those accounts are "dead" and you can't put money into them roll them over into a Trad IRA at a low cost broker like Fidelity or Vanguard. I'm not a Betterment fan they just do not give enough value for the fee's.

Your funds have a lot of overlap there's no real reason to do US Total Stock Market: 15%; & US Large-Cap Value: 15% as the value tilt on Large-Cap isn't that great compared to Small-Cap it's all risk vs reward.

Does your new job have a 401k? That's going to be your main investment driver so make sure to fully fund the total $18k a year pre-tax. When you get that IRA sat up and funded you need to add the full $5500 and do that every year.

Personally with your level of income and on the go job I might just use one Target Date 2060 fund that has a mix of Stock/Bonds/International and forget about it for awhile.

There's a forum member that runs a "doctors only blog" that's pretty good --- http://whitecoatinvestor.com/ take a look at it. I enjoy reading it. I'm not a physician but I can earn in the same ballpark when I want to.

kiddoc
Posts: 474
Joined: Mon Aug 24, 2015 10:52 pm

Re: Please help physician catch up.. late to the game

Post by kiddoc » Fri Jan 20, 2017 12:51 am

Welcome. What is your savings rate for long term investing? In your situation, I would recommend saving at least 20% of your pre-tax salary every year, even higher if possible. A lot of physicians have spending, rather than earning problems at the root of their financial issues.

Start reading about finance and investing: it's much easier than med school but needs simplicity and discipline. The above suggestion about White Coat Investor is excellent. I would also recommend reading his book, followed by the following in order:

- The Bogleheads Guide to Investing
- How a Second Grader Beats Wall Street- Allan Roth

These should suffice to develop a simple, yet excellent plan. If, after these, you want to go deeper into more complex issues:

- All about Asset Allocation- Rick Ferri
- The Four Pillars of Investing- William Bernstein.
"The four most dangerous words in investing are: 'this time it's different.'" - Sir John Templeton

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emp2b3
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Re: Please help physician catch up.. late to the game

Post by emp2b3 » Fri Jan 20, 2017 12:57 am

Others can weigh in more but if you want you consolidate accounts I would recommend rolling over any old accounts to your 403b and not a traditional IRA so that you can do a backdoor Roth IRA yearly. WCI has a great post on the logistics of doing so.
You will need to get rid of your current traditional IRA by hopefully rolling in to your 403b. The alternative is converting to a Roth IRA but this would trigger some taxes I believe (amount depends on if contributions were tax deductible or not and amount of gains).
Last edited by emp2b3 on Mon Mar 13, 2017 12:35 pm, edited 1 time in total.

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raven15
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Re: Please help physician catch up.. late to the game

Post by raven15 » Fri Jan 20, 2017 1:12 am

1. As per above, simplify every retirement account into a single IRA with very low expense ratios. You probably can't contribute to this any more, so perhaps use a very long target date fund and forget about it until you maybe decide to roll over the 401k later. I just read the above post about backdoor Roth. I am not an expert on these though.
2. Do the same for the Roth IRA. If possible continue contributions. Roth for wife too.
3. Max out employer retirement plan, perhaps you can lower your income enough to contribute to the Roth.
4. Max out HSA. Definitely. Lower that taxable income.
5. Invest simply in low cost index funds. Like, three or something. More or less is OK too, but so far your asset base is so small it doesn't matter much. So make it simple.
6. Save money. What you have so far is not enough to even bother with except to simplify it and make the foundation of a plan for the future. My wife and I together make your salary minus the leading 1, and we are saving around 64k per year. You should be able to at least match that.
7. Are you counting your wife's finances separately? You should be in the 28% tax bracket otherwise.
8. The mortgage rate is high enough that you might pay down it in lieu of bond investments.
It's Time. Adding Interest.

qwertyjazz
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Re: Please help physician catch up.. late to the game

Post by qwertyjazz » Fri Jan 20, 2017 7:36 am

Not that late - you have a decent income and secure employment for the next 25 years (may move but can get job quick)
Saving rate matters the most. Then comes tax efficiency - 401ks are your friend - figure out how much you can tax defer (depends on how paid as an employee with match or self employed with solo 401k) - pick an easy investment strategy (you have a life and a job) - read the 3 fund portfolio thread (search the site) - keep fees low - retire well
G.E. Box "All models are wrong, but some are useful."

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neurosphere
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Re: Please help physician catch up.. late to the game

Post by neurosphere » Fri Jan 20, 2017 8:25 am

I think having the ability to contribute to a Roth IRA via the backdoor method is powerful, and you should see if it's possible to arrange/move your existing accounts so that you can take advantage of this, as others have already mentioned.

