New Attending Physician looking for Portfolio Advice

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Topic Author
newinvestor1234321
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Joined: Mon Jul 13, 2020 4:44 pm

New Attending Physician looking for Portfolio Advice

Post by newinvestor1234321 » Mon Jul 13, 2020 6:15 pm

First of all, thanks for taking the time to review and (hopefully) provide constructive feedback. I am a new investor and this is my first post. I started reading (and simplifying) about a year ago. Thus far I have read White Coat Investor, Millionaire Next Door, Common Sense on Mutual Funds, and Bogleheads Guide to Investing. Anything else to add?

I have spent the far majority of my first year plus as an attending living like a resident and paying down previous med school debt, building up a portfolio (thankfully saved some during residency and wife continually has saved), and buying a car (much needed and wanted).

I also got a 1.25M basic life policy on myself, wife has 250k through work. We recently got 1M umbrella policy. I have specialty-specific short- and long-term disability through work.

Emergency Funds: Yes, approximately one year independent of portfolio balance below

Debt: None

Tax Rate: 35% marginal, 0% state (19% effective) [His salary 400k; Her 35k]

Tax Status: Married filing jointly

Age: 32 (me and wife), no kids yet

Desired Asset Allocation: Not quite decided, but probably 60-80% equities

Current portfolio – slightly over 500k

Saving account – 24.5% - this will be used as house down-payment in 1-2 years

His 401k (Fidelity) – 10% – Fidelity Freedom Index 2055
Her 403b (AIG) – 2.9% via AIG

Joint HSA (Fidelity) - 1% in Fidelity Freedom Index 2055

His roth IRA (Vanguard) – 7.4% - VFFVX – vanguard target 2055
Her roth IRA (Vanguard) – 10.5% - VFIAX – S&P 500 index

His taxable (now at Vanguard)
4.9% -VFFVX (target retirement 2055)
8.9% - VGSTX (STAR fund)
8% - VTSAX (total US stock)
4.9% - VWELX (wellington)
10% - VWITX (intermediate tax-exempt bond)

Her taxable (now at Vanguard)
7% - VFIAX (S&P 500 index)

2020 New Contributions:
19.5k his 401k (5.5k match)
19.5k her 403b (1k match)
6k his backdoor roth
6k her backdoor roth
7.1k combined HSA (first year available, as above)
Taxable: 34k over first 6 months, on pace for even more in second half now that debt gone

Funds available:
His 401k – good options with Fidelity, but happy with the low ER fidelity freedom index 2055
Her 403b – I don’t have the entire list, but I picked 33% bonds, 33% mid-cap, 34% large cap with ER’s between 0.3-0.4% (those were the lowest offered in her plan)

Questions:
1) I have spent SO many hours simplifying into the funds above. Both my wife and I had funds in different locations, individual stocks, different brokers, active management, etc. The only “high” ER funds above (0.3-0.4%) are those in her current 403b plan, which were the best of a variety of so-so to bad options. Is the above still too complicated? I ask this because I feel like I finally have a reasonable handle on all the above.

2) We are planning to buy a house in the next 1-2 years, but only after I make partner with my current group. We will probably spend between 550-750k. We are currently building up a down-payment in a high yield saving account and adding to this every month. (a) Can we afford this? (b) I’m leaning towards 15 year fixed because I think I could get this for under 3% and like being debt-free ASAP. May even want to pay off sooner. Good idea? Too much house?

3) My wife has a state 457 plan available to her. Due to consolidating both our finances I ignored the plan for this year. Is this something we should pursue for her next year and in the future? Only if low ER options exist?

4) One thing my wife and I both want to do is extensive traveling post-COVID now that we can afford it and I can get the available time off without constantly studying for the next exam or writing up the next research project. We are thinking of spending approximately 25-30k/year here in the next couple years, partially to make up for lost time during med school and residency.

5) I expect my salary to increase closer to 500k after becoming a partner. It seems like a stable job, even during COVID. I could change and get 400-450k, if needed.

6) Our current expenses with renting are below 60k, but after adding in traveling and mortgage for next year it will probably be closer to 120k. Renting cost 18k a year now, which would be subtracted from the total. I’m not sure what this number would be by retirement and with possible kid(s), but hopefully much less once the house is paid off.

7) I potentially would like the option to retire by 55, but would also consider working less (0.5-0.8 FTE) or even just selling some of the overnight and/or weekend call I really despise. Therefore, I want a percentage of my retirement savings in taxable so this is possible… Are we on pace for this?
Last edited by newinvestor1234321 on Sat Jul 25, 2020 10:10 am, edited 1 time in total.

Sgal8713
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Re: First time poster, new portfolio evaluation

Post by Sgal8713 » Mon Jul 13, 2020 7:38 pm

Seems pretty simple to me. I would careful about additional funds in taxable, but still not too crazy.

1) Seems simple enough to me if it seems simple enough to you. Could clean up taxable, but not bad. I prefer to use stock and bond funds instead of retirement funds, but multiple roads to Dublin.

