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29yo Investment Plan Review

Posted: Tue May 14, 2019 9:44 pm
by familymedicinedoctor
Emergency funds/Short term savings: 20,000. Currently have about 10,000. Plan to contribute 500/month until funded. Plan to save ~5000 toward a vacation fund. Plan to save for new car which we expect to need in 1-2 years. Will keep all this in an online savings account that brings in 2.2%

Debt:
1. Student loans – 158,000. 4.75% fixed. Plan to refinance once start new job and pay off in 4 years.
2. Mortgage – 151,000. 30 year loan at 3.7% fixed. Plan to refinance to 15 year.
3. Car loan – 15,000. 3 years remaining of 0%.

Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal
State of Residence: Indiana
Age: 29

Retirement:
Savings rate: Plan to save 30,000 a year in pre-tax fund with a goal of 3 million by retirement at age 65. This is assuming an after tax return of 4%.

Desired Asset allocation:
1. Vanguard Total Stock Market Fund (VTSMX) 30%
2. Vanguard Total International Stock Market Fund (VGTSX) 30%
3. Vanguard REIT Index Fund (VGSIX) 10%
4. Vanguard Total Bond Market Fund (VBFMX) 30%

Risk: Age = Bonds

Current Portfolio: 10k in a Transamerica Roth 403b. 60k of inherited stock split between 7 different stocks. Starting a new job August 2019. After one year in job have access to a profit sharing plan that allows for up to 56k of pre-tax savings. For first year plan to start an SEP-IRA as I am paid on 1099. Plan to roll 403b and individual stocks over into new portfolio.

Employer offered funds: these are all load-mutual funds. There is a self-management option with a $100 a year fee. I am going to do this and invest at Vanguard.
AMERICAN CAPITAL WORLD G & I
Core RWIFX
AMERICAN WASHINGTON MUT INV
Core RWMFX
BLACKROCK HL SC OPP INST
Core SHSSX
COLUMBIA SMALL CAP INDX INSTL2
Core CXXRX
FRANKLIN MUTUAL FIN SVCS FUND
Core TEFAX
FRANKLIN UTILITIES FD ADV CL
Core FRUAX
HARTFORD MID CAP FD CL R5
Core HFMTX
ISHARES S&P 500 INDEX FD INSTL
Core BSPIX
JOHN HANCOCK DISCIPLINED
Core JVMIX
MFS TECHNOLOGY FD CL R4
Core MTCJX
OPPENHEIMER INTL CL Y
Core OIGYX
T ROWE PRICE BLUE CHP GRTH INV
Core TRBCX
T ROWE PRICE QM US SM CAP GRTH
Core PRDSX
TIF INTL EQUITY SERIES FD
Core TFEQX
VICTORY SYCAMORE SMALL COMP I
Core VSOIX
BOND/FIXED INCOME
BLACKROCK TOTAL RETRN PORTFOLI
Core MAHQX
BLACKROCK US GOV BOND I
Core PNIGX
NUVEEN INFLATION PROTECTED I
Core FYIPX
LORD ABBETT BOND DEBENTURE A
Non-Core LBNDX
ALLOCATION FUNDS
AMERICAN BALANCED FUND R5
Core RLBFX
BLACKROCK GLOBAL ALLOC I
Core MALOX
STABLE VALUE FUND
FEDERATED CAPITAL PRES CL IP
Core FCPIT
GOALMANAGER MODEL
AGGRESSIVE MODEL

CONSERVATIVE MODEL

MODERATE MODEL


HSA: max out yearly.

College: currently have three children. Plan to save enough for them to attend in-state public university. This will be about 1000/month. In Indiana I get 20% tax credit up to 1000. I will max out Indiana 529 to 5000. If there is a better option, the rest of the yearly contributions will go into a different state’s fund. Plan to use a Age-Based Options

Questions:
1. Is savings rate appropriate? I realize I am not maxing out pre-tax retirement accounts. However my family lives a modest lifestyle. One difficulty is I am basing all of this planning on income from a new job I am starting in August. The new income is 3x higher than what I currently make. It is hard for me to appreciate what cash-flow will be like. Maybe I will have a lot of left over money that will make me rethink my savings rate. Or I may be able to work less while still meeting retirement goals.
2. Should I roll over current accounts into SEP-IRA or into the profit sharing plan?
3. Anything I am missing? Trying to do this by myself for the first time.

