New BH member, first time poster

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VentDoc2842
Posts: 6
Joined: Sat Feb 24, 2018 8:54 am

New BH member, first time poster

Post by VentDoc2842 » Sat Feb 24, 2018 9:10 am

First, thanks to all on this board who support this community. Great discussions and I have learned a significant amount already.

I had two questions for which I would like some sound advice.

Brief info: (more avail if questions)
Current income ~$290k, part of group practice. Good 401k with excellent profit sharing model.
Total contrib to this is $53k/year (between matching, etc), which I believe hits IRS maximums.

I recently switched from a managed porfolio -- expenses ~0.85% of investment, to an index fund approach based on this website (thanks again), with much better ERs. We have some funds remaining in older Raymond James accts from IRAs that we invested prior to new job.

Current assets:
401k -- $146,000
Roth 401k -- $24,300
Personal IRA (Raymond James)-- $15,500
Wife IRA (Raymond James)--$18,000
Personal Roth (Raymond James) -- $3,800

Current AA:
9% Domestic Bonds
42% Large Cap stocks
20% Small Cap stocks
24% International stocks
~4% (the rest) Cash/Money Market

My Raymond James Accounts are managed, can't adjust funds

401k plan at work is adjustable, my current fund election is:
40% VFIAX (Vanguard Admiral S&P 500 index) -- ER 0.04%
25% VSGDX (Vanguard Short Term Federal Bond) -- ER 0.10% -- I have almost no bond exposure elsewhere
15% DEVIX (Delaware Small Caps index) -- ER 0.99%
10% TGBAX (Templeton Global Bond Fund) -- ER 0.68%
10% AAIEX (American Beacon International Equity) -- ER 0.7%


Home mortgage $325,000 @ 3% fixed 15y. Have about 30% equity in our home
Med School debt $24,000 @ 3.65 variable 4y remain
emergency fund ~$5000 in vanguard

my questions:
1. should i pay down med school debt now given variable rate?
2. any advantage to converting the ira to roth and taking tax hit now versus later?
3. better to contribute more to 529 now for kids college or keep in taxable acct for liquidity?
Last edited by VentDoc2842 on Sat Feb 24, 2018 11:57 am, edited 2 times in total.

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Sandtrap
Posts: 5324
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: New BH member, first time poster

Post by Sandtrap » Sat Feb 24, 2018 10:06 am

Welcome :D
#1 . . Yes
EF should be addressed. 3-6 mos. income/expenses.
Then. #3

If you care to have suggestions in a greater context. . .
Target Allocation?
What funds are in the accounts?
Asking Portfolio Questions
https://www.bogleheads.org/forum/viewt ... =1&t=6212

Have you composed your IPS.
Define General Investment Goals and Objectives (what is your plan?)
https://www.bogleheads.org/wiki/Invest ... statement
Funding Priority (what do I do first?)
https://www.bogleheads.org/wiki/Priori ... vestments
Tax Efficient Fund Placement
https://www.bogleheads.org/wiki/Tax-ef ... _placement

Congratulations on your successes.
mahalo,
j :D
Last edited by Sandtrap on Sat Feb 24, 2018 11:11 am, edited 1 time in total.

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ruralavalon
Posts: 13953
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: New BH member, first time poster

Post by ruralavalon » Sat Feb 24, 2018 10:46 am

Welcome to the forum :) .

You can simply add information to your original post using the edit button (the pencil icon, near the upper right of your post), it helps a lot if all of your information is in one place.

VentDoc2842 wrote:
Sat Feb 24, 2018 9:10 am
First, thanks to all on this board who support this community. Great discussions and I have learned a significant amount already.

I had two questions for which I would like some sound advice.

Brief info: (more avail if questions)
36, wife also 36. We have 3 kids. I am a pulmonary/critical care doc in northwest Arkansas.
Current income ~$290k, part of group practice. Good 401k with excellent profit sharing model.
Total contrib to this is $53k/year (between matching, etc), which I believe hits IRS maximums.
What funds are you using, and what funds are offered in your 401k? Please give fund names, tickers and expense ratios.

Does your 401k allow Roth contributions?

Will your current 401k accept an incoming rollover from your traditional IRA?


VentDoc2842 wrote:I recently switched from a managed porfolio -- expenses ~0.85% of investment, to an index fund approach based on this website (thanks again), with much better ERs. We have some funds remaining in older Raymond James accts from IRAs that we invested prior to new job.
Personal IRA -- $15,500
Wife IRA --$18,000
Personal Roth -- $3,800
- each of these have a $50/year account fee :(
Where is each account currently located?

What funds are you using in each account? Please give fund names, tickers and expense ratios.

