Retirement Checkup - Physician nearing end of Training

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ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Retirement Checkup - Physician nearing end of Training

Post by ACN » Sat Sep 09, 2017 12:36 pm

Hello Bogleheads,

Long time reader of these forums along with WCI; first-time poster here. A quick overview of life:

-Final year of training as a surgeon (current income $50k/yr) - expected income next two years (Starting Aug 2018) $350k/yr; then $500-700k; then $700k-1m++++
-Starting to moonlight end of Sept (anticipate $10-15k this year; $25k for next year) - paid via W2 - no access to retirement accounts
-Wife income $75-80k/yr - probably will work 2-3 more years and then stay at home when we decide to start having kids
-We moved ~2 months ago to start Fellowship (will move again in 1 year Aug 2018 for first job)
-0% match for 401k in residency and fellowship

Emergency Funds: $50k @ 1.50% (Ally)
Debt:
-Student Loans: $55k @ 4.1% (May get loan repayment option with job contract) - no payments till Fall 2018
-Her new car: $40k @ 1.49% (splurged a little; just bought her a new SUV as hers had 220k miles and was not reliable)
Tax Filing Status: Married Jointly
Tax Rate: Marginal 28% Federal (Actual was 16% per CPA), 4.24% State
State of Residence: AZ
Age:
-His 32
-Her 26
Desired Asset allocation: 80% stocks / <<10% bonds / 10% REIT
Desired International allocation: 20-30% of stocks

Current retirement assets

Taxable
None

His Roth IRA (Vanguard)
US Stock (VTSAX) - 20.00%
I Stock (VTIAX) - 25.71%
Bond (VBFMX) - 7.00%

His 401k (Wells Fargo) - No Match
Wells Fargo Index Admiral (Exp: 0.04%) - 0%

Spousal Roth IRA (Vanguard)
US Stock (VTSAX) - 18.77%
REIT (VGSIX) - 7.96%

Spousal 403b (Voya Financial) - Old Job - No longer contributing
Vanguard® Institutional Index Fund - Institutional Shares - (0.04% + 0.05% Fee) (VINIX) - 17.91%
Vanguard® Small-Cap Index Fund - Institutional Shares - (0.05% + 0.05% Fee) (VSCIX) - 2.66%

Overall (NO CASH)
US Stocks -59.33%
I Stocks - 25.71%
REIT - 7.96%
Bonds - 7.00%

Contributions

New annual Contributions
$6000 his 401k (no match) for 2017
$18000 his 401k (no match) for 2018

$12000 her OLD 403b (6% match) for 2017
$2-3k her NEW 401k for 2017 (Not allowed to participate till November)
$18000 her NEW 401k for 2018

$5500 his Roth IRA Backdoor
$5500 her Roth IRA Backdoor

$0 taxable???

Available funds

Funds available in his 401(k)
Wells Fargo Index Admiral (Exp: 0.04%)
-This was the cheapest exp ratio fund, everything else was .8%+
-Just started fellowship, putting the max allowed 50% per paycheck for the rest of the year; total contribution will be ~$6k for 2017.


Funds available in her OLD 403(b)
Vanguard® Mid-Cap Index Fund - Institutional Shares - (0.05% + 0.05% Fee)
Vanguard® Institutional Index Fund - Institutional Shares - (0.04% + 0.05% Fee)
Vanguard® Small-Cap Index Fund - Institutional Shares - (0.05% + 0.05% Fee)
-Only funds available that don't have exp ratio over 0.5 (most are 0.5-1.2%)

Funds available in her NEW 401k
-unknown; haven't received information

Questions:
1. In regards to Her OLD 403b; currently, it has $25.6k. My question is what to do with this account:
-Keep it as is?
-Rollover to her new 401k once opened to decrease total accounts (if fund options are as good or better)?
-Transfer to IRA at Vanguard and convert it to Roth?

2. In 2018, if I continue to contribute 50%/check to my 401k, will the company automatically stop contributions when I hit $18k?

3. With my moonlighting W2 income starting end of Sept, I'm guessing my only option to save for retirement would be a taxable account, correct?

Any other suggestions/comments would be appreciated. I can add balances of all the accounts if that helps with recommendations, but it is ~$100k.

fabis
Posts: 15
Joined: Sun May 14, 2017 8:04 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by fabis » Sat Sep 09, 2017 1:05 pm

in my opinion you are counting chickens before they hatch.

how do you know your income will be $X ?

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Sat Sep 09, 2017 1:08 pm

fabis wrote:
Sat Sep 09, 2017 1:05 pm
in my opinion you are counting chickens before they hatch.

how do you know your income will be $X ?
Obviously, the income numbers are subject to change, but they are based on current partners incomes at 2-6 years out. The $350k is a guaranteed salary for the first two years till partnership. There is no reason for me to not hit those numbers once I become partner unless there is a drastic change in medicine. I'm currently providing information that I have available to me at this point in time.

mrsytf
Posts: 208
Joined: Sun Aug 14, 2016 9:04 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by mrsytf » Sat Sep 09, 2017 1:22 pm

I would pay off the student loans. Many of those loan payment plans offered by a physician practice or hospital come with a required number of years to be employed by that entity. If those required years are not met then the grant converts to a loan, with likely a >4% interest. I would just pay off a hunk of that or the car loan with a good chunk of your efund. I hate debt as well as monthly payments so this recommendations reflect my priorities -may not be yours.

