First "real" job with 401(k), HSA and higher income. Any advice?

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kjdbonez
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Joined: Tue Aug 09, 2016 2:14 pm

First "real" job with 401(k), HSA and higher income. Any advice?

Post by kjdbonez » Sat Nov 11, 2017 9:50 pm

Emergency fund: ~4 months all expenses
Debt: Only student debt, but significant… $255k at 3.45% variable and $35k at 3.5% fixed
Tax Filing Status: Single
Tax Rate: 28% Federal, 9.85% state
State of Residence: MN
Age: 35
Income: I just finished training in a surgical subspecialty, so income is in the lower end to begin with. Right now I’m taking a draw of $200k, but my partners of the same subspecialty in our group are making $450-650k/year, so mine will likely go up to somewhere in that range over time.
Desired Asset Allocation: 90% stocks / 10% bonds
Desired International Allocation: 35% of stocks

Portfolio Balance: September was the first time I've ever been eligible to contribute to a 401(k) and I have $10k in it so far - it will be maxed out at $18k by end of the year. I also have $13k in Roth IRA. I just reached the minimum balance in my HSA to invest in their funds.

Current Retirement Assets

Taxable – I don’t have one yet.

Roth IRA
100% in Vanguard Target Retirement 2050 Fund Investor Shares (VFIFX) (0.16%)

401k
13% in Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
37% in Vanguard Institutional Index Fund Institutional Shares (VINIX) (0.04%)
10% in Vanguard S&P Mid-Cap 400 Index Fund Institutional Shares (VSPMX) (0.08%)
5% in Vanguard Small Cap Index Fund Admiral Shares (VSMAX) (0.06%)
35% in Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)

Contributions
Plan to max out 401(k), Roth IRA, and HSA each year. Will have profit-sharing employer contribution to 401(k) next year. When income allows I’ll start a taxable account as well.

Funds available in 401(k)
Metropolitan West Total Return Bond Fund Class I (MWTIX) (0.44%)
Vanguard GNMA Fund Admiral Shares (VFIJX) (0.11%)
Columbia Dividend Opportunity Fund Class Y (CDOYX) (0.63%)
MFS Technology Fund Class R3 (MTCHX) (0.25%)
Vanguard REIT Index Fund Admiral Shares (VGSLX) (0.12%)
Touchstone Small Cap Growth Fund Institutional Class (MXCIX) (1.25%)
JPMorgan Mid Cap Value Fund Class L (FLMVX) (0.95%)
Victory Integrity Small-Cap Value Fund Class R6 (MVSSX) (1.0%)
Janus Henderson Enterprise Fund Class I (JMGR) (0.78%)
ClearBridge Large Cap Growth Fund Class I (SBLYX) (0.85%)
American Funds - EuroPacific Growth Fund Class R6 (RERGX) (0.5%)
Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
Vanguard Institutional Index Fund Institutional Shares (VINIX) (0.04%)
Vanguard S&P Mid-Cap 400 Index Fund Institutional Shares (VSPMX) (0.08%)
Vanguard Small Cap Index Fund Admiral Shares (VSMAX) (0.06%)
Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)