Will your current 401k accept a rollover of your traditional IRA? If so then I suggest doing that rollover. Getting rid of your traditional IRA with let you do a backdoor Roth IRA. Please see the wiki article "Backdoor Roth IRA".

This is a relatively small matter now, but I suggest moving the other IRAs (and your traditional IRA if you can't roll that over into your current 401k) to a low cost provider like Vanguard. This will get you easy access to mutual funds with lower expense ratios, and also no account fees if you sign up for e-delivery of paperwork. Just call Vanguard and they will help with the transfers, ask for "trustee to trustee" rollovers.

Low expenses are critical to long-term investing performance.


VentDoc2842 wrote:Home mortgage $325,000 @ 3% fixed 15y. Have about 30% equity in our home
Med School debt $24,000 @ 3.65 variable 4y remain
emergency fund ~$5000 in vanguard
I suggest building up the emergency fund.

Do you have an own-occupation disability insurance policy?

Do you each have a term life insurance policy?


VentDoc2842 wrote:my questions:
1. should i pay down med school debt ["$24,000 @ 3.65% variable 4y remain"] now given variable rate?
Yes, pay that off now if you can still keep up the maximum contributions to your 401k.


VentDoc2842 wrote:2. any advantage to converting the ira to roth and taking tax hit now versus later?
I don't believe so.


VentDoc2842 wrote:3. better to contribute more to 529 now for kids college or keep in taxable acct for liquidity?
I believe the 529 accounts will be better, but I must add that I have no experience on this since 529 accounts didn't exist before our children attended college.
Last edited by ruralavalon on Sat Feb 24, 2018 11:17 am, edited 3 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

laserdoc
Posts: 12
Joined: Sat Dec 18, 2010 6:50 pm

Re: New BH member, first time poster

Post by laserdoc » Sat Feb 24, 2018 11:15 am

One consideration. I assume you are putting 18,500 into 401K (2018) then the company match of some amount. Is the remainder being put into get to $53,000 a match or your After Tax contribution or a combination of both. If there is an after tax contribution into your 401k you MAY be able to do a Backdoor Mega Roth conversion of that money, depending upon plan rules. I also work for a large group practice and last year was able to do a tax free conversion into the Roth 401k of $32,000. (My company allows lump sum after tax additions to the 401k in December). It is an awesome option if available in your plan.

Also given your age and anticipating your future income may be much higher and tax rates much higher, Roth contributions may be better now despite your current income. I know I wish I had opted tor Roth earlier in my career when my pay was half of what is is now. Anything you can do to expand the Roth bucket is good.

Finally, pay off student debt first and beef up emergency funds.

Lafder
Posts: 3794
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: New BH member, first time poster

Post by Lafder » Sat Feb 24, 2018 11:45 am

I sent you a private message.
lafder

VentDoc2842
Posts: 6
Joined: Sat Feb 24, 2018 8:54 am

Re: New BH member, first time poster

Post by VentDoc2842 » Sat Feb 24, 2018 12:06 pm

All,

Thanks for the info already. Appreciate it.

Regarding the additional match, the profit sharing is treated pretax I believe.

VentDoc2842
Posts: 6
Joined: Sat Feb 24, 2018 8:54 am

Re: New BH member, first time poster

Post by VentDoc2842 » Sat Feb 24, 2018 1:47 pm

ruralavalon wrote:
Sat Feb 24, 2018 10:46 am
Welcome to the forum :) .

You can simply add information to your original post using the edit button (the pencil icon, near the upper right of your post), it helps a lot if all of your information is in one place.

VentDoc2842 wrote:
Sat Feb 24, 2018 9:10 am
First, thanks to all on this board who support this community. Great discussions and I have learned a significant amount already.

I had two questions for which I would like some sound advice.

Brief info: (more avail if questions)
36, wife also 36. We have 3 kids. I am a pulmonary/critical care doc in northwest Arkansas.
Current income ~$290k, part of group practice. Good 401k with excellent profit sharing model.
Total contrib to this is $53k/year (between matching, etc), which I believe hits IRS maximums.
What funds are you using, and what funds are offered in your 401k? Please give fund names, tickers and expense ratios.

Does your 401k allow Roth contributions?

Will your current 401k accept an incoming rollover from your traditional IRA?


VentDoc2842 wrote:I recently switched from a managed porfolio -- expenses ~0.85% of investment, to an index fund approach based on this website (thanks again), with much better ERs. We have some funds remaining in older Raymond James accts from IRAs that we invested prior to new job.
Personal IRA -- $15,500
Wife IRA --$18,000
Personal Roth -- $3,800
- each of these have a $50/year account fee :(
Where is each account currently located?

What funds are you using in each account? Please give fund names, tickers and expense ratios.

Will your current 401k accept a rollover of your traditional IRA? If so then I suggest doing that rollover. Getting rid of your traditional IRA with let you do a backdoor Roth IRA. Please see the wiki article "Backdoor Roth IRA".