I would contribute to the 401k now even without a match.
Also do a ROTH, after that taxable. Backdoor ROTH when you become an attending. Nothing wrong with taxable -gives you a lot of flexibility. Treat it as a retirement account but maybe you might want to open your own practice down the line, put some money into a patent of some new surgical device you developed, buy your old parents a home etc. A taxable account gives you more options.

As far as automatic shutoff of retirement contributions. Some plans do, some don't. My employer yes. My husband's employer no (which is really annoying) because I have to elect contributions as a percentage of his gross paycheck and not a straight dollar amount. Changes are sometimes reflected on the next paycheck or sometimes the following. I never really know when. I frontload the 457 but for the 403b we would miss out on the match if I did that so something has to come out for each of his 24 paychecks. Further complicating the issue is that his gross paycheck changes around April/May because by that time he has paid into SS and his gross paycheck is higher which means I again need to recalculate the contribution percentage. This year we contributed $17896, last year $18120 (accountant told me not to worry about it).

tigerdoc93
Posts: 90
Joined: Wed Oct 07, 2015 8:50 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by tigerdoc93 » Sat Sep 09, 2017 2:34 pm

As a physician, I'm curious what specialty you are studying and how long is the fellowship?

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Sat Sep 09, 2017 2:46 pm

tigerdoc93 wrote:
Sat Sep 09, 2017 2:34 pm
As a physician, I'm curious what specialty you are studying and how long is the fellowship?
Ortho. One year fellowship

Finance-MD
Posts: 314
Joined: Sun Mar 26, 2017 9:27 am

Re: Retirement Checkup - Physician nearing end of Training

Post by Finance-MD » Sat Sep 09, 2017 4:52 pm

1. Her 403b
Have good options there. Could leave it.
I would however move to IRA though and do Roth conversion while you have the chance this year assuming you can do it all at the 28% marginal rate.
It's a bit of a wash really, but for tax diversification purposes, you may be very happy to have more Roth money now. You will likely retire with a huge pretax retirement account subject to RMD's.
Paying tax on $25k is not that big a deal in the big picture of your lifelong finances.... just make sure you have the money ($8k) set aside so you can pay it next April.

2. If you're at a big hospital employer I'd be surprised if they did not automatically stop your contributions at 18k. But not all places do it... crazy.

3. If side Job is w2 but no retirement options available to you, then it's taxable investing only. Which is fine.
However if you can find a side gig as a 1099, then you can do employer contributions to solo 401k or you can do a SEP.
You could also potentially find LOTS of deductions off your self employment income....

Side note.. may want to consider all 401k contributions as Roth contributions this year assuming it doesn't bump you into 33% bracket.

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Sat Sep 09, 2017 5:41 pm

Finance-MD wrote:
Sat Sep 09, 2017 4:52 pm
Side note.. may want to consider all 401k contributions as Roth contributions this year assuming it doesn't bump you into 33% bracket.
Thanks for the information. I am definitely leaning towards converting it to Roth.

As for your comment above, when would I transfer it out of my current WF account to Vanguard? Can it be transferred at anytime or do I have to wait till Im done with Fellowship? Does it have to be in 2017 for the rollover to be in that tax year?

If I can do it at anytime, say like Jan 2018; does that affect my backdoor Roth?

cheapindexer
Posts: 19
Joined: Tue Feb 02, 2016 2:33 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by cheapindexer » Sat Sep 09, 2017 6:23 pm

A word of caution : agree not to count chickens before they hatch

First job after fellowship frequently ends in disaster . Mine did .

It sounds like salesmen are getting to you . You didn't need to spend 40 k to get your spouse "reliable" transportation

After years of delayed gratification ... stay in that mode for another couple of years and don't expect this to be your dream job

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Sat Sep 09, 2017 7:24 pm

cheapindexer wrote:
Sat Sep 09, 2017 6:23 pm
A word of caution : agree not to count chickens before they hatch

First job after fellowship frequently ends in disaster . Mine did .

It sounds like salesmen are getting to you . You didn't need to spend 40 k to get your spouse "reliable" transportation

After years of delayed gratification ... stay in that mode for another couple of years and don't expect this to be your dream job
We spent 2 months test driving SUVs and unfortunately with the safety features that we wanted in the vehicle (adaptive cruise control, lane keeping assist, ect), these features drove up the price on all makes and models as we're ahead of the technology game. We eventually got a great deal on a vehicle and will keep it for the next ten years. I plan on driving my car until it dies (150k miles).

As for the job, we are interviewing at many places and the numbers from the job above are very similar to most of the jobs we have interviewed for across the country. Haven't signed a contract yet, but, as I said, nearly all the offers and potential income are similar.