2) Yes and yes. You have 125k or so, I would allow it up to 200k so you have well over 20%. With your income and savings rate you can buy any reasonable (I would say up to 800k-1m) house. I would get it with a 15 year once you are partner and feel like the pay is stable. How bad of a haircut did the partners take with COVID?

3-7) As WCI has said: You can do anything you want, but not everything. Spend some money traveling before kids. They aren't cheap (money or time).

The only other comment is make sure you have enough disability insurance. Your term life seems light compared to your earnings. Probably not a huge deal while renting, but wife has put alot of skin in to get you where you are and would not keep same lifestyle on 1.25m. I would definitely go up once house and kids are pending. Probably 3-5m range

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geerhardusvos
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Location: heavenlies

Re: First time poster, new portfolio evaluation

Post by geerhardusvos » Mon Jul 13, 2020 7:40 pm

newinvestor1234321 wrote:
Mon Jul 13, 2020 6:15 pm
First of all, thanks for taking the time to review and (hopefully) provide constructive feedback. I am a new investor and this is my first post. I started reading (and simplifying) about a year ago. Thus far I have read White Coat Investor, Millionaire Next Door, Common Sense on Mutual Funds, and Bogleheads Guide to Investing. Anything else to add?

I have spent the far majority of my first year plus as an attending living like a resident and paying down previous med school debt, building up a portfolio (thankfully saved some during residency and wife continually has saved), and buying a car (much needed and wanted).

I also got a 1.25M basic life policy on myself, wife has 250k through work. We recently got 1M umbrella policy. I have specialty-specific short- and long-term disability through work.

Emergency Funds: Yes, approximately one year independent of portfolio balance below

Debt: None

Tax Rate: 35% marginal, 0% state (19% effective) [His salary 400k; Her 35k]

Tax Status: Married filing jointly

Age: 32 (me and wife), no kids yet

Desired Asset Allocation: Not quite decided, but probably 60-80% equities

Current portfolio – slightly over 500k

Saving account – 24.5% - this will be used as house down-payment in 1-2 years

His 401k (Fidelity) – 10% – Fidelity Freedom Index 2055
Her 403b (AIG) – 2.9% via AIG

Joint HSA (Fidelity) - 1% in Fidelity Freedom Index 2055

His roth IRA (Vanguard) – 7.4% - VFFVX – vanguard target 2055
Her roth IRA (Vanguard) – 10.5% - VFIAX – S&P 500 index

His taxable (now at Vanguard)
4.9% -VFFVX (target retirement 2055)
8.9% - VGSTX (STAR fund)
8% - VTSAX (total US stock)
4.9% - VWELX (wellington)
10% - VWITX (intermediate tax-exempt bond)

Her taxable (now at Vanguard)
7% - VFIAX (S&P 500 index)

2020 New Contributions:
19.5k his 401k (5.5k match)
19.5k her 403b (1k match)
6k his backdoor roth
6k her backdoor roth
7.1k combined HSA (first year available, as above)
Taxable: 34k over first 6 months, on pace for even more in second half now that debt gone

Funds available:
His 401k – good options with Fidelity, but happy with the low ER fidelity freedom index 2055
Her 403b – I don’t have the entire list, but I picked 33% bonds, 33% mid-cap, 34% large cap with ER’s between 0.3-0.4% (those were the lowest offered in her plan)

Questions:
1) I have spent SO many hours simplifying into the funds above. Both my wife and I had funds in different locations, individual stocks, different brokers, active management, etc. The only “high” ER funds above (0.3-0.4%) are those in her current 403b plan, which were the best of a variety of so-so to bad options. Is the above still too complicated? I ask this because I feel like I finally have a reasonable handle on all the above.

2) We are planning to buy a house in the next 1-2 years, but only after I make partner with my current group. We will probably spend between 550-750k. We are currently building up a down-payment in a high yield saving account and adding to this every month. (a) Can we afford this? (b) I’m leaning towards 15 year fixed because I think I could get this for under 3% and like being debt-free ASAP. May even want to pay off sooner. Good idea? Too much house?

3) My wife has a state 457 plan available to her. Due to consolidating both our finances I ignored the plan for this year. Is this something we should pursue for her next year and in the future? Only if low ER options exist?

4) One thing my wife and I both want to do is extensive traveling post-COVID now that we can afford it and I can get the available time off without constantly studying for the next exam or writing up the next research project. We are thinking of spending approximately 25-30k/year here in the next couple years, partially to make up for lost time during med school and residency.

5) I expect my salary to increase closer to 500k after becoming a partner. It seems like a stable job, even during COVID. I could change and get 400-450k, if needed.

6) Our current expenses with renting are below 60k, but after adding in traveling and mortgage for next year it will probably be closer to 120k. Renting cost 18k a year now, which would be subtracted from the total. I’m not sure what this number would be by retirement and with possible kid(s), but hopefully much less once the house is paid off.

7) I potentially would like the option to retire by 55, but would also consider working less (0.5-0.8 FTE) or even just selling some of the overnight and/or weekend call I really despise. Therefore, I want a percentage of my retirement savings in taxable so this is possible… Are we on pace for this?
Your funds look fine. Keep maxing out all available retirement accounts. Try for the lowest expense ratio funds you can get. Invest as much as you can as early as you can.