Funds available in HSA
American Beacon Large Cap Value Fund Investor Class (AAGPX) (0.93%)
American Funds Capital World Growth &Income Fund Class F2 (WGIFX) (0.55%)
BlackRock Equity Dividend K Shares (MKDVX) (0.59%)
Columbia Mid Cap Index Fund Class A (NTIAX) (0.45%)
Delaware Small Cap Value Fund Institutional Class (DEVIX) (0.99%)
Dodge & Cox Income Fund (DODIX) (0.43%)
Dreyfus Small Cap Stock Index Fund Investor Shares (DISSX) (0.5%)
Fidelity Low-Priced Stock Fund (FLPSX) (0.68%)
Goldman Sachs Small Cap Value Fund Institutional Class (GSSIX) (0.97%)
John Hancock Fundamental Large Cap Core Fund Class I (JLVIX) (0.78%)
Lord Abbett High Yield Fund Class F (LHYFX) (0.78%)
Neuberger Berman Genesis Fund Institutional Class (NBGIX) (0.85%)
Oppenheimer Developing Markets Fund Class I (ODVIX) (0.88%)
Schwab Target 2020 Index Fund I (SWYLX) (0.08%)
Schwab Target 2030 Index Fund I (SWYEX) (0.08%)
Schwab Target 2040 Index Fund I (SWYGX) (0.08%)
Schwab Target 2050 Index Fund I (SWYMX) (0.08%)
Schwab Target 2060 Index Fund I (SWYNX) (0.08%)
T. Rowe Price Blue Chip Growth Fund I Class (TBCIX) (0.58%)
Vanguard 500 Index Admiral Shares (VFIAX) (0.04%)
Vanguard Equity-Income Admiral Shares (VEIRX) (0.17%)
Vanguard Extended Market Index Fund Institutional Shares (VIEIX) (0.06%)
Vanguard Global Equity Investor Shares (VHGEX) (0.51%)
Vanguard Healthcare Fund Admiral Shares (VGHAX) (0.32%)
Vanguard Inflation-Protected Securities Fund Institutional Shares (VIPIX) (0.07%)
Vanguard Life Strategy Growth Fund Investor Shares (VASGX) (0.15%)
Vanguard LifeStrategy Conservative Growth Fund Investor Shares (VSCGX) (0.13%)
Vanguard LifeStrategy Moderate Growth Fund Investor Shares (VSMGX) (0.14%)
Vanguard Mid Cap Index Fund Institutional Shares (VMCIX) (0.05%)
Vanguard REIT Index Fund Institutional Shares (VGSNX) (0.10%)
Vanguard Short-Term Federal Fund Admiral Shares (VSGDX) (0.10%)
Vanguard Short-Term Investment Grade Fund Institutional Shares (VFSIX) (0.07%)
Vanguard Small Cap Index Fund Institutional Shares (VSCIX) (0.05%)
Vanguard Total Bond Market Index Fund Institutional Shares (VBTIX) (0.04%)
Vanguard Total Stock Market Index Fund Institutional Shares (VITSX) (0.04%)
Vanguard Wellington Fund Admiral Shares (VWENX) (0.16%)
Virtus Ceredex Mid-Cap Value Equity Fund Class I (SMVTX) (1.09%)
Wells Fargo Core Bond Fund Class Admin (MNTRX) (0.70%)
Wells Fargo Discovery Fund Class Admin (WFDDX) (1.12%)
Wells Fargo Diversified Equity Fund Class Admin (NVDAX) (1.00%)
Wells Fargo Diversified International Fund Class Admin (WFIEX) (1.26%)
Wells Fargo Dow Jones Target 2010 Class Admin (WFLGX) (0.54%)
Wells Fargo Dow Jones Target 2020 Class Admin (WFLPX) (0.54%)
Wells Fargo Dow Jones Target 2030 Class Admin (WFLIX) (0.54%)
Wells Fargo Dow Jones Target 2040 Class Admin (WFLWX) (0.54%)
Wells Fargo Dow Jones Target 2050 Class Admin (WFQDX) (0.54%)
Wells Fargo Dow Jones Target Today Class Admin (WFLOX) (0.54%)
Wells Fargo Global Small Cap Fund Class Admin (EKGYX) (1.41%)
Wells Fargo Government Money Market Fund (NWGXX) (0.40%)
Wells Fargo Growth Fund Class Admin (SGRKX) (0.96%)
Wells Fargo Growth Balanced Fund Class Admin (NVGBX) (0.95%)
Wells Fargo High Yield Bond Fund Class Admin (EKHYX) (0.80%)
Wells Fargo Index Fund Class Admin (WFIOX) (0.25%)
Wells Fargo Large Cap Growth Fund Class Admin (STDFX) (0.95%)
Wells Fargo Moderate Balanced Fund Class Admin (NVMBX) (0.90%)
Wells Fargo Small Company Growth Fund Class Admin (NVSCX) (1.20%)

Funds available in Roth IRA
Vanguard Roth IRA account options

Questions/Comments:
1) I know that I am really the only one that can answer this, but does my asset allocation seem appropriate?
2) Since I can contribute significantly more to my 401(k) than I can to my Roth IRA and HSA, I feel like it's easier to passively manage a portfolio like this by holding a similar AA in each account rather than trying to balance my overall AA across all accounts. Any reason to not do that?
3) I tried to make my 401(k) investments mirror the investments in the Target Date fund I have invested in my Roth IRA (as seen above). I realize the Target Date fund asset allocation will change over time, so I plan to change the 401(k) investments to become more conservative with time as well. Does that approach sound reasonable, or too complicated?
4) Should I take a similar approach with my HSA in trying to mirror the allocation of my Target Date fund from the Roth IRA?
5) Any other advice in general?

aristotelian
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by aristotelian » Sat Nov 11, 2017 10:05 pm

I think you are on the right track. You have an aggressive allocation but if that suits your personality it is perfectly defensible. You might look into the concept of "risk adjusted return", i.e. 70/30 is thought to reduce volatility significantly while only reducing return only incrementally.