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GreatOdinsRaven
Posts: 474
Joined: Thu Apr 23, 2015 8:47 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by GreatOdinsRaven » Sat Sep 09, 2017 10:18 pm

ACN,

I'd like to chime in with some practical advice. I'm a physician in private practice. I've watched many new hires make some very bad decisions. You're on this forum as a trainee so that bodes well for you. You're going to be golden. Just in case, though, I have a few recommendations and comments based on what I've observed. Not trying to be preachy or self-righteous. They don't tell you this in med school/residency- at least no one told me.

1. Don't buy a home until you make partner. If you can't hold off, then don't buy an expensive home and definitely don't buy one the first year you join. You never know what can happen. I've seen many doctors buy homes they couldn't afford at their current salary, but they banked on the hope they could afford it once they made partner.

I know many doctors who didn't make partner for myriad reasons. It can happen to anyone- a couple of randomly bad outcomes, upsetting the wrong people within or outside the group, loss of contracts, inability to do the work at the pace required for compensation at that level, etc. These people lost their jobs soon after buying their homes, with no emergency fund and with a large unexpected malpractice tail coverage bill. Life is unfair and no one cares. Don't make unforced errors.

Don't forget the mantra "last man in, first man out." Trust me on this one. I've seen it many times.

There is zero guarantee that once you make partner your income will be larger than it is now. It should be, but you just never know. Again, trust me on this. I've seen many examples of salaries dropping drastically for unforeseen reasons. ACOs are coming etc.

2. Don't finance your home for 30 years. Everyone will tell you a 15 year mortgage is a bad idea (your realtor, your mortgage broker, your friends and colleagues). They'll tell you that having a 30 year mortgage and lower payment gives you the freedom to lower payments and have better cash flow characteristics if money becomes tight. They'll also suggest that you make extra payments each month. Almost no one actually follows through and makes extra payments to accelerate the payoff. Heck, I've seen guys refinance at 30 year terms every 5 years turning a 30 year mortgage into a potential 50 year mortgage. When you're 50 you'll thank me for this advice.

Yeah, yeah I understand that you can probably invest in a taxable account and have more $ than if you pay off your home in 15 years (or less). I also know doctors in their 60s and 70s with large mortgages and who can't retire, because they never made extra payments and they didn't invest their "extra" money. They spent it all and then some. Can happen to anyone.

3. Don't allow lifestyle creep to set in. Live Far BYM for no less than 5 years and honestly for as long as possible until you relax a little and then just LBYM (it's harder to do than it sounds). Simple but not easy.

That tech package in your car- yeah, that's how it begins. Easy to explain away. It's the death of 1000 paper cuts leading to DIC. Then comes the home that's a little too big, with really nice finishes, gated community, and the summer kitchen, chef's kitchen, spa bath, country club/yacht club, etc.

I like nice things, don't get me wrong. But, I opted for delayed gratification. My way's not for everyone.

4. Don't assume that all your partners are wealthy or even financially/investment/tax literate. You'd be shocked how many aren't. Easily >90% aren't. I've seen partners decline to participate in a great 401(k) plan and take the money as taxable income. I've even seen them encourage new hires not to save outside of the 401k and to buy the largest home they can secure a mortgage on. If you're going to make >1mm as you suggest think about how much you have to save to retire at your accustomed standard of living. It's a significant number.

5. The guy in your group with the Rolexes, Porsche, largest house, vacation home, kids in private school and who talks about his investment prowess is probably in the bottom quartile of relative net worth unless financially independent via inheritance, spouse, patent, etc. The irony is that many people will think she/he's the wealthiest. I know doctors making in excess of 1mm who have to work extra shifts to pay down debt and who do not have a taxable investment account. Let that sink in. How is that even possible?

Good luck!

GOR
"The greatest enemies of the equity investor are expenses and emotions." -John C. Bogle, Little Book of Common Sense Investing. | | "Winter is coming." Lord Eddard Stark.

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Sat Sep 09, 2017 11:42 pm

GreatOdinsRaven wrote:
Sat Sep 09, 2017 10:18 pm

GOR
Thanks for the advice! We definitely are planning on renting for at least 2 years and making partner before buying property (wherever we end up), as well as, living well below our means (last year we saved 64.58% of our income). Besides the new SUV, we have no intentions nor plans in buying anything else extravagant. Once again, thanks for taking the time in replying and your wisdom; much appreciated!! :sharebeer

Finance-MD
Posts: 314
Joined: Sun Mar 26, 2017 9:27 am

Re: Retirement Checkup - Physician nearing end of Training

Post by Finance-MD » Sun Sep 10, 2017 11:41 am

ACN wrote:
Sat Sep 09, 2017 5:41 pm
Finance-MD wrote:
Sat Sep 09, 2017 4:52 pm
Side note.. may want to consider all 401k contributions as Roth contributions this year assuming it doesn't bump you into 33% bracket.
Thanks for the information. I am definitely leaning towards converting it to Roth.