What’s your current income? You should try to spend less than 3X your annual take-home pay on a house. So if you make partner, you can afford a very nice house. I personally would skip the house altogether. If you do end up buying a house, by the least amount of house in the nicest area. It’s all about location and don’t overbuy, because the maintenance costs really do add up. I personally don’t want to spend my weekends mowing the lawn, doing house projects, etc. I like the lifestyle renting.

My advice: Make partner for a few years and retire with $2-3m and never look back. If you enjoy the work, which you may end up hating being a partner, but if you do end up liking it, working until 55 will put you in a very very good position financially if you continue to save a good portion of your income. Even if you didn’t make partner, and you continue to save half of your income, you can retire in 10 years. Even with kids, which kids aren’t as expensive as people say they are, but they are if you pay for private lessons in private school and private university. It’s whatever lifestyle you want. Once you are a partner, and maybe even now, you will be tempted to continue to inflate your lifestyle. I am extremely impressed by how little you currently spend with your base expenses. If you are happy, why not just keep that up and get off the hamster wheel?

You guys are in great shape, and welcome to the forum!
VTSAX and chill

tashnewbie
Posts: 515
Joined: Thu Apr 23, 2020 12:44 pm

Re: First time poster, new portfolio evaluation

Post by tashnewbie » Mon Jul 13, 2020 8:03 pm

Welcome and congrats on paying off the student loans!!

I think you can definitely afford a house in the range you stated. You could put down 20% now on a $625k house, so you’d have quite a bit more than that if you save for another 1-2 years. What kind and how much house does the stated range buy in your area? Is that what you need and really want? I’m sure you and your wife have considered these things.

I think it’s worth investigating the 457 option for her because the contributions would reduce your taxable income, which is especially valuable in your high tax bracket.

Good luck!

Topic Author
newinvestor1234321
Posts: 4
Joined: Mon Jul 13, 2020 4:44 pm

Re: First time poster, new portfolio evaluation

Post by newinvestor1234321 » Tue Jul 14, 2020 7:45 pm

Thanks for the input.

sgal:
If we buy next summer to fall and I continue saving at our current rate I estimate a down payment of approx 160-180k by then. Will continue to contribute to this every month to minimize interest payments. If we get into any debt with house or upcoming kids will surely go up on the life insurance for myself (don't necessarily see the benefit for adding to my wife at this time).

geerhardusvos:
Current income 400, hopeful for 500 in the near future. I'm not sure my wife and I would like to live in an apartment or rent forever, especially with the potential for kids. If nothing else - a bit of real estate seems like reasonable diversity in the long run.

I usually love the medicine and do find it interesting, but hate the business aspects, dealing with personalities/administrators, and call. I would like to be comfortable enough to dampen down the hamster wheel long before 55.

tashnewbie:
We live in a "medium" cost of living area, so that much could buy us 3500 sq ft or so in a nice neighborhood/school district with a pool. We do want to live in a nice area that is really close to multiple hospitals when I take home call and also in good school districts.

I will ask for her 457 plan info for next year.

If she makes 35k and puts 19.5k in 403b and 6k in backdoor Roth -- is she eligible to put 15.5k in the 457 with the 6k coming from my salary? Or is it 35k minus both the pretax 19.5k and post tax 6k separately?

tashnewbie
Posts: 515
Joined: Thu Apr 23, 2020 12:44 pm

Re: First time poster, new portfolio evaluation

Post by tashnewbie » Tue Jul 14, 2020 7:58 pm

I think the maximum she could possibly defer between the 403b and 457 is $35k, her gross salary, so up to $15.5k if she defers $19.5k into 403b. However, you’ll want to check with her employer regarding how much she can defer with each paycheck. My employer limits 401k contributions to 50% of each paycheck, for example. I’ll let others with more specific knowledge confirm that.

The Roth IRA contributions are after-tax and can be made with household income, so not dependent on her income from her job.

tashnewbie
Posts: 515
Joined: Thu Apr 23, 2020 12:44 pm

Re: First time poster, new portfolio evaluation

Post by tashnewbie » Fri Jul 17, 2020 3:25 pm

Thought I'd mention you'll probably get more responses if you change the title of your post to something like, "New Attending Physician looking for Portfolio Advice." Don't know if you're satisfied with the quantity of responses you got to your post.

retiredjg
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Re: First time poster, new portfolio evaluation

Post by retiredjg » Sun Jul 19, 2020 9:44 am

Welcome to the forum. :happy
Saving account – 24.5% - this will be used as house down-payment in 1-2 years
It does not matter for the questions you are asking, but do not include amount this in your retirement portfolio....unless you intentionally are choosing a high bond percentage to accommodate this sum.

1) I have spent SO many hours simplifying into the funds above. Both my wife and I had funds in different locations, individual stocks, different brokers, active management, etc. The only “high” ER funds above (0.3-0.4%) are those in her current 403b plan, which were the best of a variety of so-so to bad options. Is the above still too complicated? I ask this because I feel like I finally have a reasonable handle on all the above.
It's fine in terms of complexity. You do have some tax efficiency problems - see below.