This is a relatively small matter now, but I suggest moving the other IRAs (and your traditional IRA if you can't roll that over into your current 401k) to a low cost provider like Vanguard. This will get you easy access to mutual funds with lower expense ratios, and also no account fees if you sign up for e-delivery of paperwork. Just call Vanguard and they will help with the transfers, ask for "trustee to trustee" rollovers.

Low expenses are critical to long-term investing performance.


VentDoc2842 wrote:Home mortgage $325,000 @ 3% fixed 15y. Have about 30% equity in our home
Med School debt $24,000 @ 3.65 variable 4y remain
emergency fund ~$5000 in vanguard
I suggest building up the emergency fund.

Do you have an own-occupation disability insurance policy?

I have own occupation DI. short term DI starts after 37 days with income of around $12,000/mo; runs until 90d when longterm kicks in. ~$12000 post-tax per month after that.
This has been one reason for my relatively small emergency fund.

Do you each have a term life insurance policy?
Yes. Both.

VentDoc2842 wrote:my questions:
1. should i pay down med school debt ["$24,000 @ 3.65% variable 4y remain"] now given variable rate?
Yes, pay that off now if you can still keep up the maximum contributions to your 401k.


VentDoc2842 wrote:2. any advantage to converting the ira to roth and taking tax hit now versus later?
I don't believe so.


VentDoc2842 wrote:3. better to contribute more to 529 now for kids college or keep in taxable acct for liquidity?
I believe the 529 accounts will be better, but I must add that I have no experience on this since 529 accounts didn't exist before our children attended college.

doc2547
Posts: 6
Joined: Sat Feb 24, 2018 8:16 am

Re: New BH member, first time poster

Post by doc2547 » Sat Feb 24, 2018 1:58 pm

my major suggestion as a 55 year old dentist with a housewife and two children in college is save save. watch your expenses and put as much away as possible. Trust its never enough!!!

JBTX
Posts: 4043
Joined: Wed Jul 26, 2017 12:46 pm

Re: New BH member, first time poster

Post by JBTX » Sat Feb 24, 2018 2:21 pm

VentDoc2842 wrote:
Sat Feb 24, 2018 9:10 am
First, thanks to all on this board who support this community. Great discussions and I have learned a significant amount already.

I had two questions for which I would like some sound advice.

Brief info: (more avail if questions)
Current income ~$290k, part of group practice. Good 401k with excellent profit sharing model.
Total contrib to this is $53k/year (between matching, etc), which I believe hits IRS maximums.
Just curious, is all of that 401k deductible, or is it non deductible?

I recently switched from a managed porfolio -- expenses ~0.85% of investment, to an index fund approach based on this website (thanks again), with much better ERs. We have some funds remaining in older Raymond James accts from IRAs that we invested prior to new job.

Current assets:
401k -- $146,000
Roth 401k -- $24,300
Personal IRA (Raymond James)-- $15,500
Wife IRA (Raymond James)--$18,000
Personal Roth (Raymond James) -- $3,800

Current AA:
9% Domestic Bonds
42% Large Cap stocks
20% Small Cap stocks
24% International stocks
~4% (the rest) Cash/Money Market

My Raymond James Accounts are managed, can't adjust funds

401k plan at work is adjustable, my current fund election is:
40% VFIAX (Vanguard Admiral S&P 500 index) -- ER 0.04%
25% VSGDX (Vanguard Short Term Federal Bond) -- ER 0.10% -- I have almost no bond exposure elsewhere
15% DEVIX (Delaware Small Caps index) -- ER 0.99%
10% TGBAX (Templeton Global Bond Fund) -- ER 0.68%
10% AAIEX (American Beacon International Equity) -- ER 0.7%


Home mortgage $325,000 @ 3% fixed 15y. Have about 30% equity in our home
Med School debt $24,000 @ 3.65 variable 4y remain
emergency fund ~$5000 in vanguard

my questions:
1. should i pay down med school debt now given variable rate?
If you have extra cash sitting around I’d pay it off. If you don’t I wouldn’t worry with it. I’d pay it off before making taxable investments but I’d fully fund all retirement opportunities before paying it off. Also, is the med school debt tax deductible?
2. any advantage to converting the ira to roth and taking tax hit now versus later?
For you this is a complex question

Typically at your tax bracket I would not do that. You may have the opportunity to take it out at a lower rate down the road. However, having those traditional IRAs makes the possibility of doing backdoor Roths impractical. If they were converted then you could do backdoor Roths and not worry about hairy tax allocations.

If I were you I wouldn’t worry about this until I had ample liquidity.