As for your comment above, when would I transfer it out of my current WF account to Vanguard? Can it be transferred at anytime or do I have to wait till Im done with Fellowship? Does it have to be in 2017 for the rollover to be in that tax year?

If I can do it at anytime, say like Jan 2018; does that affect my backdoor Roth?
I'm a bit confused by your question.

First, any previous PREtax retirement plans from previous employers, I would move them out to IRA's then do Roth conversions to move to Roth IRA this year in 2017. I would do that this year (prior to December 2017) as long as the income doesn't push you into 33% bracket. I would start the rollover to IRA in November to make sure it gets done.

This is different from your CURRENT employer retirement accounts. You need to check if you have a Roth option for your 401k/403b so that it goes in POST tax for this year 2017. I would do only Roth contributions to those plans for this year 201) assuming you don't hit 33% bracket.

Then in January 2018 you need to calculate/estimate what your marginal tax rate will be for 2018 year. If it is going to be 33%, I'd switch my contributions to PREtax (non Roth) in 401k/403b for January-June 2018 for you and wife.

Then after you leave fellowship, Roth 401k/403b can be moved to Roth IRA. Any pretax 401k/403b can stay there or be rolled over to your next employer 401k/403b so that you can keep your pretax IRA's empty for backdoor Roth IRA contributions annually.

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Sun Sep 10, 2017 12:19 pm

Finance-MD wrote:
Sun Sep 10, 2017 11:41 am
ACN wrote:
Sat Sep 09, 2017 5:41 pm
Finance-MD wrote:
Sat Sep 09, 2017 4:52 pm
Side note.. may want to consider all 401k contributions as Roth contributions this year assuming it doesn't bump you into 33% bracket.
Thanks for the information. I am definitely leaning towards converting it to Roth.

As for your comment above, when would I transfer it out of my current WF account to Vanguard? Can it be transferred at anytime or do I have to wait till Im done with Fellowship? Does it have to be in 2017 for the rollover to be in that tax year?

If I can do it at anytime, say like Jan 2018; does that affect my backdoor Roth?
I'm a bit confused by your question.

First, any previous PREtax retirement plans from previous employers, I would move them out to IRA's then do Roth conversions to move to Roth IRA this year in 2017. I would do that this year (prior to December 2017) as long as the income doesn't push you into 33% bracket. I would start the rollover to IRA in November to make sure it gets done.

This is different from your CURRENT employer retirement accounts. You need to check if you have a Roth option for your 401k/403b so that it goes in POST tax for this year 2017. I would do only Roth contributions to those plans for this year 201) assuming you don't hit 33% bracket.

Then in January 2018 you need to calculate/estimate what your marginal tax rate will be for 2018 year. If it is going to be 33%, I'd switch my contributions to PREtax (non Roth) in 401k/403b for January-June 2018 for you and wife.

Then after you leave fellowship, Roth 401k/403b can be moved to Roth IRA. Any pretax 401k/403b can stay there or be rolled over to your next employer 401k/403b so that you can keep your pretax IRA's empty for backdoor Roth IRA contributions annually.
Thanks for the explanation, this answered my confusing question perfectly.

I'm not sure if my current employer offers a Roth option (I didn't see anything about it when I read the paperwork, so I doubt it), however I will double check with HR.

WL2034
Posts: 393
Joined: Tue May 21, 2013 10:36 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by WL2034 » Sun Sep 10, 2017 1:29 pm

ACN wrote:
Sat Sep 09, 2017 11:42 pm
GreatOdinsRaven wrote:
Sat Sep 09, 2017 10:18 pm

GOR
Thanks for the advice! We definitely are planning on renting for at least 2 years and making partner before buying property (wherever we end up), as well as, living well below our means (last year we saved 64.58% of our income). Besides the new SUV, we have no intentions nor plans in buying anything else extravagant. Once again, thanks for taking the time in replying and your wisdom; much appreciated!! :sharebeer
At your expected income and saving level, I would start with a rough estimate of how long you think you want to work and go backwards from there. If you were so inclined, you could easily retire by age 40 by living well below your means. If you want to work to 50, determine how much you need to save. If you want to work to 60, you can LBYM for about 5 years (save $3m-$4m) and then pretty much buy any and everything you want. Obviously, I would focus on saving early no matter what because there is always going to be long-term risk related to reimbursement, no matter what your expected salary is now. Make hay while the sun shines, as they say.

You are on a great trajectory. As for the $40k SUV, you will soon be a millionaire driving a Highlander or Pilot, I'm guessing. That doesn't seem too out of line. Just don't decide you need a boat to tow behind it. Boats are for when you can pay cash while still meeting all your savings goals.