2) We are planning to buy a house in the next 1-2 years, but only after I make partner with my current group. We will probably spend between 550-750k. We are currently building up a down-payment in a high yield saving account and adding to this every month. (a) Can we afford this? (b) I’m leaning towards 15 year fixed because I think I could get this for under 3% and like being debt-free ASAP. May even want to pay off sooner. Good idea? Too much house?
Who knows? In many places, this wouldn't even be a starter home for high earners. In other places, it's a mansion. Doesn't seem like too much based on your income. Seems like you plan to put down a pretty good chunk of change.

3) My wife has a state 457 plan available to her. Due to consolidating both our finances I ignored the plan for this year. Is this something we should pursue for her next year and in the future? Only if low ER options exist?
Maybe. Maybe not. It might be better to use the state 457 instead of her 403b. You should check it out. If it is a good plan, the 457 would be available with no penalty when she leaves work at any age. This would fit nicely into your early retirement plan.

I'm not sure you should fill His 401k, Her 403b, and Her 457 for the next 20 years, because you could end up with too much in tax-deferred accounts. However, if you do retire at 55, that would be dealt with by doing Roth conversions then. What you want to avoid is having an overly huge tax-deferred account when you reach RMDs at age 72.


7) I potentially would like the option to retire by 55, but would also consider working less (0.5-0.8 FTE) or even just selling some of the overnight and/or weekend call I really despise. Therefore, I want a percentage of my retirement savings in taxable so this is possible… Are we on pace for this?
Hard to say because it depends on your expenses in retirement. You seem pretty frugal, so I expect your expenses will not be large.


Things you did not ask about....

His taxable (now at Vanguard)
4.9% -VFFVX (target retirement 2055)
8.9% - VGSTX (STAR fund)
4.9% - VWELX (wellington)
These are good funds but do not belong in a taxable account, particularly in the higher tax brackets. You should sell them - now would be good, over two tax years would be OK.

They should not be held in taxable because they are not "tax-efficient" - because they all contain taxable bonds and also because the STAR and Wellington are actively managed funds, not index funds. The taxable bonds and the active management cause the funds to throw off dividends and capital gains distributions that are taxable every year.

Your goal should be to hold nothing other than total stock, total international, and tax-exempt bonds in your taxable account.

Desired Asset Allocation: Not quite decided, but probably 60-80% equities
I did not do the math, but I'm not sure you are near your target. The target funds you are using are all probably 90% stocks or greater. I'm thinking your stock percentage is higher than what you want.

Tax Rate: 35% marginal, 0% state (19% effective) [His salary 400k; Her 35k]
Your tax bracket is determined by your taxable income (after deductions), not your total income. With these salaries, you are currently in the 32% tax bracket.


Overall, I think you are doing a really good job. Fix your taxable account and just keep adding money. It appears you are doing a great job of avoiding too much lifestyle creep.

Topic Author
newinvestor1234321
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Joined: Mon Jul 13, 2020 4:44 pm

Re: New Attending Physician looking for Portfolio Advice

Post by newinvestor1234321 » Sat Jul 25, 2020 10:18 am

retiredjg:

Thanks for taking the time to write out a detailed response. I am trying to understand and am curious about your response - not trying to come across as too critical.

By tax-inefficient, do you mean the target retirement, STAR, and Wellington throw off dividends from bonds and/or stock that, because they are bonds or traded more regularly, are taxed at my marginal rate of 32%?

If the stock portions of these are traded less frequently (I believe STAR and Wellington are 60% stock), would I only pay the 32% on the bonds portion and the regular LTCG on the stock portion?

My understanding is that even VTSAX throws off yearly dividends. Is it because they are traded less frequently that those dividends are taxed at LTCG, which for me would be 15%?

So I'm essentially paying 32% tax on the growth of some funds and 15% on the growth of others? (And 0% for the munis?).

retiredjg
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Re: New Attending Physician looking for Portfolio Advice

Post by retiredjg » Sat Jul 25, 2020 11:26 am

So I'm essentially paying 32% tax on the growth of some funds and 15% on the growth of others? (And 0% for the munis?).
Yes, kinda sorta....

There are a bunch of factors going on here. Just bear with me.

Capital gains distributions: In an actively managed stock fund, there is a lot of trading going on with the managers picking what they consider to be the best stocks. These funds will have a high turnover - say 40% or 73% - during the year. As they do these trades, capital gains build up in the funds and at least a portion of those capital gains must be paid out to you as a taxable capital gains distribution each year.

A broad index stock fund, on the other hand, has very little turnover - maybe 1% or 2% a year? - so there is very little if any capital gain to distribute to you to add to your taxable income each year.

The stock portion of STAR and Wellington are actively managed. You will get taxable capital gains distributions each year from these funds even if you do not sell any of what you hold.

The stock portion of the Target Fund in in index funds (passively managed). There should be little to no capital gains distributions from this fund.