You should research the backdoor Roth, but essentially it "requires" having no other balances in any other non-Roth IRA. These include Traditional, SIMPLE, SEP, and Rollover IRA.

It's seems the current 403b is with TIAA (with some Roth and regular dollars) and the previous one is the Metlife 403b? So there are only two 403bs in total, the old one and the current one?

The first question is whether the 403b in your current job allows incoming rollovers of IRAs and the 403b? The second question is what are the fees and investment choices in your current employer plan? If it accepts incoming rollovers, and the fees and investment choices are reasonable, you should (probably) rollover all your other accounts into it. This will simplify your finances, and by "getting rid" of the IRA balance, allow you to make Roth contributions free of any tax.

If your current plan does NOT allow incoming rollovers, then you'll need to think about whether you want to keep the old 403b account as is, and also consider converting the IRA to a Roth. This will incur a one-time tax hit, but then allow for future backdoor Roth contributions.

Of course, you'll need enough cash flow to max out your 401k first, prior to doing any backdoor Roth. But with your salary and your late start (I'm an MD/PhD and got an even later start!) you're likely going to need a very high savings rate anyway. Thus, maxing out your 401k and also maxing out a Roth each year is probably the minimum you'll want (need) to do. :D
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

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White Coat Investor
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Re: Please help physician catch up.. late to the game

Post by White Coat Investor » Fri Jan 20, 2017 9:56 am

InvestorNewbie2016 wrote:Hi Bogleheads,
I am rather new to the group and want to learn from the impressive collective knowledge and smarts of the group.
Having spent >15 years in medical education and little knowledge about finances, I feel I need to learn to do more than just saving.
I am aware of, and reading up on 'white coat investor' and discussions on this forum.

Here is roughly what I have going, appreciate your input as I try to get better at this. I am aware that most of this may be poorly managed, but thats the point...

35, Married
Personal income, recently started job - 190k/yr
Mortgage at 3.7%
No other significant debt
Tax rate: 33% Federal + 6% State
Desired retirement at 60 (possibly in another country)
Savings approx 9 mo worth emergency fund in checking and savings accounts (mostly Ally)

Current retirement assets -50k

- TIRA w/ Betterment - 7k (rolled over from previous employer, no contribution in >3 yr)
US Total Stock Market: 15%; US Large-Cap Value: 15%; Developed Market: 30%

- Taxable account w/ Betterment 90% stocks - 5k (no recent contribution)
US Total Stock Market: 15%; US Large-Cap Value: 15%; Developed Markets: 35%; Emerging Markets 10%

- 403b w/ Metlife - 10k (from previous employment, no contribution in > 3 yrs)
- Roth 403b w/ TIAA Lifecycle 2045- 5k
- 403b TDA retirement plan w/ TIAA lifecycle 2045 - 20k (recently started max contribution in 2016)
- Investments in foreign banks from my previous life - 20k (at 7% interest, no plan to repatriate due to currency conversion losses etc)

Please advise. Appreciate minor to major overhaul suggestions for the above.
Thanks y'all!
Not sure why you feel you're late to the game. You're 35, have no student loans, have an enviable income, and a rapidly growing net worth. You're ahead of most docs at your stage of the game. Put 20% of your gross income toward retirement and invest it in some reasonable way and you're likely to have enough to retire early if you so desire.

You would likely benefit from learning about and starting to do Backdoor Roth IRAs.

Sounds like you need a written investing plan as well. You can read a few books and do that on your own, or you can hire a competent, low-cost, hourly rate financial planner to help you do that.
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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PhysicianOnFIRE
Posts: 459
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Location: Up North

Re: Please help physician catch up.. late to the game

Post by PhysicianOnFIRE » Fri Jan 20, 2017 1:59 pm

Welcome!

Debt-free at 35 is no small feat for a physician. You didn't mention your spouse's income or funds. Do you keep your finances separate? If not, then I would consider your joint income and assets as one pool of money and set your asset allocation across all accounts.

There have been several great suggestions for books and suggestions that you should develop an investor policy statement. I second the recommendation for Dr. Dahle's book, The White Coat Investor, which I've read.

Here are several guides to writing an Investor Policy Statement from Bogleheads, WCI, and me.

:beer
-PoF

Topic Author
InvestorNewbie2016
Posts: 27
Joined: Thu Dec 22, 2016 1:35 pm

Re: Please help physician catch up.. late to the game

Post by InvestorNewbie2016 » Sun Jan 29, 2017 12:00 am

neurosphere wrote:I think having the ability to contribute to a Roth IRA via the backdoor method is powerful, and you should see if it's possible to arrange/move your existing accounts so that you can take advantage of this, as others have already mentioned.