Just to piggyback on the previous poster, don't even bother talking finances with partners or anyone at work. The flashiest people always have the grandiose side business plans and investment tips. At first I really thought they might be making millions off of stock trading and other investments and that's how they did the fancy car, private school, luxurious lifestyle thing. I've slowly realized that it's a mirage in most instances. I was in a meeting among other physicians lately when a physician practicing for 15-20 years was lamenting that compensation for additional shifts was distributed only quarterly rather than monthly or bi-weekly. He was working extra shifts at age 55ish and withdrawing from retirement accounts (not sure of the specifics) to make ends meet between quarterly bonus checks (when extra shift income was paid). Not as high-paying a specialty as yours, but still several multiples of the median salary for an American family. Nearly unfathomable to me.

hightower
Posts: 321
Joined: Mon Dec 12, 2016 2:28 am

Re: Retirement Checkup - Physician nearing end of Training

Post by hightower » Sun Sep 10, 2017 1:52 pm

GreatOdinsRaven wrote:
Sat Sep 09, 2017 10:18 pm
ACN,

I'd like to chime in with some practical advice. I'm a physician in private practice. I've watched many new hires make some very bad decisions. You're on this forum as a trainee so that bodes well for you. You're going to be golden. Just in case, though, I have a few recommendations and comments based on what I've observed. Not trying to be preachy or self-righteous. They don't tell you this in med school/residency- at least no one told me.

1. Don't buy a home until you make partner. If you can't hold off, then don't buy an expensive home and definitely don't buy one the first year you join. You never know what can happen. I've seen many doctors buy homes they couldn't afford at their current salary, but they banked on the hope they could afford it once they made partner.

I know many doctors who didn't make partner for myriad reasons. It can happen to anyone- a couple of randomly bad outcomes, upsetting the wrong people within or outside the group, loss of contracts, inability to do the work at the pace required for compensation at that level, etc. These people lost their jobs soon after buying their homes, with no emergency fund and with a large unexpected malpractice tail coverage bill. Life is unfair and no one cares. Don't make unforced errors.

Don't forget the mantra "last man in, first man out." Trust me on this one. I've seen it many times.

There is zero guarantee that once you make partner your income will be larger than it is now. It should be, but you just never know. Again, trust me on this. I've seen many examples of salaries dropping drastically for unforeseen reasons. ACOs are coming etc.

2. Don't finance your home for 30 years. Everyone will tell you a 15 year mortgage is a bad idea (your realtor, your mortgage broker, your friends and colleagues). They'll tell you that having a 30 year mortgage and lower payment gives you the freedom to lower payments and have better cash flow characteristics if money becomes tight. They'll also suggest that you make extra payments each month. Almost no one actually follows through and makes extra payments to accelerate the payoff. Heck, I've seen guys refinance at 30 year terms every 5 years turning a 30 year mortgage into a potential 50 year mortgage. When you're 50 you'll thank me for this advice.

Yeah, yeah I understand that you can probably invest in a taxable account and have more $ than if you pay off your home in 15 years (or less). I also know doctors in their 60s and 70s with large mortgages and who can't retire, because they never made extra payments and they didn't invest their "extra" money. They spent it all and then some. Can happen to anyone.

3. Don't allow lifestyle creep to set in. Live Far BYM for no less than 5 years and honestly for as long as possible until you relax a little and then just LBYM (it's harder to do than it sounds). Simple but not easy.

That tech package in your car- yeah, that's how it begins. Easy to explain away. It's the death of 1000 paper cuts leading to DIC. Then comes the home that's a little too big, with really nice finishes, gated community, and the summer kitchen, chef's kitchen, spa bath, country club/yacht club, etc.

I like nice things, don't get me wrong. But, I opted for delayed gratification. My way's not for everyone.

4. Don't assume that all your partners are wealthy or even financially/investment/tax literate. You'd be shocked how many aren't. Easily >90% aren't. I've seen partners decline to participate in a great 401(k) plan and take the money as taxable income. I've even seen them encourage new hires not to save outside of the 401k and to buy the largest home they can secure a mortgage on. If you're going to make >1mm as you suggest think about how much you have to save to retire at your accustomed standard of living. It's a significant number.

5. The guy in your group with the Rolexes, Porsche, largest house, vacation home, kids in private school and who talks about his investment prowess is probably in the bottom quartile of relative net worth unless financially independent via inheritance, spouse, patent, etc. The irony is that many people will think she/he's the wealthiest. I know doctors making in excess of 1mm who have to work extra shifts to pay down debt and who do not have a taxable investment account. Let that sink in. How is that even possible?

Good luck!

GOR
Excellent post! All is so true. Your biggest challenges at this point in your life are #1 doing a good job at work to help secure your ability to make money and #2 Resisting the urge to spend more than you have. Learn to pay cash for things (or at least pay for them with a credit card and pay the balance off in full each month). Don't get a mortgage more than 2x your actual income. Try to live off of less than 1/2 of what you make.
Couldn't agree more with the comments on not counting your chickens before they hatch. Medicine is an unpredictable world these days and quickly changing every year. Save aggressively and pay close attention to what you're spending money on each month. Post here or on WCI for "check ups" from time to time and it will keep you on track. More than likely you will end up doing very well for yourself in that field, but you have to get into a mentality of saving aggressively first and foremost.

