Couple in early 30s, any changes?

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investing1012
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Couple in early 30s, any changes?

Post by investing1012 » Sun Sep 03, 2017 6:11 pm

I'm 35, my wife is 32, any changes to asset allocation?

Taxable accounts:
-His: Vanguard Total Stock: 180k
Vanguard Total International Stock: 40k
Vanguard Total Bond Market: 10k
-Her: Vanguard Total Stock: 260k
Vanguard Total International Stock: 40k
Vanguard Total Bond Market: 175k

401k
-His: Stocks: 80k
Bonds: 0
-Her: Stocks: 150k
Bonds: 0

Cash: 80K
Commercial Property: 220K
Home Equity: 150k

Mortgage expense: 3k
Other expense: 3k (cars paid off)
No debt other than mortgage ~450k
Combined annual Income: 950K

Any Input appreciated

NightFall
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Re: Couple in early 30s, any changes?

Post by NightFall » Sun Sep 03, 2017 6:21 pm

Congrats on a truly impressive income at such a young age (or at any age). I would suggest putting your bond holdings in your 401k and putting the equivalent stocks in taxable... especially in your tax bracket.

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BolderBoy
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Re: Couple in early 30s, any changes?

Post by BolderBoy » Sun Sep 03, 2017 6:41 pm

NightFall wrote:
Sun Sep 03, 2017 6:21 pm
Congrats on a truly impressive income at such a young age (or at any age). I would suggest putting your bond holdings in your 401k and putting the equivalent stocks in taxable... especially in your tax bracket.
Agreed. Try not to hold taxable bond funds in your taxable account.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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badbreath
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Re: Couple in early 30s, any changes?

Post by badbreath » Sun Sep 03, 2017 6:56 pm

Yes I agree with the above no bonds in taxable. Read this

www.bogleheads.org/wiki/Tax-efficient_fund_placement
“While money can’t buy happiness, it certainly lets you choose your own form of misery.” Groucho Marx

aristotelian
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Re: Couple in early 30s, any changes?

Post by aristotelian » Sun Sep 03, 2017 9:59 pm

$950K income and only $230k net worth? Better get that savings rate up.

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Sun Sep 03, 2017 10:08 pm

aristotelian wrote:
Sun Sep 03, 2017 9:59 pm
$950K income and only $230k net worth? Better get that savings rate up.
Thank you for the insight into bonds in tax-advantaged accounts.

How did you calculate 230k net worth? Based on the numbers I showed above our net worth is ~1.3 million. Also due to the long period of training we've reached this income in the past 2 years.

Lars_2013
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Re: Couple in early 30s, any changes?

Post by Lars_2013 » Sun Sep 03, 2017 10:20 pm

Without knowing your goals, desired asset allocation, etc, it's hard to provide feedback on your asset allocation. Also, when you say "stocks" in your 401k, that's not very specific. Is that in a fund that tracks the S&P500 index? Total US stock market? Something else?

At a glance, your international holdings as a share of your total stock holdings are lower than what I would choose for a long-term portfolio. Also, I don't know the back story on the commercial real estate holding, but if you've both got demanding jobs it might not be worth holding a building that requires some level of active management.

But, again, without knowing your goals / risk tolerance / desired asset allocation, it's hard to give meaningful feedback.

aristotelian
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Re: Couple in early 30s, any changes?

Post by aristotelian » Sun Sep 03, 2017 11:10 pm

investing1012 wrote:
Sun Sep 03, 2017 10:08 pm
aristotelian wrote:
Sun Sep 03, 2017 9:59 pm
$950K income and only $230k net worth? Better get that savings rate up.
Thank you for the insight into bonds in tax-advantaged accounts.

How did you calculate 230k net worth? Based on the numbers I showed above our net worth is ~1.3 million. Also due to the long period of training we've reached this income in the past 2 years.
I think I double counted the mortgage.

Taxable $440k
401k $230k
Cash $80k
Commercial Prop $220k
Home Equity $150k
Mortgage -$450k

I get $680k now. That makes more sense.

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Mon Sep 04, 2017 2:28 am

I see the confusion, by home equity I had already subtracted it's debt. The home residence is worth 600

denovo
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Re: Couple in early 30s, any changes?

Post by denovo » Mon Sep 04, 2017 4:31 am

Show the percentages, easier to give a look.
"Don't trust everything you read on the Internet"- Abraham Lincoln

denovo
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Re: Couple in early 30s, any changes?

Post by denovo » Mon Sep 04, 2017 4:33 am

investing1012 wrote:
Sun Sep 03, 2017 10:08 pm


How did you calculate 230k net worth? Based on the numbers I showed above our net worth is ~1.3 million. Also due to the long period of training we've reached this income in the past 2 years.

Since I am guessing MD, because of "training" and only this income for 2 years, I think probably most important thing is to make sure you have good malpractice insurance and good disability insurance.
"Don't trust everything you read on the Internet"- Abraham Lincoln

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Strayshot
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Re: Couple in early 30s, any changes?