You should research the backdoor Roth, but essentially it "requires" having no other balances in any other non-Roth IRA. These include Traditional, SIMPLE, SEP, and Rollover IRA.

It's seems the current 403b is with TIAA (with some Roth and regular dollars) and the previous one is the Metlife 403b? So there are only two 403bs in total, the old one and the current one?Yes I have only 2 403b accounts - one of which is 'dead'

The first question is whether the 403b in your current job allows incoming rollovers of IRAs and the 403b? The second question is what are the fees and investment choices in your current employer plan? If it accepts incoming rollovers, and the fees and investment choices are reasonable, you should (probably) rollover all your other accounts into it. This will simplify your finances, and by "getting rid" of the IRA balance, allow you to make Roth contributions free of any tax. I did looks into it, my current 403b account does accept rollovers from 403b and IRAs. It is lifecycle 2045 premier TTFPX (U.S. Equity 63.51%, International Equity 27.35%, Fixed Income 8.29%) and net expense 0.61

If your current plan does NOT allow incoming rollovers, then you'll need to think about whether you want to keep the old 403b account as is, and also consider converting the IRA to a Roth. This will incur a one-time tax hit, but then allow for future backdoor Roth contributions.

Of course, you'll need enough cash flow to max out your 401k first, prior to doing any backdoor Roth. But with your salary and your late start (I'm an MD/PhD and got an even later start!) you're likely going to need a very high savings rate anyway. Thus, maxing out your 401k and also maxing out a Roth each year is probably the minimum you'll want (need) to do. :D
Thanks a lot!! I have to work on the last point, which clearly is the most important.

wxl31
Posts: 58
Joined: Sat Jun 15, 2013 6:52 am

Re: Please help physician catch up.. late to the game

Post by wxl31 » Sun Jan 29, 2017 2:41 am

Much good advice given above but would disagree with consolidating your 401k/403b into a TIRA. Doing so 1. complicates your ability to do a backdoor Roth contribution and 2. disadvantages you from an asset protection standpoint in certain states (where ERISA plans like 401ks are fully sheltered from judgments against you whereas IRAs are susceptible - you will have to look at your individual state law to see if this applies).

My advice:

1. Simplify your cluttered accounts by consolidating all of your "old" 401k/403b/TIRAs into the 401k/403b at your current employer (assuming they accept these funds and the fund choices are reasonable). Same for your wife.
2. Maximize your 401k contributions yearly. If your wife works, maximize her 401k contributions yearly.
3. Once you have rolled all of your (and your wife's) TIRAs into a 401k/403b, do a backdoor Roth IRA for each of you yearly.
4. If you and your wife each contribute $18k to a 401k/403b and $5.5k to a Roth IRA, you'll be putting away $47k/year which is a respectable savings rate of 25%. Learn to live on what's left.
5. Put everything in a target retirement fund based on your anticipated retirement date until you figure stuff out.
6. Figure stuff out. I'd recommend reading Bogleheads wiki on asset allocation, tax-efficient fund placement, three-fund portfolio and spend some time at www.whitecoatinvestor.com. Once you've educated yourself and come up with an IPS, then get your funds out of the target retirement funds and be more DIY with your investments.

Strayshot
Posts: 611
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Location: New Mexico

Re: Please help physician catch up.. late to the game

Post by Strayshot » Sun Jan 29, 2017 10:55 am

If OP has a 401k that allows incoming rollovers that is a mechanism to simplify accounts but still enable a backdoor IRA.

OP as others have said you are in great shape as you are not servicing a multi-hundred-thousand student loan debt burden. If you can save 18k pretax 401k, 5500 after tax backdoor Roth, and another 1-2k per month in a taxable investing account your savings rate will be on track for a solid retirement. :sharebeer

This is all assuming your spouse does not work, but you can still put 5500 into a backdoor Roth for her as well

Topic Author
InvestorNewbie2016
Posts: 27
Joined: Thu Dec 22, 2016 1:35 pm

Re: Please help physician catch up.. late to the game

Post by InvestorNewbie2016 » Mon Mar 06, 2017 12:32 am

Thanks for all the knowledgeable replies!
Some of my investing confusion has always been related to whether or not I will continue to live in US after 5-10 yrs. Originally from India, kids growing up now and who knows if/when we may make that move. So plan to dive in make the most of investments. Hoping I am thinking straight.