Re: 29yo Investmant Plan Review

Posted: Tue May 14, 2019 10:39 pm
by megabad
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
1. Is savings rate appropriate? I realize I am not maxing out pre-tax retirement accounts. However my family lives a modest lifestyle. One difficulty is I am basing all of this planning on income from a new job I am starting in August. The new income is 3x higher than what I currently make. It is hard for me to appreciate what cash-flow will be like. Maybe I will have a lot of left over money that will make me rethink my savings rate. Or I may be able to work less while still meeting retirement goals.
Using your assumptions, my rough math tells me that you will be a little short of your $3 million goal if that is in todays dollars. But I have no idea if this is ok or not for your personal situation. It sounds like your savings situation hasn't firmed up yet, so I don't think the exact numbers are that important yet.
2. Should I roll over current accounts into SEP-IRA or into the profit sharing plan?
Yes. I don't know what "profit sharing plan" means exactly in your case, but i know the SEP IRA would be fine.
3. Anything I am missing? Trying to do this by myself for the first time.
Since you are considering SEP IRA, I assume you have already investigated the Solo 401k. For many, the Solo 401k allows more for more tax advantaged space, but every situation is different.

Can I ask why the mortgage refinance? 3.7% is a great rate on a 30 yr.

You indicate that your income is about to drastically increase. Does this move your tax bracket? Is this a permanent increase? If so, you may want to heavily invest in Roth retirement accounts (Roth IRA, Roth 403b) this year if your tax bracket will be lower than in the future.

Re: 29yo Investmant Plan Review

Posted: Tue May 14, 2019 11:22 pm
by familymedicinedoctor
megabad;

Good point about the savings rate. Very reasonable to be flexible. I am trying to set a budget to be responsible early on with the large increase in income. That is why I pushed toward picking a number.

The self-employed profit-sharing plan includes 4 parts:
1. Profit sharing plan up to 22,750
2. Mandatory Safe Harbor 8,250
3. 401k up to 18,500 (can do Roth)
4. Employer discretionary match up to 5,500

In researching the solo 401k it seems the main benefit would be backdoor IRA which I am not planning on.

I thought I might be able to get a better rate on my mortgage if I go from 30 to 15. Maybe that is wrong.

Re: 29yo Investmant Plan Review

Posted: Tue May 14, 2019 11:33 pm
by Watty
If you have not seen it yet be sure to check out the White Coat Investor website which is run by a doctor who is a poster here.

https://www.whitecoatinvestor.com/

Re: 29yo Investmant Plan Review

Posted: Wed May 15, 2019 5:58 am
by familymedicinedoctor
Everything I know came from the White Coat Investor, his book, and recommendations for other books. Thanks!

Re: 29yo Investmant Plan Review

Posted: Wed May 15, 2019 6:24 am
by SCb&b
What is your income going to be? Can't comment on savings rate without it but your savings rate may be low for someone who is starting career late (say this as a fellow physician). Also, you have a new car already, why do you need 2 new cars?

At 29 years old, your savings rate and income are most important to your longterm net worth. Investment choices, far less so.

Re: 29yo Investmant Plan Review

Posted: Wed May 15, 2019 12:11 pm
by familymedicinedoctor
I make about 80k now and will be making 225-240k.

Sorry. When I say new car, I just mean new me. Open to buying used We have three kids and the car that can lug them around has about a year max left in it. We will likely have more kids in the future so have to purchase a bigger vehicle.

Re: 29yo Investmant Plan Review

Posted: Wed May 15, 2019 12:12 pm
by ExitStageLeft
Welcome to the forum!

Your plan looks like an excellent first step in securing your financial future. Given how much uncertainty lies ahead, it's good to anticipate there being multiple iterations of the plan as things progress and your career and family life evolve. The biggest challenge I see will be in resisting the inevitable lifestyle creep that comes with more income. Once the student loans are paid off you should strive to max out the tax-advantaged savings every year. Don't dismiss Roth IRAs either. Since it sounds like the 3x income boost will give you a high MAGI then you should look into backdoor Roth contributions.

Re: 29yo Investmant Plan Review

Posted: Wed May 15, 2019 1:25 pm
by softwaregeek
I would reconsider the mortgage paydown. Your mortgage is probably not worth doing a refi on, but basically you can 'earn' 4.75% by paying on the student loans vs. 3.75% for the mortgage. Also, probably even more favorable after tax since you can deduct interest on mortgages.