Because of the capital gains distributions, actively managed stock funds are not considered a good choice in your taxable account. If you really want to hold STAR or Wellington, put it in an IRA instead.

Capital gains distributions from bond fund are so small as to not even worry about.


Dividends:. Dividends are paid by both stock funds and bond funds. The difference is in how they are taxed.

Dividends from a stock fund may be mostly or all "qualified" (this is determined by the fund family, not you). A qualified dividend is taxed at the long term capital gains rate which is lower than your ordinary tax rate. Your qualified dividends from the the Target Fund, STAR, and Wellington are taxed at only 15% instead of 32%.

Because of how dividends are determined to be qualified, I believe that actively managed funds will also produce less qualified and more unqualified dividends as well and these would be taxed at your higher rate, not the lower rate.

Dividends from bond funds are, by definition, never qualified. All the bond dividends from the Target Fund, STAR, and Wellington are being taxed at 32% in your case.

Good choices for a taxable account are broad index funds like total stock and total international. They produce very little (if any) capital gains distributions and their dividends are almost all "qualified". Little "tax drag" going on there.

A tax-exempt bond can also be a good choice for taxable....but...over the long haul will very likely pay you less than holding a taxable bond of equal risk in an IRA and eventually paying tax on the earnings. Just trading one intermediate term tax-exempt bond fund for an intermediate term taxable bond fund is generally NOT an even trade. The tax-exempt fund is likely higher risk. Not saying you should not use a tax-exempt bond . I'm saying it is not an even swap.

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ram
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Re: New Attending Physician looking for Portfolio Advice

Post by ram » Sat Jul 25, 2020 12:30 pm

newinvestor1234321 wrote:
Mon Jul 13, 2020 6:15 pm
I am a physician in his 50's.

I have spent the far majority of my first year plus as an attending living like a resident and paying down previous med school debt.
Excellent.

I also got a 1.25M basic life policy on myself,
Not enough.
Do 7 times your income. 3 to 4 M. Term Life insurance is cheap for young healthy people.

wife has 250k through work.
May be enough. Consider 1 M for her when you have kids.

We recently got 1M umbrella policy.
Barely enough at this point. Consider increasing to 2 M when you renew next and go up to 3 or 4 M in the next 10 years. This should grow as your net worth grows but perhaps 3 to 4 M is adequate even if your net worth eventually grows to 8 or 10M.

I have specialty-specific short- and long-term disability through work.
Good

Emergency Funds: Yes, approximately one year independent of portfolio balance below.
Perhaps OK. But I think 6 mo is enough for a physician. Realize that the amount in Roth can act as an Emergency fund also. But nothing wrong with your approach either.


Debt: None

Tax Rate: 35% marginal, 0% state (19% effective) [His salary 400k; Her 35k]

Tax Status: Married filing jointly

Age: 32 (me and wife), no kids yet

Desired Asset Allocation: Not quite decided, but probably 60-80% equities
Acceptable. Would suggest nearer to 80% at your age. 60% is near what I have as a 50+ year old MD.

Current portfolio – slightly over 500k

Saving account – 24.5% - this will be used as house down-payment in 1-2 years.
Fine. You can always pay much more than 20% as the down payment. I did.

His 401k (Fidelity) – 10% – Fidelity Freedom Index 2055
Fine

Her 403b (AIG) – 2.9% via AIG
Dont know anything

Joint HSA (Fidelity) - 1% in Fidelity Freedom Index 2055

His roth IRA (Vanguard) – 7.4% - VFFVX – vanguard target 2055
Not ideal. But very much acceptable.

Her roth IRA (Vanguard) – 10.5% - VFIAX – S&P 500 index
Good

His taxable (now at Vanguard)
4.9% -VFFVX (target retirement 2055)
8.9% - VGSTX (STAR fund)
8% - VTSAX (total US stock)
4.9% - VWELX (wellington)
10% - VWITX (intermediate tax-exempt bond)
Not the most ideal situation. Read about asset location within the next 12 months and make amends. You may save a few hundreds each year by correcting this situation.Another poster above has given good advice.


Her taxable (now at Vanguard)
7% - VFIAX (S&P 500 index)
Good

2020 New Contributions:
19.5k his 401k (5.5k match)
19.5k her 403b (1k match)
6k his backdoor roth
6k her backdoor roth
7.1k combined HSA (first year available, as above)
Taxable: 34k over first 6 months, on pace for even more in second half now that debt gone
Great

Funds available:
His 401k – good options with Fidelity, but happy with the low ER fidelity freedom index 2055
Read about asset location.

Her 403b – I don’t have the entire list, but I picked 33% bonds, 33% mid-cap, 34% large cap with ER’s between 0.3-0.4% (those were the lowest offered in her plan)
One option would be to only pick one fund in her 401K. Even bad 401K plans usually have a reasonable S&P 500 fund. You can then adjust the allocations to other funds in other accounts to reach the desired asset allocation.