Anyway, questions for the collective wisdom -

If it helps - focusing on > 10 years (retirement and kids' college), ready to be aggressive and take some risk to make the most.

1. Employer TDA 403b plan: Will max out only starting this year. I tried to catch up with the entire last paycheck of 2016, and reached the TDA after 1/1/17. Am I correct that I can still count that towards 2016?
Also, I have TIAA Lifecycle 2045 plan, wonder if I should be considering 2060? I am 34, plan to retire in about 30 yrs.

2. Old / 'dead' 403b: Consolidate to current TIAA plan (which accepts incoming transfers but ER and the asset allocation aren't ideal), or would Vanguard be a better option?

3. TIRA at betterment: Plan to convert that to Roth at Vanguard as DMFA mentioned above. Don't have any other TIRA, so I plan to do Backdoor Roth starting 2018. Can I do it this year?

4. 529: Reading up on these for kids - 3 and 1, but haven't started one yet. Live in MO, have state tax deduction and may supplement with NV plan. Found a debate on WCI insightful. Am not very sure how that would work if my kids decide to go to college outside of US (live with their grandparents in India).

Lastly (and kinda importantly), I know I should be maxing out on tax deferred accounts before taxable, which both wife and I have started but can't go to previous years. I would like to put the money (in excess of 6 months of emergency fund) thats doing little work in an online bank to some use. Would you recommend putting it in a taxable account at Vanguard and use 3 fund portfolio? Any other suggestions?

Thanks a lot in advance.

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emp2b3
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Re: Please help physician catch up.. late to the game

Post by emp2b3 » Mon Mar 13, 2017 1:04 pm

InvestorNewbie2016 wrote: 1. Employer TDA 403b plan: Will max out only starting this year. I tried to catch up with the entire last paycheck of 2016, and reached the TDA after 1/1/17. Am I correct that I can still count that towards 2016?
Also, I have TIAA Lifecycle 2045 plan, wonder if I should be considering 2060? I am 34, plan to retire in about 30 yrs.
For your current 403b you should be able to log in and see how any contributions were characterized in terms of tax year. Also it will show on your W2 from 2016 how much you contributed to a pre-tax retirement account. You can look at the different asset allocations for the two Lifecycle plans and see which one better matches your goals. You can also compare the ERs of the Lifecycle funds two the basic funds that would make up a 3 fund portfolio (knowing that you may not need to use all 3 of the US stock, International stock, and Bonds funds in each separate account).
InvestorNewbie2016 wrote: 2. Old / 'dead' 403b: Consolidate to current TIAA plan (which accepts incoming transfers but ER and the asset allocation aren't ideal), or would Vanguard be a better option?
It would be helpful to know the old 403b options compared to your current TIAA plan. You could edit your initial post above to include the different options available and their expenses or just add a new one here below.
InvestorNewbie2016 wrote: 3. TIRA at betterment: Plan to convert that to Roth at Vanguard as DMFA mentioned above. Don't have any other TIRA, so I plan to do Backdoor Roth starting 2018. Can I do it this year?
Read up a bit on the Backdoor Roth IRA (White Coat Investor website and The Finance Buff websites have helpful tutorials. Yes, you will be able to do a 2017 year contribution as long as you do not have the TIRA as of December 31st, 2017.
InvestorNewbie2016 wrote: 4. 529: Reading up on these for kids - 3 and 1, but haven't started one yet. Live in MO, have state tax deduction and may supplement with NV plan. Found a debate on WCI insightful. Am not very sure how that would work if my kids decide to go to college outside of US (live with their grandparents in India).
Check out this Finance Buff article https://thefinancebuff.com/529-plan-deduct-and-run.html. You do not need to use the MO plan. I do not how that would work if your kids end up studying in India; if there are too many negatives to the 529 plan you could contribute the minimum needed to get the state tax deduction and then invest the rest of the money in a taxable brokerage account that would be earmarked for their education.
InvestorNewbie2016 wrote: Lastly (and kinda importantly), I know I should be maxing out on tax deferred accounts before taxable, which both wife and I have started but can't go to previous years. I would like to put the money (in excess of 6 months of emergency fund) thats doing little work in an online bank to some use. Would you recommend putting it in a taxable account at Vanguard and use 3 fund portfolio? Any other suggestions?
If you do not need that "extra" money for anything within the next few years then I think it is fair to invest it as you see fit. I am a big fan of the 3 fund portfolio for my retirement savings as I prefer to keep things as simple as possible. I hope this helps at least a little bit and maybe some others can help to weigh in again as well!

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