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Sun Sep 10, 2017 6:04 pm

hightower wrote:
Sun Sep 10, 2017 1:52 pm
Excellent post! All is so true. Your biggest challenges at this point in your life are #1 doing a good job at work to help secure your ability to make money and #2 Resisting the urge to spend more than you have. Learn to pay cash for things (or at least pay for them with a credit card and pay the balance off in full each month). Don't get a mortgage more than 2x your actual income. Try to live off of less than 1/2 of what you make.
Couldn't agree more with the comments on not counting your chickens before they hatch. Medicine is an unpredictable world these days and quickly changing every year. Save aggressively and pay close attention to what you're spending money on each month. Post here or on WCI for "check ups" from time to time and it will keep you on track. More than likely you will end up doing very well for yourself in that field, but you have to get into a mentality of saving aggressively first and foremost.
Thanks for the reply. We never have carried any CC debt and use it for only for points. It is funding a trip for us that we are planning next year. Both my wife and I are pretty conservative with our purchasing and we really hope to "live like a resident" for many years once I become an attending. We're on pace to save 50-70% of our income again this year.

Finance-MD
Posts: 314
Joined: Sun Mar 26, 2017 9:27 am

Re: Retirement Checkup - Physician nearing end of Training

Post by Finance-MD » Sun Sep 10, 2017 6:51 pm

Congrats on your excellent saving rate.
When you get the bump in income and you're in the 80-90% savings rate range, you could be comfortably Financially independent in <5 years.
Then... as your investments grow, you can inflate your lifestyle proportionally based on 4% rule and always be FI...

E.g. For every $300k invested, you have $1000 to live off of....
so within 5 years your Portfolio is $2.1M, that's 7k per month to live off of. 1 year later you're up to $2.7M and you're up to 9k per month.

My wife and I started at around -500k after fellowship ended 2 years ago and should be at 2M within the next 3 years (possibly 2 depending on partnership distributions) and FI.

investing1012
Posts: 134
Joined: Sun Aug 07, 2016 5:19 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by investing1012 » Sun Sep 10, 2017 6:53 pm

ACN wrote:
Sat Sep 09, 2017 12:36 pm
Hello Bogleheads,

Long time reader of these forums along with WCI; first-time poster here. A quick overview of life:

-Final year of training as a surgeon (current income $50k/yr) - expected income next two years (Starting Aug 2018) $350k/yr; then $500-700k; then $700k-1m++++
-Starting to moonlight end of Sept (anticipate $10-15k this year; $25k for next year) - paid via W2 - no access to retirement accounts
-Wife income $75-80k/yr - probably will work 2-3 more years and then stay at home when we decide to start having kids
-We moved ~2 months ago to start Fellowship (will move again in 1 year Aug 2018 for first job)
-0% match for 401k in residency and fellowship

Emergency Funds: $50k @ 1.50% (Ally)
Debt:
-Student Loans: $55k @ 4.1% (May get loan repayment option with job contract) - no payments till Fall 2018
-Her new car: $40k @ 1.49% (splurged a little; just bought her a new SUV as hers had 220k miles and was not reliable)
Tax Filing Status: Married Jointly
Tax Rate: Marginal 28% Federal (Actual was 16% per CPA), 4.24% State
State of Residence: AZ
Age:
-His 32
-Her 26
Desired Asset allocation: 80% stocks / <<10% bonds / 10% REIT
Desired International allocation: 20-30% of stocks

Current retirement assets

Taxable
None

His Roth IRA (Vanguard)
US Stock (VTSAX) - 20.00%
I Stock (VTIAX) - 25.71%
Bond (VBFMX) - 7.00%

His 401k (Wells Fargo) - No Match
Wells Fargo Index Admiral (Exp: 0.04%) - 0%

Spousal Roth IRA (Vanguard)
US Stock (VTSAX) - 18.77%
REIT (VGSIX) - 7.96%

Spousal 403b (Voya Financial) - Old Job - No longer contributing
Vanguard® Institutional Index Fund - Institutional Shares - (0.04% + 0.05% Fee) (VINIX) - 17.91%
Vanguard® Small-Cap Index Fund - Institutional Shares - (0.05% + 0.05% Fee) (VSCIX) - 2.66%

Overall (NO CASH)
US Stocks -59.33%
I Stocks - 25.71%
REIT - 7.96%
Bonds - 7.00%

Contributions

New annual Contributions
$6000 his 401k (no match) for 2017
$18000 his 401k (no match) for 2018

$12000 her OLD 403b (6% match) for 2017
$2-3k her NEW 401k for 2017 (Not allowed to participate till November)
$18000 her NEW 401k for 2018

$5500 his Roth IRA Backdoor
$5500 her Roth IRA Backdoor

$0 taxable???

Available funds

Funds available in his 401(k)
Wells Fargo Index Admiral (Exp: 0.04%)
-This was the cheapest exp ratio fund, everything else was .8%+
-Just started fellowship, putting the max allowed 50% per paycheck for the rest of the year; total contribution will be ~$6k for 2017.