Regarding #2 and some of your other questions, you are lucky. You have great fund choices in all your accounts. That is not always the case. If you have poor choices, that forces you to prioritize different asset classes in different accounts. I think your strategy of keeping each account at the same allocation is fine as long as you don't end up paying extra fees to do so, and Target Date funds are great for that purpose.

lazylarry
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by lazylarry » Sat Nov 11, 2017 11:12 pm

-congrats on finishing surgery fellowship!


1 - Yes
2 - There are slight differences - e.g. bonds are more tax efficient in a tax advantaged. Not critical but would probably improve returns. Basically, all you would do is make sure that bonds are only in 401k or Roth IRA.

https://www.bogleheads.org/wiki/Tax-eff ... _placement

3- Reasonable.
4- Yes. Or you could stay where you are at. Depending on your needs in retirement (e.g. having a beach home in LA vs living in apt in Iowa), then this would matter. If you don't need as much, then you can afford to take on more risk.
5 -

-Keep maxing your Roth IRA contributions via backdoor Roth IRA (assumed ,but you didn't mention this specifically)
-IMHO your asset allocation is ok given stability of your job and increase in income
-Your AA is ok, but if you were trying to match VTSMX, I'd use the following, as it approximates it better.:
81% Vanguard 500 Index Fund (VFINX)
4% Vanguard Mid-Cap Index Fund (VIMSX)
15% Vanguard Small-Cap Index Fund (NAESX)
https://www.bogleheads.org/wiki/Approxi ... ock_market
You could specifically boost your small-cap allocation -historically this has had higher risk-adjusted returns.
-I assume you have read White coat investor. Particularly the disability section given surgery speciality.
Asking questions: https://www.bogleheads.org/forum/viewtopic.php?f=1&t=6212 | My profile: https://www.bogleheads.org/forum/memberlist.php?mode=viewprofile&u=86026

Ron Scott
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by Ron Scott » Sun Nov 12, 2017 12:53 am

Re: #5, the best advice I know for young high income individuals who rely on W-2s is to live below your means, eschew the heavily marketed luxury accouterments of the day, and build as much wealth on top of your tax deferred accounts as you can.

Financial independence and the life opportunities that come with it can be had if you play the long game. Taxes and family expenses are givens. Million+ dollar mortgages, six-figure cars, country club dues, vacation homes and mistresses are optional. If you want to reach the promised land you dont spend stupid money.

You know how to do the math. Run the numbers on saving 50% of your net pay, after taxes, 401(k) and HSA.

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FiveK
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by FiveK » Sun Nov 12, 2017 3:39 am

kjdbonez wrote:
Sat Nov 11, 2017 9:50 pm
5) Any other advice in general?
Yes - keep up the good work!

See Investment Order, Prioritizing investments - Bogleheads, and Paying down loans versus investing - Bogleheads for some reading.

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ruralavalon
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by ruralavalon » Sun Nov 12, 2017 8:24 am

Welcome to the forum :) .

Congratulations on completing your fellowship.

There are some excellent funds offered in your 401k, you are fortunate. You have chosen good funds to use. Its good to see you are making maximum contributions to your 401k, Roth IRA and HSA.

kjdbonez wrote:
Sat Nov 11, 2017 9:50 pm
Age: 35
. . . . .
Desired Asset Allocation: 90% stocks / 10% bonds
Desired International Allocation: 35% of stocks
. . . . .
Questions/Comments:
1) I know that I am really the only one that can answer this, but does my asset allocation seem appropriate?
At age 35 I suggest about 20 - 25% in bonds. This is expected to substantially reduce volatility (risk), with only a relatively slight decrease in return. Graph, "An Efficient Frontier: the power of diversification". Please see the wiki articles Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk", and "Asset allocation".