Questions:
1) I have spent SO many hours simplifying into the funds above. Both my wife and I had funds in different locations, individual stocks, different brokers, active management, etc. The only “high” ER funds above (0.3-0.4%) are those in her current 403b plan, which were the best of a variety of so-so to bad options. Is the above still too complicated? I ask this because I feel like I finally have a reasonable handle on all the above.
See above

2) We are planning to buy a house in the next 1-2 years, but only after I make partner with my current group. We will probably spend between 550-750k. We are currently building up a down-payment in a high yield saving account and adding to this every month. (a) Can we afford this?
Yes.

(b) I’m leaning towards 15 year fixed because I think I could get this for under 3% and like being debt-free ASAP. May even want to pay off sooner. Good idea?
Very good idea.

Too much house?
Certainly not.

3) My wife has a state 457 plan available to her. Due to consolidating both our finances I ignored the plan for this year. Is this something we should pursue for her next year and in the future? Only if low ER options exist?
Yes. Will save on taxes.

4) One thing my wife and I both want to do is extensive traveling post-COVID now that we can afford it and I can get the available time off without constantly studying for the next exam or writing up the next research project. We are thinking of spending approximately 25-30k/year here in the next couple years, partially to make up for lost time during med school and residency.
Stongly recommend.

5) I expect my salary to increase closer to 500k after becoming a partner. It seems like a stable job, even during COVID. I could change and get 400-450k, if needed.

6) Our current expenses with renting are below 60k, but after adding in traveling and mortgage for next year it will probably be closer to 120k. Renting cost 18k a year now, which would be subtracted from the total. I’m not sure what this number would be by retirement and with possible kid(s), but hopefully much less once the house is paid off.
Spend at least 33% of your gross salary each year. We have all spent too much time eating Ramen noodles during residency. Time to spend a little. Look at all the old peoples posts here saying I have too much money and what to do with it.


7) I potentially would like the option to retire by 55, but would also consider working less (0.5-0.8 FTE) or even just selling some of the overnight and/or weekend call I really despise. Therefore, I want a percentage of my retirement savings in taxable so this is possible… Are we on pace for this?
Yes. You will be with the above data.
Ram

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neurosphere
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Re: New Attending Physician looking for Portfolio Advice

Post by neurosphere » Sat Jul 25, 2020 1:22 pm

Welcome to Bogleheads!

I'm a physician, and I also (allegedly) know a thing or two about personal finance. I have just a few comments for now.
newinvestor1234321 wrote:
Mon Jul 13, 2020 6:15 pm
I also got a 1.25M basic life policy on myself, wife has 250k through work. We recently got 1M umbrella policy. I have specialty-specific short- and long-term disability through work.
I think you should consider increasing the amount of life insurance you need. See this link for a very basic way to think about how much life insurance you might need.

Likewise, strongly consider getting private disability insurance without relying on your work/group policies. Here's a good FAQ about disability insurance, written for a physician audience. It also discusses some of the problems with employer-based disability insurance. (disclaimer, I helped write the content at those insurance links, but no, I don't sell insurance :D ).

3) My wife has a state 457 plan available to her. Due to consolidating both our finances I ignored the plan for this year. Is this something we should pursue for her next year and in the future? Only if low ER options exist?
I'm generally a fan of 457b plans for high tax-bracket folks, provided you understand 100% the limitations and risk of non-governmental (aka tax-exempt) 457b plans. But, you mentioned "state" 457b, implying its a "governmental" 457b, in which case it's essentially like a 401k and no good reason to avoid maxing out the 457b contributions. Even with a non-governmental 457b, I feel the upsides often strongly outweigh the downsides for high-bracket physicians and especially those considering early retirement, depending on the employer.

7) I potentially would like the option to retire by 55, but would also consider working less (0.5-0.8 FTE) or even just selling some of the overnight and/or weekend call I really despise.
Going part time and/or taking less compensation to avoid call is something I support. I went to medicine half-time a few years ago, using the other time to do philanthropy and start a side business. I've shuffled back and forth between part time and full time when the full time opportunity was appropriate (e.g. no weekends, or no call, or justifiable pay for the call/weekends). If I were to do traditional full time medicine I'm certain I would burn out before 55 (I was 44 when I made the decision to go part time). But doing it less than full time? I can do it forever.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

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Taylor Larimore
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"Too much in tax-deferred accounts."

Post by Taylor Larimore » Sat Jul 25, 2020 1:44 pm

retiredjg:

I enjoyed reading your good advice.

You wrote: "I'm not sure you should fill His 401k, Her 403b, and Her 457 for the next 20 years, because you could end up with too much in tax-deferred accounts."

I don't understand how the doctor and his wife could end up with too much in tax-deferred accounts?

Care to explain?

Thank you and best wishes
Taylor
Jack Bogle's Words of Wisdom: "Tax-deferred plans are especially valuable jewels because tax-deferral, combined with low-cost investing, is the most valuable weapon in the long-term investor's arsenal."
"Simplicity is the master key to financial success." -- Jack Bogle

retiredjg
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Re: "Too much in tax-deferred accounts."

Post by retiredjg » Sat Jul 25, 2020 2:49 pm

Taylor Larimore wrote:
Sat Jul 25, 2020 1:44 pm
retiredjg:

I enjoyed reading your good advice.