Post by Strayshot » Mon Sep 04, 2017 8:12 am

No backdoor Roth? That is 11k of tax advantaged space a year you aren't using. Any deferred comp options? Mega-backdoor 401k options? If not, lobby the practice to change 401k plans, especially if it is a larger group practice where many physicians will benefit.
That's my .02

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Mon Sep 04, 2017 9:21 am

Yes, MD couple. We have disability and malpractice insurance. What do the bogleheads think of umbrella insurance?

Employer is a big corporation, so no negotiating with them. I understand how to get a backdoor Roth IRA. My main question is what is the benefit of it since you've already paid taxes on it?

nimo956
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Re: Couple in early 30s, any changes?

Post by nimo956 » Mon Sep 04, 2017 9:28 am

investing1012 wrote:
Mon Sep 04, 2017 9:21 am
Yes, MD couple. We have disability and malpractice insurance. What do the bogleheads think of umbrella insurance?

Employer is a big corporation, so no negotiating with them. I understand how to get a backdoor Roth IRA. My main question is what is the benefit of it since you've already paid taxes on it?
A taxable account throws off dividends and capital gains, on which you have to pay taxes. You also need to pay capital gains taxes if you sell shares at a gain. By comparison, you don't pay any taxes on the dividends within a Roth, and all withdrawals are tax-free.
50% VTI / 50% VXUS

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Mon Sep 04, 2017 9:52 am

nimo956 wrote:
Mon Sep 04, 2017 9:28 am
investing1012 wrote:
Mon Sep 04, 2017 9:21 am
Yes, MD couple. We have disability and malpractice insurance. What do the bogleheads think of umbrella insurance?

Employer is a big corporation, so no negotiating with them. I understand how to get a backdoor Roth IRA. My main question is what is the benefit of it since you've already paid taxes on it?
A taxable account throws off dividends and capital gains, on which you have to pay taxes. You also need to pay capital gains taxes if you sell shares at a gain. By comparison, you don't pay any taxes on the dividends within a Roth, and all withdrawals are tax-free.
I see, thank you for the explanation.

runner540
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Re: Couple in early 30s, any changes?

Post by runner540 » Mon Sep 04, 2017 10:27 am

investing1012 wrote:
Mon Sep 04, 2017 9:21 am
Yes, MD couple. We have disability and malpractice insurance. What do the bogleheads think of umbrella insurance?

Employer is a big corporation, so no negotiating with them. I understand how to get a backdoor Roth IRA. My main question is what is the benefit of it since you've already paid taxes on it?
I won't speak for all Bogleheads but I think umbrella insurance is important: you can afford the premium without even noticing it, and as a high income household, you would be an attractive lawsuit target.

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Watty
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Re: Couple in early 30s, any changes?

Post by Watty » Mon Sep 04, 2017 10:44 am

investing1012 wrote:
Sun Sep 03, 2017 6:11 pm
No debt other than mortgage ~450k
Combined annual Income: 950K
I would plan on getting the mortgage paid off over the next few years.

It is not exact but in a lot of ways a mortgage is like a negative bond so if you treat it like that in your asset allocation then you would have an asset allocation of something like 130% stocks and -30% bond(or whatever the numbers actually add up to).

That may be a lot more aggressive than you realize.

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Mon Sep 04, 2017 11:50 am

Wouldn't it be better to put the money in bonds than pay off the mortgage? On average the total bond fund has been returning 5%. My mortgage is at 3%. Since it's a tax deduction it would be more like 2%.

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Watty
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Re: Couple in early 30s, any changes?

Post by Watty » Mon Sep 04, 2017 7:47 pm

investing1012 wrote:
Mon Sep 04, 2017 11:50 am
Wouldn't it be better to put the money in bonds than pay off the mortgage? On average the total bond fund has been returning 5%. My mortgage is at 3%. Since it's a tax deduction it would be more like 2%.
Double check the 5% return on the bund fund, it is likely a lot less. If there is one that is yielding that much then please post the name of it since lots of people would like to get that on a total bond fund.

I tend to be a bit more conservative about mortgages than some people here so I would turn the question around and ask, "I have a paid off house, should I get a new mortgage so that I can invest the money?" Few people would say "yes" when it is asked that way. There usually is not a clear answer to the "Should I pay off the mortgage?" question but if you do decide to keep the mortgage just to invest the money then that would be using leverage and adding risk, but I don't see any need to you to take on any more risk.

Mrxyz
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Re: Couple in early 30s, any changes?