I suggest around 20 - 30% of stocks in international stocks. Vanguard paper (March 2012), "Considerations for investing in non-U.S. equities". Historically, allocating 20% of an equity portfolio to non-U.S. stocks would have captured about 84% of the maximum possible diversification benefit, and allocating 30% of an equity portfolio to non-U.S. stocks would have captured about 99% of the maximum possible diversification benefit (p. 6). You can find lots of debate here on international allocation, opinions rangeing all the way from 00% to 50% of stocks in international stocks. If you want more viewpoints on international stocks please try the Google search box (upper right, this page.)

This works out to about 20% bonds, 20% international stock, and 60% domestic stock. Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.


kjdbonez wrote:
Sat Nov 11, 2017 9:50 pm
Debt: Only student debt, but significant… $255k at 3.45% variable and $35k at 3.5% fixed
. . . . .
5) Any other advice in general?
Make it a priority to pay off student debt before expanding your lifestyle, and start a taxable investing account as well.

Here is a general account funding priority that usually works well for many people :
1) Contribute to the work-based plans (401k, 403b, 457, TSP, etc.) enough to get the full employer match (the match is like free money, your best possible investment);
2) Pay off high interest debt (a guaranteed high return, the next best thing to free money),
3) Contribute to a Health Savings Account (HSA) if available (unlike many other tax deductions, there are no income restrictions to contribute to an HSA)
4) Contribute the maximum to an IRA, traditional or Roth, depending on eligibility and personal circumstances;
5) Contribute the remainder of the maximum employee contribution to the work-based accounts; and
6) Contribute to a taxable investing account.
Please see the wiki article "Prioritizing investments".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Chris001122
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by Chris001122 » Sun Nov 12, 2017 9:08 am

Lots of smart folks here amd their advice may be even better than mine, but that said, I do have a decent portfolio and +$1M net worth. I might help you some.

My takeaways on a quick glance:

1. Asset allocation. I can't tell 100%, but it seems you have 13% in bonds. I believe you should have closer to your age in %bonds and I doubt you are a 13 year old surgeon. Sorry, couldn't resist. The bonds give you stability in your portfolio and shield your next egg from wide swings in the market.

2. Your debt is huge and your income is large and likely to become larger. I'd start aggressively paying off that debt, even if it meant pausing the 401K for a little while. Throw every extra dollar towards that until it is paid off. That interest will eat your 401K alive. It's like a band-aid on an aorta wound. Cauterize it and tourniquet that debt. Dave Ramsey has a good book for debt reduction, "The Total Money Makeover" and a radio show and podcast. He helps "docs" grow their net worth all the time. Just have to delay gratification and get that debt to zero.

3. Minor issue - try to have 6 months in expenses in your emergency fund. Use the level of expenses that are the lowest, though, as if you weren't giving to charity or doing other optional things (vacation, eating out a lot).

Hope that helps. Gotta get ready for church!

Chris
"It's always been a mistake to bet against the United States since 1776." - Warren Buffett

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hoppy08520
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by hoppy08520 » Sun Nov 12, 2017 9:20 am

lazylarry wrote:
Sat Nov 11, 2017 11:12 pm
-I assume you have read White coat investor. Particularly the disability section given surgery speciality.
+1

I was going to write the same thing. Caution: this is not cheap. You may think you’ll never need it, but many surgeons get a personal DI policy.

And congrats 🎉

kjdbonez
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by kjdbonez » Sun Nov 12, 2017 10:42 am

Thanks for all the replies so far.

I have been following WhiteCoatInvestor's website for a while now and have been researching disability policy options. I should qualify for own occupation options initially as a "new in practice" physician, so I'm planning to get one early 2018 when cash flows are a little higher. I do have a policy through my work already that is considerably cheaper than an individual own occupation policy, but it loses its "own occupation" status after 2 years. I also have a life insurance policy through work, but will probably add an individual term life policy even though I'm not [yet] married and have no children.

The reason I'm maxing out the 401(k) - and correct me if I'm wrong about this - is that the current annual return from the similar investment in my Roth IRA is 19% which is significantly higher than the 3.45-3.5% interest rates on my student loans. From Sept-Dec 2017 I'm putting $18k in the 401(k) which limits my ability to pay more on my student loans, but I'm still making a small dent at least. Starting 2018 when my monthly contributions to the 401(k) are significantly less I'll be able to put all that "extra" money towards student loan debt.