You wrote: "I'm not sure you should fill His 401k, Her 403b, and Her 457 for the next 20 years, because you could end up with too much in tax-deferred accounts."

I don't understand how the doctor and his wife could end up with too much in tax-deferred accounts?

Care to explain?

Thank you and best wishes
Taylor
Jack Bogle's Words of Wisdom: "Tax-deferred plans are especially valuable jewels because tax-deferral, combined with low-cost investing, is the most valuable weapon in the long-term investor's arsenal."
Taylor, I've very much in favor of tax-deferred accounts, but we've seen some people who have saved too much in tax-deferred accounts. The result can be a tax bomb in later years. And with new legislation requiring inherited IRAs to be depleted in 10 years, might cause a tax bomb for heirs.

Filling 3 or more separate tax-deferred accounts for 20 years is only one factor that can contribute to this problem. It might or might not be a factor for these people, especially since early retirement is being considered. Early retirement can give a lot of time for Roth conversions.

Nevertheless, I like to at least introduce high earners who are high savers to the concept that tax-deferral is a very good thing, but that does not mean that doing extra is a good thing. It might be too much. For some, it is better to fill 2 tax-deferred accounts and put the rest in Roth and taxable.

In my opinion. :happy

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abuss368
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Re: New Attending Physician looking for Portfolio Advice

Post by abuss368 » Sat Jul 25, 2020 3:01 pm

We started converting our Traditional IRAs to Roth IRAs years ago to better tax diversify.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

NewMoneyMustBeSmart
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Re: New Attending Physician looking for Portfolio Advice

Post by NewMoneyMustBeSmart » Sat Jul 25, 2020 3:13 pm

newinvestor1234321 wrote:
Mon Jul 13, 2020 6:15 pm

2) We are planning to buy a house in the next 1-2 years, but only after I make partner with my current group. We will probably spend between 550-750k. We are currently building up a down-payment in a high yield saving account and adding to this every month. (a) Can we afford this? (b) I’m leaning towards 15 year fixed because I think I could get this for under 3% and like being debt-free ASAP. May even want to pay off sooner. Good idea? Too much house?
If I could afford it, I'd buy it now.

Use a tool like https://www.mtgprofessor.com/calculators.htm to compare costs.

Maybe your 15 year is 2.75% and your 30 year is 3.25%. At $650k @ 30 year @ 3.25 you pay $368k in interest with no extra payments and $2830/mo payments. At $650k @ 15 year @ 2.75% you pay $144k in interest with a $4411/mo payment.

If you take he 30 year and pay it like a 15 year, you pay it off in 189 months (9 months longer than the 15 year) and pay $180k in interest ; +$40k.

Therefore, buying the optionality of the 30 year may be beneficial to you, especially if I wanted to start earlier.
-- | Few are those who see with their own eyes and feel with their own hearts - Einstein

book lover
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Re: New Attending Physician looking for Portfolio Advice

Post by book lover » Sat Jul 25, 2020 3:26 pm

Be sure to check out The White Coat Investor Podcast: It is chock-full of great information.

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Taylor Larimore
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Mutual Fund Taxes

Post by Taylor Larimore » Sat Jul 25, 2020 4:37 pm

retiredjg:

Thank you for your reply.

I'll add another reason an older person might prefer having money in a taxable account: When we die, capital-gains are currently eliminated at death.

Taxes are extremely complicated. I know; I spent five years in the IRS.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom (2010): "Since 1998, equity mutual funds have distributed nearly $1.5 trillion of realized capital gains to their shareholders."
"Simplicity is the master key to financial success." -- Jack Bogle

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KingRiggs
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Re: New Attending Physician looking for Portfolio Advice

Post by KingRiggs » Sat Jul 25, 2020 5:00 pm

As a physician myself, I think your ideas on the home purchase are great. You will be tempted to reach for bigger and more expensive housing as you attend parties and gatherings at your colleagues' homes... Resist the lifestyle creep if you can!

In retrospect, I wish we had not stretched to buy as much house as we did. I also wish we had gone for a 15-year mortgage as you propose. The rate or equity build in a 30-year mortgage is painfully slow. As long as your cashflow doesn't suffer from going the 15-year route, I would highly recommend it. Having that house paid off by age 50 will give you freedom you can't put a value on. We refinanced to a 15-year fixed three years ago, and I'm accelerating payments with the goal of no mortgage by age 60... :beer
Advice = noun | Advise = verb | | Roth, not ROTH

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newinvestor1234321
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Re: New Attending Physician looking for Portfolio Advice

Post by newinvestor1234321 » Sat Aug 01, 2020 12:44 pm

Thanks to everyone for a lot of great advice.

Based on these posts and conversation with my wife, we did increase my term life by 1M for a total of 2.25M. She actually spends less money than me and feels like this would be enough for her.

My current specialty-specific disability policy through work maxes at $10,000 per month. I'm getting another, independent speciality-specific long term disability policy to add another $8000 per month on top of this. Thanks for picking up on this.

I discussed with our insurance carrier to change the umbrella policy for 2M starting next year.