Funds available in her OLD 403(b)
Vanguard® Mid-Cap Index Fund - Institutional Shares - (0.05% + 0.05% Fee)
Vanguard® Institutional Index Fund - Institutional Shares - (0.04% + 0.05% Fee)
Vanguard® Small-Cap Index Fund - Institutional Shares - (0.05% + 0.05% Fee)
-Only funds available that don't have exp ratio over 0.5 (most are 0.5-1.2%)

Funds available in her NEW 401k
-unknown; haven't received information

Questions:
1. In regards to Her OLD 403b; currently, it has $25.6k. My question is what to do with this account:
-Keep it as is?
-Rollover to her new 401k once opened to decrease total accounts (if fund options are as good or better)?
-Transfer to IRA at Vanguard and convert it to Roth?

2. In 2018, if I continue to contribute 50%/check to my 401k, will the company automatically stop contributions when I hit $18k?

3. With my moonlighting W2 income starting end of Sept, I'm guessing my only option to save for retirement would be a taxable account, correct?

Any other suggestions/comments would be appreciated. I can add balances of all the accounts if that helps with recommendations, but it is ~$100k.
I'm also a physician in his 30s. One recommendation is absolutely don't buy a house until you make partner. I remember the previous group I was with wanted me to buy a house so that once partnership time comes around I would have less negotiating ability (due to being tied down with the house). If they know you're renting, and can get up and leave whenever you want, they would be more inclined to make you partner.

Also, unfortunately in this day and age for some reason senior physicians are not making their juniors partners as often as historically was the case. I think a big factor in this is the declining reimbursements, and hence they want to keep a bigger portion of the pie. So make sure on your contract the partnership is guaranteed after a certain number of years. Also, even though the senior partners say they made 7 figures in the past, that doesn't mean you'll make 7 figures due to the significant decline in reimbursements. Unfortunately in medicine (including ortho) reimbursements have drastically decreased over the past 5 years. So don't bank on making 7 figures if you're the only physician in the household.

WanderingDoc
Posts: 288
Joined: Sat Aug 05, 2017 8:21 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by WanderingDoc » Mon Sep 11, 2017 5:38 pm

Finance-MD wrote:
Sun Sep 10, 2017 6:51 pm
Congrats on your excellent saving rate.
When you get the bump in income and you're in the 80-90% savings rate range, you could be comfortably Financially independent in <5 years.
Then... as your investments grow, you can inflate your lifestyle proportionally based on 4% rule and always be FI...

E.g. For every $300k invested, you have $1000 to live off of....
so within 5 years your Portfolio is $2.1M, that's 7k per month to live off of. 1 year later you're up to $2.7M and you're up to 9k per month.

My wife and I started at around -500k after fellowship ended 2 years ago and should be at 2M within the next 3 years (possibly 2 depending on partnership distributions) and FI.
That's a fantastic combined income, congrats!

Would you recommend marriage to someone in the same field as you? Presumably if there is only 1 physician there would be plenty of money to go around.. eventually it becomes numbers on a screen. How about living with someone talking about patients, medicine, and science all the time? I haven't done it for a significant amount of time so I am genuinely curious.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

westrichj312
Posts: 43
Joined: Wed Jul 05, 2017 4:25 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by westrichj312 » Mon Sep 11, 2017 5:53 pm

OMG wait about 20 years please. just save as much as you can, tomorrow is not promised enjoy yourself and LIVE everyday.

mrsytf
Posts: 208
Joined: Sun Aug 14, 2016 9:04 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by mrsytf » Mon Sep 11, 2017 7:57 pm

Would you recommend marriage to someone in the same field as you? Presumably if there is only 1 physician there would be plenty of money to go around.. eventually it becomes numbers on a screen. How about living with someone talking about patients, medicine, and science all the time? I haven't done it for a significant amount of time so I am genuinely curious.


My husband and I met in fellowship so exact same specialty. We never talk about work- too many other things going on: kids, shared hobbies, vacations, gossip about the extended family, etc.

I always find it funny when residents tell me they or their family think they should marry another doctor because that person will "understand." First my husband and I never talk about work. I still don't really have a handle on his schedule ten years later. Monday is OR and Friday is clinic- not sure what else he does in the middle. Two, when I've had a long day at work and am faced with dinner, homework, soccer practice and bath time with three kids by myself- while I understand why he came home so late, it doesn't make me feel any less exasperated.

bonez
Posts: 1
Joined: Fri Apr 01, 2016 9:51 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by bonez » Mon Sep 11, 2017 8:48 pm

ACN wrote:
Sat Sep 09, 2017 2:46 pm
tigerdoc93 wrote:
Sat Sep 09, 2017 2:34 pm
As a physician, I'm curious what specialty you are studying and how long is the fellowship?
Ortho. One year fellowship
Congrats! I'm in my final year of Ortho residency before fellowship next year.

Your portfolio is more complicated than my wife and mine. Our only debt is my student loans ($220K) with 25K in my Roth IRA (Vanguard Growth). Probably have 8K in savings/checking. Our big decision is whether to buy a new vs used Subaru Outback for AWD. I'm moving to a snowy/icy location for fellowship and currently drive a nearly 17 year old 2WD truck.