I'm also going to use some of that extra cash flow towards padding my EF so it has 6 months all expenses. I'm living below my means and plan to do so for the next few years to try to pay off my student loans in as short of a time as possible (i.e. renting an apartment that is cheaper than average for its size/location, drive a 2009 Outback, no fancy vacations, barely ever go out to eat, etc).

I agree that maybe my AA is a little aggressive. I was thinking about modifying my future 401(k) contributions to looks like this:
20% in Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
40% in Vanguard Institutional Index Fund Institutional Shares (VINIX) (0.04%)
10% in Vanguard S&P Mid-Cap 400 Index Fund Institutional Shares (VSPMX) (0.08%)
10% in Vanguard Small Cap Index Fund Admiral Shares (VSMAX) (0.06%)
20% in Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)

Any thoughts on that?

About my prior question regarding bonds in a taxable account.. Is there a role for having ONLY some tax-free municipal bonds in taxable account as part of the overall AA?
Last edited by kjdbonez on Tue Nov 14, 2017 8:25 pm, edited 1 time in total.

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ruralavalon
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by ruralavalon » Sun Nov 12, 2017 11:05 am

kjdbonez wrote:
Sun Nov 12, 2017 10:42 am
The reason I'm maxing out the 401(k) - and correct me if I'm wrong about this - is that the current annual return from the similar investment in my Roth IRA is 19% which is significantly higher than the 3.45-3.5% interest rates on my student loans. From Sept-Dec 2017 I'm putting $18k in the 401(k) which limits my ability to pay more on my student loans, but I'm still making a small dent at least. Starting 2019 when my monthly contributions to the 401(k) are significantly less I'll be able to put all that "extra" money towards student loan debt.
I think it's good to max the 401k this year when working just 4 months, even though it limits your ability to advance pay the student debt. The contribution limit is on a use-it-or-lose-it basis, if you don't contribute the maximum in 2017 you can not make it up in later years. Next year, working all year, you can still max the 401k and also do more on the debt.


kjdbonez wrote:I'm also going to use some of that extra cash flow towards padding my EF so it has 6 months all expenses. I'm living below my means and plan to do so for the next few years to try to pay off my student loans in as short of a time as possible (i.e. renting an apartment that is cheaper than average for its size/location, drive a 2009 Outback, no fancy vacations, barely ever go out to eat, etc)
I would not make a larger emergency fund a priority over paying off debt.

It's good to see you will be living well within your means, aggressively saving and investing, not rapidly expanding your lifestyle, but do not forget to enjoy your life (UNfancy vacation, some nice restaurant meals).


kjdbonex wrote:I agree that maybe my AA is a little aggressive. I was thinking about modifying my future 401(k) contributions to looks like this:
20% in Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (0.05%)
40% in Vanguard Institutional Index Fund Institutional Shares (VINIX) (0.04%)
10% in Vanguard S&P Mid-Cap 400 Index Fund Institutional Shares (VSPMX) (0.08%)
10% in Vanguard Small Cap Index Fund Admiral Shares (VSMAX) (0.06%)
20% in Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (0.11%)
That seems reasonable in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

kjdbonez
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by kjdbonez » Tue Nov 14, 2017 1:54 pm

Which fund available in the HSA options above do you guys think would be best for international equity exposure?

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ruralavalon
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by ruralavalon » Tue Nov 14, 2017 3:10 pm

kjdbonez wrote:
Tue Nov 14, 2017 1:54 pm
Which fund available in the HSA options above do you guys think would be best for international equity exposure?
None.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Tamarind
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by Tamarind » Tue Nov 14, 2017 3:34 pm

kjdbonez wrote:
Tue Nov 14, 2017 1:54 pm
Which fund available in the HSA options above do you guys think would be best for international equity exposure?
None of them. You have better options in your 401k and will continue to have better in your taxable brokerage once you kick your student loans. Were I you, I would defer taxable investing for two years while you finish paying your loans, but keep maxing out tax-deferred accounts. Put all the international in your Roth or 401k for now.