I would even consider a cash-out refi on the house to pay off the student loan debt. Debt against the house is better than debt against the person, when you are young at least. And the interest rate would be lower and tax advantaged. (Which is about to become much more important to you)

Re: 29yo Investmant Plan Review

Posted: Wed May 15, 2019 3:55 pm
by curryitr
As a mortgage lender I will tell you that you are likely going to end up with the same rate that you currently have if you are going to refi to a 15 year fixed. It’s not going to be worth the closing costs unless you are doing a debt consolidation like the previous poster commented. Even then I’m not sure how much you are going to save if your plan is to pay off the student loans in 4-5 years. If you want to pay off the mortgage in 15 then I would just make an amortization schedule to meet your goals and start paying extra.

Unless that is you are in an FHA loan and stuck with PMI indefinitely....

Re: 29yo Investmant Plan Review

Posted: Wed May 15, 2019 5:22 pm
by Watty
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
3. Anything I am missing?
One thing that I do is that I have a very simple spreadsheet that I update each year with my net worth on January 1st.

I do this so that I can see my progress since a lot of the things like paying down debt will increase your net worth even if it does not increase your total account balance.

Ar first your net worth may be negative but it will be good to see that as a reality check when the high income starts.
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
College: currently have three children. Plan to save enough for them to attend in-state public university. This will be about 1000/month. In Indiana I get 20% tax credit up to 1000. I will max out Indiana 529 to 5000. If there is a better option, the rest of the yearly contributions will go into a different state’s fund. Plan to use a Age-Based Options
One thing you might consider in your plans to pay for college is that if you get your house paid off by the time the kids are in college then you can use your "mortage payment" to pay part of the college costs out of your cash flow.

I don't see how refinancing would be to your advantage though so I would just keep making your normal mortage payment until the student loans are paid off then each month use that money to pay down your mortage.

One other thing to keep in mind about college costs is that you will have around 22 years to pay for them if your youngest kid is a baby now since the youngest kid will not graduate college for around 22 years. Sometimes people will realize that a kindergarten age kid will start college in 12 years and feel a lot of pressure to quickly save up the college funds.
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
3. Anything I am missing?
I did not see a plan for paying for things like vacations or other extras. It is really important to budget and plan for these so that when you want to do them you have money earmarked for things like that. For example with your income, especially once you start your new job, doing something like taking a family trip to Florida or Hawaii might me a reasonable thing to do. The potential problem is that if you have not budgeted for that then you might raid some other account to pay for it.

I was in a much different situation but when I was about your age I had a seperate account that was my travel fund and I had 1 or 2 percent of my paycheck automatically deposited into that separate account from each paycheck. . When there was enough money in that account I had not guilt in spending that on travel or some other splurge.

One your kids get to be in middle and high school it will be much harder to schedule things like vacations to be sure to do things like that when they are young.

Re: 29yo Investmant Plan Review

Posted: Thu May 16, 2019 11:15 am
by familymedicinedoctor
ExitStageLeft wrote:
Wed May 15, 2019 12:12 pm
Welcome to the forum!

Your plan looks like an excellent first step in securing your financial future. Given how much uncertainty lies ahead, it's good to anticipate there being multiple iterations of the plan as things progress and your career and family life evolve. The biggest challenge I see will be in resisting the inevitable lifestyle creep that comes with more income. Once the student loans are paid off you should strive to max out the tax-advantaged savings every year. Don't dismiss Roth IRAs either. Since it sounds like the 3x income boost will give you a high MAGI then you should look into backdoor Roth contributions.
What to do once the loans are paid off is something I have not thought enough about thank you. I would be okay with some creep as admittedly at that point I owe it to my family to let them live a bit after 11 years of training to be a physician and then focusing on debt for another 4.

My wife really does not like the idea of being tied to a budget so I am using the “pay yourself first approach” and then giving her the space to use the left overs as she sees fit. I will have to think about what to do with the extra money from loan repayments.

Re: 29yo Investmant Plan Review

Posted: Thu May 16, 2019 12:10 pm
by familymedicinedoctor
softwaregeek wrote:
Wed May 15, 2019 1:25 pm
I would reconsider the mortgage paydown. Your mortgage is probably not worth doing a refi on, but basically you can 'earn' 4.75% by paying on the student loans vs. 3.75% for the mortgage. Also, probably even more favorable after tax since you can deduct interest on mortgages.

I would even consider a cash-out refi on the house to pay off the student loan debt. Debt against the house is better than debt against the person, when you are young at least. And the interest rate would be lower and tax advantaged. (Which is about to become much more important to you)
This gives me a lot to think about. I didn’t factor in things like closing costs with refinancing.

The interesting thing about my student loans is my employer is giving me 33k yearly for three years for loan repayment. So should I add everything above 100k to my mirtgage now to pay off the student loans or wait to see how much is left after three years and then pay the rest from the mortgage?