Best case scenario would be to roll those IRAs into 401k if plan allows it. One way or other I’d get it out of Raymond James
3. better to contribute more to 529 now for kids college or keep in taxable acct for liquidity?
Judgment call. If you live in state where you get state income tax deduction 529 may be worthwhile. Otherwise I would wait until you feel you have ample liquidity and are financially “flush” before funding 529. You do get some marginal investment savings, but at the same time if your kid doesn’t go to college you have less flexibility and potential penalties down the road when you tap it.

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ruralavalon
Posts: 13953
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: New BH member, first time poster

Post by ruralavalon » Sat Feb 24, 2018 2:55 pm

Consider building an emergency fund large enough to cover basic living expenses for that 37 day elimination period of the disability insurance.

Will your current 401k accept an incoming rollover from your traditional IRA?

Will your current 401k allow Roth contributions?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Lafder
Posts: 3794
Joined: Sat Aug 03, 2013 7:56 pm
Location: East of the Rio Grande

Re: New BH member, first time poster

Post by Lafder » Sat Feb 24, 2018 4:38 pm

Current assets:
401k -- $146,000
Roth 401k -- $24,300
Personal IRA (Raymond James)-- $15,500
Wife IRA (Raymond James)--$18,000
Personal Roth (Raymond James) -- $3,800

((Consider rolling your IRAs into your 401k so you can do back door Roths. You must have a zero IRA balance by 12/31 to do back door Roths. With your wife's IRA, I would consider converting that to a Roth so you can start making back door Roth contributions for her too. If you prefer not to pay the tax on converting her IRA to a Roth, consider funding her IRA each year as a spousal IRA if she is not working, if working, let us know her options))

Current AA:
9% Domestic Bonds
42% Large Cap stocks
20% Small Cap stocks
24% International stocks
~4% (the rest) Cash/Money Market

((This is about 87% stocks/13% cash and bonds, 28% of stocks are international. I prefer at least 20% bonds, not including emergency fund))

My Raymond James Accounts are managed, can't adjust funds ((But you can move them :)))

401k plan at work is adjustable, my current fund election is:

((Can you take the time to list all possibilities in your work 401k? And can you roll your old IRAs into it?))

40% VFIAX (Vanguard Admiral S&P 500 index) -- ER 0.04% ((Large cap US stocks, nice low ER))

25% VSGDX (Vanguard Short Term Federal Bond) -- ER 0.10% -- I have almost no bond exposure elsewhere ((other bond options ?))

15% DEVIX (Delaware Small Caps index) -- ER 0.99% ((I would not hold this, the 1% ER is just too high, just SP 500 is fine. Total stock market is more than 85% large cap anyway))

10% TGBAX (Templeton Global Bond Fund) -- ER 0.68% ((International bonds is controversial. Vanguard uses them in their all on one funds but the Boglehead 3 fund portfolio does not include them. I would not hold them due to the high ER))

10% AAIEX (American Beacon International Equity) -- ER 0.7% ((Also high ER. Are there any other options? You can use your Roth space that you control for International if there are no low cost options in your 401k))


Home mortgage $325,000 @ 3% fixed 15y. Have about 30% equity in our home ((Nice low rate! I like to pay at least a payment or two extra a year since it makes a difference over the years. I just rounded up my payment so it is spread out over every month. Hopefully it is a small enough monthly amount that it is possible))

Med School debt $24,000 @ 3.65 variable 4y remain ((This is my mortgage rate :O, it will be paid off in no time. I might also pay a bit ahead on this as it is hard to get a guaranteed 3.65 return anywhere!))

emergency fund ~$5000 in vanguard ((Is this invested or money market? How many months expenses? I usually just use my checking account for my emergency fund and try to have 3-6 months of living expenses in there if possible))

my questions:
1. should i pay down med school debt now given variable rate? ((I would prioritize this over the mortgage yes))

2. any advantage to converting the ira to roth and taking tax hit now versus later? ((Maybe. I was thinking yes for your wife so she can do back door Roths, with yours I was thinking roll into your 401k. But the Roth conversion now is a possibility for you too! I have been told in general there is an advantage to the tax savings of a pretax IRA now at your income. But Roth space is valuable since you never pay tax on it again and you can add to Roths with your existing IRAs. Maybe someone will give you a mathematical reason why one or the other is better that is more clear than mine))

3. better to contribute more to 529 now for kids college or keep in taxable acct for liquidity?
((You can pay college from any taxable savings, or income stream so I say taxable! Not everyone agrees with me. If your house is paid for by the time they are college age, you can use the equivalent of the payments to fund college. I say max retirement accounts, get a healthy emergency fund, have taxable savings, ok to put some aside in 529s. A little now will grow. In full disclosure we never did 529s. We never seemed to have enough extra and then it seemed to complicated to figure out if they were worth it for the short time and fees we would have them))

lafder

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