Post by Mrxyz » Mon Sep 04, 2017 8:05 pm

BolderBoy wrote:
Sun Sep 03, 2017 6:41 pm
NightFall wrote:
Sun Sep 03, 2017 6:21 pm
Congrats on a truly impressive income at such a young age (or at any age). I would suggest putting your bond holdings in your 401k and putting the equivalent stocks in taxable... especially in your tax bracket.
Agreed. Try not to hold taxable bond funds in your taxable account.
+1

Let me take a stab at this;

Place IRA in bond funds,
keep stocks in taxable
You may have problem in keeping an stable AA (do you know what you want your AA to be?) due to high savings amount each year - you may get stock heavy. Good problem to have.
Consider backdoor roth - google it and Ibonds - if you want to increase your bond investments.
Kids? if yes, then 529 may be considered
Mortgage - consider paying it off.........what's the interest rate?
Rebalance once a year. Establish an investment policy statement.

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Thu Sep 07, 2017 8:28 am

Mrxyz wrote:
Mon Sep 04, 2017 8:05 pm
BolderBoy wrote:
Sun Sep 03, 2017 6:41 pm
NightFall wrote:
Sun Sep 03, 2017 6:21 pm
Congrats on a truly impressive income at such a young age (or at any age). I would suggest putting your bond holdings in your 401k and putting the equivalent stocks in taxable... especially in your tax bracket.
Agreed. Try not to hold taxable bond funds in your taxable account.
+1

Let me take a stab at this;

Place IRA in bond funds,
keep stocks in taxable
You may have problem in keeping an stable AA (do you know what you want your AA to be?) due to high savings amount each year - you may get stock heavy. Good problem to have.
Consider backdoor roth - google it and Ibonds - if you want to increase your bond investments.
Kids? if yes, then 529 may be considered
Mortgage - consider paying it off.........what's the interest rate?
Rebalance once a year. Establish an investment policy statement.
The interest rate on the Mortgage is 3% (30 year fixed).

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knpstr
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Re: Couple in early 30s, any changes?

Post by knpstr » Thu Sep 07, 2017 8:39 am

aristotelian wrote:
Sun Sep 03, 2017 11:10 pm
I think I double counted the mortgage.

Taxable $440k
401k $230k
Cash $80k
Commercial Prop $220k
Home Equity $150k
Mortgage -$450k

I get $680k now. That makes more sense.
Among other errors, I think you didn't count about half of their taxable investments either. They have $705K not $440K

the calculation is:
Taxable $705K
401K $230K
Cash $80K
Commercial property $220K
Home Equity $150K ($600 asset minus $450 mortgage)
======================
Net worth $1,385,000
Very little is needed to make a happy life; it is all within yourself, in your way of thinking. -Marcus Aurelius

BW1985
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Re: Couple in early 30s, any changes?

Post by BW1985 » Thu Sep 07, 2017 9:02 am

I didn't know MD's can make 500K a couple years out of residency. Wowzers :shock:
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Thu Sep 07, 2017 11:34 am

BW1985 wrote:
Thu Sep 07, 2017 9:02 am
I didn't know MD's can make 500K a couple years out of residency. Wowzers :shock:
You have to go into the right field. My first offer out of residency was 550K.

ImmigrantSaver
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Re: Couple in early 30s, any changes?

Post by ImmigrantSaver » Thu Sep 07, 2017 2:36 pm

investing1012 wrote:
Thu Sep 07, 2017 11:34 am
BW1985 wrote:
Thu Sep 07, 2017 9:02 am
I didn't know MD's can make 500K a couple years out of residency. Wowzers :shock:
You have to go into the right field. My first offer out of residency was 550K.
Some specialized surgery? Just curious..

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Thu Sep 07, 2017 5:11 pm

ImmigrantSaver wrote:
Thu Sep 07, 2017 2:36 pm


Some specialized surgery? Just curious..
No, I'm in a non-surgical sub-specialty.

mervinj7
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Re: Couple in early 30s, any changes?

Post by mervinj7 » Thu Sep 07, 2017 6:26 pm

You can edit your post to follow the below format. It makes it easier for people to give you advice (with less clarification questions).

https://www.bogleheads.org/wiki/Asking_ ... _questions

investing1012
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Re: Couple in early 30s, any changes?

Post by investing1012 » Sat Sep 09, 2017 10:51 am

mervinj7 wrote:
Thu Sep 07, 2017 6:26 pm
You can edit your post to follow the below format. It makes it easier for people to give you advice (with less clarification questions).

https://www.bogleheads.org/wiki/Asking_ ... _questions
That involves too much work :sharebeer I got the jist though, that I need to put my bonds in tax-advantaged accounts. I guess I'm a little confused as to why you should put bonds in there as opposed to stocks, considering stocks are more likely to gain?

abonder
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Re: Couple in early 30s, any changes?

Post by abonder » Sat Sep 09, 2017 5:48 pm

There's a lot debate around the "which assets go preferentially in tax-protected." White coat investor had a provocative post arguing for bonds in taxable. One thing that is worth considering is a low-cost, high-quality municipal bond fund for any bonds you do have in taxable. The Vanguard intermediate-term municipal bond fund is one that is popular around here. Some prefer the Baird fund. A regular (non-muni) bond fund doesn't make sense for your income bracket given your federal tax rates.

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