Re: 29yo Investmant Plan Review

Posted: Thu May 16, 2019 2:21 pm
by familymedicinedoctor
Watty wrote:
Wed May 15, 2019 5:22 pm
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
3. Anything I am missing?
One thing that I do is that I have a very simple spreadsheet that I update each year with my net worth on January 1st.

I do this so that I can see my progress since a lot of the things like paying down debt will increase your net worth even if it does not increase your total account balance.

Ar first your net worth may be negative but it will be good to see that as a reality check when the high income starts.
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
College: currently have three children. Plan to save enough for them to attend in-state public university. This will be about 1000/month. In Indiana I get 20% tax credit up to 1000. I will max out Indiana 529 to 5000. If there is a better option, the rest of the yearly contributions will go into a different state’s fund. Plan to use a Age-Based Options
One thing you might consider in your plans to pay for college is that if you get your house paid off by the time the kids are in college then you can use your "mortage payment" to pay part of the college costs out of your cash flow.

I don't see how refinancing would be to your advantage though so I would just keep making your normal mortage payment until the student loans are paid off then each month use that money to pay down your mortage.

One other thing to keep in mind about college costs is that you will have around 22 years to pay for them if your youngest kid is a baby now since the youngest kid will not graduate college for around 22 years. Sometimes people will realize that a kindergarten age kid will start college in 12 years and feel a lot of pressure to quickly save up the college funds.
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
3. Anything I am missing?
I did not see a plan for paying for things like vacations or other extras. It is really important to budget and plan for these so that when you want to do them you have money earmarked for things like that. For example with your income, especially once you start your new job, doing something like taking a family trip to Florida or Hawaii might me a reasonable thing to do. The potential problem is that if you have not budgeted for that then you might raid some other account to pay for it.

I was in a much different situation but when I was about your age I had a seperate account that was my travel fund and I had 1 or 2 percent of my paycheck automatically deposited into that separate account from each paycheck. . When there was enough money in that account I had not guilt in spending that on travel or some other splurge.

One your kids get to be in middle and high school it will be much harder to schedule things like vacations to be sure to do things like that when they are young.
I have an excel spreadsheet going. Thanks!

Regarding vacation I do have that planned into the budget. I thought it would be too much detail for the post. Thanks for the encouragement to vacation when the kids are younger. It is definitely not easy traveling with them but I appreciate the encouragement.

Re: 29yo Investment Plan Review

Posted: Thu May 16, 2019 5:29 pm
by ralph124cf
I like your choice of taking the self directed investing plan for the profit sharing. The investment choices in the company provided plan has some real stinkers.

Ralph

Re: 29yo Investmant Plan Review

Posted: Fri May 17, 2019 6:18 pm
by softwaregeek
familymedicinedoctor wrote:
Thu May 16, 2019 11:15 am
ExitStageLeft wrote:
Wed May 15, 2019 12:12 pm
Welcome to the forum!

Your plan looks like an excellent first step in securing your financial future. Given how much uncertainty lies ahead, it's good to anticipate there being multiple iterations of the plan as things progress and your career and family life evolve. The biggest challenge I see will be in resisting the inevitable lifestyle creep that comes with more income. Once the student loans are paid off you should strive to max out the tax-advantaged savings every year. Don't dismiss Roth IRAs either. Since it sounds like the 3x income boost will give you a high MAGI then you should look into backdoor Roth contributions.
What to do once the loans are paid off is something I have not thought enough about thank you. I would be okay with some creep as admittedly at that point I owe it to my family to let them live a bit after 11 years of training to be a physician and then focusing on debt for another 4.

My wife really does not like the idea of being tied to a budget so I am using the “pay yourself first approach” and then giving her the space to use the left overs as she sees fit. I will have to think about what to do with the extra money from loan repayments.
I definitely agree with that. For a long time, I swept 15 percent of my paycheck directly into the company stock plan. It caused a modest degree of discomfort that kept me from overspending. My wife asked why we were constantly having cash flow issues and I had to explain we were putting aside 35% of our pay.

Re: 29yo Investment Plan Review

Posted: Fri May 17, 2019 6:33 pm
by betablocker
familymedicinedoctor wrote:
Tue May 14, 2019 9:44 pm
Emergency funds/Short term savings: 20,000. Currently have about 10,000. Plan to contribute 500/month until funded. Plan to save ~5000 toward a vacation fund. Plan to save for new car which we expect to need in 1-2 years. Will keep all this in an online savings account that brings in 2.2%

Debt:
1. Student loans – 158,000. 4.75% fixed. Plan to refinance once start new job and pay off in 4 years.
2. Mortgage – 151,000. 30 year loan at 3.7% fixed. Plan to refinance to 15 year.
3. Car loan – 15,000. 3 years remaining of 0%.