ACN
Posts: 9
Joined: Sat Sep 09, 2017 11:22 am

Re: Retirement Checkup - Physician nearing end of Training

Post by ACN » Mon Sep 11, 2017 9:15 pm

bonez wrote:
Mon Sep 11, 2017 8:48 pm
ACN wrote:
Sat Sep 09, 2017 2:46 pm
tigerdoc93 wrote:
Sat Sep 09, 2017 2:34 pm
As a physician, I'm curious what specialty you are studying and how long is the fellowship?
Ortho. One year fellowship
Congrats! I'm in my final year of Ortho residency before fellowship next year.

Your portfolio is more complicated than my wife and mine. Our only debt is my student loans ($220K) with 25K in my Roth IRA (Vanguard Growth). Probably have 8K in savings/checking. Our big decision is whether to buy a new vs used Subaru Outback for AWD. I'm moving to a snowy/icy location for fellowship and currently drive a nearly 17 year old 2WD truck.
Everyone is going to say a used vehicle unless you can buy it with Cash. But do your research, decide what features are important for you and find that in a used vehicle. If not (like us), we bought new and will keep the car for 10 years. Not the "best" financial decision, but a very calculated one. :moneybag

MiddleOfTheRoad
Posts: 37
Joined: Fri Jul 21, 2017 11:19 am

Re: Retirement Checkup - Physician nearing end of Training

Post by MiddleOfTheRoad » Mon Sep 11, 2017 9:18 pm

Delete
Last edited by MiddleOfTheRoad on Thu Nov 16, 2017 10:57 pm, edited 1 time in total.

Finance-MD
Posts: 314
Joined: Sun Mar 26, 2017 9:27 am

Re: Retirement Checkup - Physician nearing end of Training

Post by Finance-MD » Wed Sep 13, 2017 10:32 pm

WanderingDoc wrote:
Mon Sep 11, 2017 5:38 pm
Finance-MD wrote:
Sun Sep 10, 2017 6:51 pm
Congrats on your excellent saving rate.
When you get the bump in income and you're in the 80-90% savings rate range, you could be comfortably Financially independent in <5 years.
Then... as your investments grow, you can inflate your lifestyle proportionally based on 4% rule and always be FI...

E.g. For every $300k invested, you have $1000 to live off of....
so within 5 years your Portfolio is $2.1M, that's 7k per month to live off of. 1 year later you're up to $2.7M and you're up to 9k per month.

My wife and I started at around -500k after fellowship ended 2 years ago and should be at 2M within the next 3 years (possibly 2 depending on partnership distributions) and FI.
That's a fantastic combined income, congrats!

Would you recommend marriage to someone in the same field as you? Presumably if there is only 1 physician there would be plenty of money to go around.. eventually it becomes numbers on a screen. How about living with someone talking about patients, medicine, and science all the time? I haven't done it for a significant amount of time so I am genuinely curious.
We're different specialties.
Occasionally discuss academic things but really most of our work conversation is the typical venting about what happened at work that anyone else would have with someone they live with... I assume.

We barely have enough time to discuss non-work things.

We can't keep each other's schedules straight and sometimes I'm in her main hospital and swing by to see her just to have a coworker tell me she's working at a satellite campus that day...

ThrustVectoring
Posts: 239
Joined: Wed Jul 12, 2017 2:51 pm

Re: Retirement Checkup - Physician nearing end of Training

Post by ThrustVectoring » Thu Sep 14, 2017 2:24 am

You need literally zero advice for your retirement accounts and savings. You can easily afford to retire if you did something terribly like put all your savings in taxable cash accounts. The only advice you need is on the spend side - figure out how much is "enough" for you, and avoiding spending more just because you can.

That and, uhh, you probably want to look into term life insurance and own-occupation disability insurance. Your largest asset right now is your ability to do surgery, and you've got no way to replace that future income should something terrible happen.

There's some tax and portfolio optimization stuff you can do on top of that, but in your shoes - and especially this early in your career - your focus should be on maintaining healthy spending habits, developing your careerl, and insuring your future earning potential. Think of it this way: your retirement portfolio is currently sitting at $100k or so and you can maybe squeeze a percent out of it. Your income over the next five years is expected to be about $1M and you can move the needle on career progression probably ~5%. Go shove stuff in target date funds or whatever, stop thinking about investing, and start thinking about your career and what you want to do with your money in general.

advice789
Posts: 33
Joined: Mon Jan 30, 2017 1:47 am

Re: Retirement Checkup - Physician nearing end of Training

Post by advice789 » Thu Sep 14, 2017 3:09 am

Lots of solid feedback from the forum members. My sense is you are seeking investment advice to build wealth. Suggest you talk to a couple of CPAs who specialize in doctors. Ask your older colleagues for CPAs they use for tax advice- CPAs see the plus and minus of their clients investment and spending practices. Useful source of experienced based finance practices. And look for a CPA who does not offer investment products.

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