As far as her 403b, I liked the idea of combining into one fund - we picked the BNY Mellon S&P 500 Index with ER 0.5 for 100% of assets. Unfortunately that is one of the lowest ER options that exist (and the plan doesn't charge another fee for using that mutual fund, while it does for others).

We also signed up for her 457 plan (state/government). All the options except one have ER's greater than 0.6. Luckily that one is vanguard total US stock institutional shares at ER 0.02. We will do this 100%.

Thanks for the reassurance about the house. We will start looking once the partnership is finalized.

This has brought up another question. Since the 401k, 403b, and 457 all have bad options (high ER's of 0.7 or more) for bond funds - where do I put bonds? Add to munis in taxable? Use some of our Roth IRA space for vanguard total bond? Or just buy some vanguard total bond in taxable?

retiredjg
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Re: New Attending Physician looking for Portfolio Advice

Post by retiredjg » Sat Aug 01, 2020 1:23 pm

You should watch her contributions to 403b and 457. They could add up to more than her salary. I'm not sure that is allowed.

No, do not put total bond in your taxable account. For the reasons I suggested above that you eliminate several of the funds you have there.

You could hold some bonds in taxable but I believe it is a mistake to put more than half your bonds in a tax-exempt bond fund. They are less diversified and riskier.

You could put a bit of bonds in the Roth IRAs. I would not put much there - save that premium space for stocks.

You might look at I bonds - information in the Wiki.

Mostly, I'd just pay for bonds in the tax-deferred accounts.

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neurosphere
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Re: New Attending Physician looking for Portfolio Advice

Post by neurosphere » Sat Aug 01, 2020 1:41 pm

retiredjg wrote:
Sat Aug 01, 2020 1:23 pm
No, do not put total bond in your taxable account. For the reasons I suggested above that you eliminate several of the funds you have there.

You could hold some bonds in taxable but I believe it is a mistake to put more than half your bonds in a tax-exempt bond fund. They are less diversified and riskier.

You could put a bit of bonds in the Roth IRAs. I would not put much there - save that premium space for stocks.

You might look at I bonds - information in the Wiki.

Mostly, I'd just pay for bonds in the tax-deferred accounts.
I agree with much of this, although I'm less worried about munis than most. I like the idea of splitting your bond allocation among:
-- the high-fee bond funds in the employer plans
-- municipal bonds in taxable
-- Series I or even EE bonds
-- Roth IRA

Whether you do 2 or 4, or all 4, is up to you. Personally, I very much like being well diversified in my fixed income investments. Equity investing seems so much EASIER than fixed income. Inflation? Deflation? Disinflation? Default risk? Currency risk? Liquidity issues? Makes my head spin. And thus with fixed income I take the "buy some of everything" approach because I'm not smart enough to do otherwise. That said, if I would feel just fine owning a cheap Total Bond in tax-advantaged. :D

I personally keep a relatively similar asset allocation across Roth and pre-tax accounts. Yes, the Roth allows for more growth, but I feel Roth dollars are so valuable, that I psychologically prefer to reduce the volatility in Roths, and don't mind some bonds in Roth accounts.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".

LeeMKE
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Re: New Attending Physician looking for Portfolio Advice

Post by LeeMKE » Sat Aug 01, 2020 3:41 pm

OP wins the prize for Best New Doctor of the year.

All my usual recommendations, you've already done.
You are both being prudent in your housing decision. The pandemic may present a buying opportunity, depending on where you live (Seattle, for some reason I can't guess, is seeing another UPTICK in housing prices before the pandemic even tapers off.) You are ready as soon as you make partner.

SO nice to see a new doctor taking these steps early. I just cringe when we first see doctors here after 20 years of bad financial decisions.

You are doing great!
Welcome to the Bogleheads forum.
The mightiest Oak is just a nut who stayed the course.

Skyflyerman
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Re: New Attending Physician looking for Portfolio Advice

Post by Skyflyerman » Sat Aug 01, 2020 11:35 pm

"Just what the doctor ordered:

https://www.whitecoatinvestor.com

This website is full of great investing information tailored specifically for docs and your particular tax situations. I would consider it a home run of info for any doc wanting to get started off right in your investment future. The guy who writes the articles and blog is a doc and exceptionally informed about investing as well.

catchup
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Re: New Attending Physician looking for Portfolio Advice

Post by catchup » Sun Aug 02, 2020 11:34 am

I would read David Swensen Unconventional Success. That, Bogleheads guide, and this forum was enough for me to put together a 6 asset class well diversified portfolio and address questions as they come up.

I would continue to max out tax advantages options, 457.
You can afford the nice house, but need to be prepared for worst case scenarios, things like housing market crashes, burnout etc.

Continue to have a live within your means attitude.

Agree you can do anything you want but not everything. It’s amazing how a nice comfortable salary can still leave you wondering how to pay for everything...

Big house equals big expenses. Big salary equals big taxes. Furnishing, painting, new roof, can all add up in a big house.

30k travel. Private schools? 529s? Retirement savings? All adds up.

You’ll have to make choices, but you’re in a great position.

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