Tax Filing Status: Married Filing Jointly
Tax Rate: 22% Federal
State of Residence: Indiana
Age: 29

Retirement:
Savings rate: Plan to save 30,000 a year in pre-tax fund with a goal of 3 million by retirement at age 65. This is assuming an after tax return of 4%.

Desired Asset allocation:
1. Vanguard Total Stock Market Fund (VTSMX) 30%
2. Vanguard Total International Stock Market Fund (VGTSX) 30%
3. Vanguard REIT Index Fund (VGSIX) 10%
4. Vanguard Total Bond Market Fund (VBFMX) 30%

Risk: Age = Bonds

Current Portfolio: 10k in a Transamerica Roth 403b. 60k of inherited stock split between 7 different stocks. Starting a new job August 2019. After one year in job have access to a profit sharing plan that allows for up to 56k of pre-tax savings. For first year plan to start an SEP-IRA as I am paid on 1099. Plan to roll 403b and individual stocks over into new portfolio.

Employer offered funds: these are all load-mutual funds. There is a self-management option with a $100 a year fee. I am going to do this and invest at Vanguard.
AMERICAN CAPITAL WORLD G & I
Core RWIFX
AMERICAN WASHINGTON MUT INV
Core RWMFX
BLACKROCK HL SC OPP INST
Core SHSSX
COLUMBIA SMALL CAP INDX INSTL2
Core CXXRX
FRANKLIN MUTUAL FIN SVCS FUND
Core TEFAX
FRANKLIN UTILITIES FD ADV CL
Core FRUAX
HARTFORD MID CAP FD CL R5
Core HFMTX
ISHARES S&P 500 INDEX FD INSTL
Core BSPIX
JOHN HANCOCK DISCIPLINED
Core JVMIX
MFS TECHNOLOGY FD CL R4
Core MTCJX
OPPENHEIMER INTL CL Y
Core OIGYX
T ROWE PRICE BLUE CHP GRTH INV
Core TRBCX
T ROWE PRICE QM US SM CAP GRTH
Core PRDSX
TIF INTL EQUITY SERIES FD
Core TFEQX
VICTORY SYCAMORE SMALL COMP I
Core VSOIX
BOND/FIXED INCOME
BLACKROCK TOTAL RETRN PORTFOLI
Core MAHQX
BLACKROCK US GOV BOND I
Core PNIGX
NUVEEN INFLATION PROTECTED I
Core FYIPX
LORD ABBETT BOND DEBENTURE A
Non-Core LBNDX
ALLOCATION FUNDS
AMERICAN BALANCED FUND R5
Core RLBFX
BLACKROCK GLOBAL ALLOC I
Core MALOX
STABLE VALUE FUND
FEDERATED CAPITAL PRES CL IP
Core FCPIT
GOALMANAGER MODEL
AGGRESSIVE MODEL

CONSERVATIVE MODEL

MODERATE MODEL


HSA: max out yearly.

College: currently have three children. Plan to save enough for them to attend in-state public university. This will be about 1000/month. In Indiana I get 20% tax credit up to 1000. I will max out Indiana 529 to 5000. If there is a better option, the rest of the yearly contributions will go into a different state’s fund. Plan to use a Age-Based Options

Questions:
1. Is savings rate appropriate? I realize I am not maxing out pre-tax retirement accounts. However my family lives a modest lifestyle. One difficulty is I am basing all of this planning on income from a new job I am starting in August. The new income is 3x higher than what I currently make. It is hard for me to appreciate what cash-flow will be like. Maybe I will have a lot of left over money that will make me rethink my savings rate. Or I may be able to work less while still meeting retirement goals.
2. Should I roll over current accounts into SEP-IRA or into the profit sharing plan?
3. Anything I am missing? Trying to do this by myself for the first time.
I’d consider not paying off the mortgage certainly and most likely not the student debt either since it is tax deductible. Use that money to max out your retirement accounts. Otherwise you are doing great

Re: 29yo Investment Plan Review

Posted: Mon May 20, 2019 5:31 pm
by softwaregeek
Since you have the upcoming annual student loan repayment from your employer, I would worry less about your student loans and suggest amping up your tax-advantaged retirement fund now. It's probably worth paying 4.75% tax deductible to have that put in an IRA/401k.

After that, consider ramping up your emergency fund more. I am a paranoid; I think 3-6 months is too little.