I actually don't agree that it's easier to hold the same AA in each account. If you keep to an annual budget, you'll know in advance how much you plan to invest and in what accounts. You can combine that math with your AA to figure out the allocation for your balance and for new contributions. Each year, plan ahead for your savings and update what funds your contributions go to if needed. If you have a major change in income you can always reevaluate mid year.

ge1
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by ge1 » Tue Nov 14, 2017 8:56 pm

I was about to comment on that as well. Why would you want to hold the same AA in every account? View all accounts together as one portfolio and then decide on which asset class to hold where (e.g., bonds should not be in taxable account etc).

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ruralavalon
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by ruralavalon » Tue Nov 14, 2017 9:05 pm

If you want the same asset allocation in each account, in the HSA just use Vanguard LifeStrategy Growth Fund (VASGX) ER 0.15%. That fund has an 80/20 asset allocation.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

kjdbonez
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by kjdbonez » Tue Nov 14, 2017 9:10 pm

The only reason why I would hold similar AA in each account is for simplicity. i.e. predetermined percentages of each biweekly paycheck to the funds to match my AA. I'd put $5500 in backdoor Roth at beginning of the year to match my AA as well. Then automatically re-balance each account annually. I get what you're saying about just forecasting contributions and making up the AA across overall accounts, but I guess I was just thinking that if I could find a similar AA for each account then I avoid the extra step. Right now I have everything invested in a Target Date fund in my Roth IRA because I don't have the minimum to get individual funds at a low ER. I could do that with the HSA as well I guess, even though it doesn't appear that I need to have a minimum investment necessary per fund.

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Tamarind
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by Tamarind » Tue Nov 14, 2017 10:17 pm

kjdbonez wrote:
Tue Nov 14, 2017 9:10 pm
The only reason why I would hold similar AA in each account is for simplicity. i.e. predetermined percentages of each biweekly paycheck to the funds to match my AA. I'd put $5500 in backdoor Roth at beginning of the year to match my AA as well. Then automatically re-balance each account annually. I get what you're saying about just forecasting contributions and making up the AA across overall accounts, but I guess I was just thinking that if I could find a similar AA for each account then I avoid the extra step. Right now I have everything invested in a Target Date fund in my Roth IRA because I don't have the minimum to get individual funds at a low ER. I could do that with the HSA as well I guess, even though it doesn't appear that I need to have a minimum investment necessary per fund.
You still get to do the predetermined percentages even if you don't duplicate AA, it's just fewer funds.

For instance, my 401k contribution is 60% US Equities and 40% US Bond, my Roth contribution is 100% International Equities, and my HSA contribution is 100% REIT. The sum works out to exactly my AA for the amount that I save, and I set it at the beginning of the year. I never have to manually allocate contributions and I mess with it once a year when I get a raise and increase my savings amount.

Using a Target Date fund everywhere is also a perfectly fine solution.

jayk238
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by jayk238 » Tue Nov 14, 2017 10:36 pm

Cant speak to the allocation but-
Fellow doctor here and want to point out a few things

I really think focusing on the basics is the most important thing.
1. Live like a resident. As wci says repeatedly and mark cuban says too now. The cheaper you live these first few years the farther your money goes.
2. Rent the first few years. I know youre going to make big bucks hopefully soon as a surgeon - but only the first few years is guaranteed. It looks like there are a few concerns.
By drawdown im assuming this is a loaner income. Thus your 200k may need to be paid back-meaning you work more years to pay it off. This is ok but -what happens if you leave or get sick? How about the terms -do you have to meet certain rvus to pay the 200 back?
Also, Im a bit surprised at the lower income for the first few years-surgical residents are usually paid higher starting salaries. Regardless just make sure this is on par with mgma incomes for your field.
Next, are you part of pslf? Or are you w a private firm? If private know that you have greater risk than a nonprofit hospital.
3. Which brings me to- With all the potential risk associated are you comfortable investing and having to pay back in a downturn if you do have to leave.

kjdbonez
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Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by kjdbonez » Tue Nov 14, 2017 11:19 pm

jayk238 wrote:
Tue Nov 14, 2017 10:36 pm
Cant speak to the allocation but-
Fellow doctor here and want to point out a few things

I really think focusing on the basics is the most important thing.
1. Live like a resident. As wci says repeatedly and mark cuban says too now. The cheaper you live these first few years the farther your money goes.
2. Rent the first few years. I know youre going to make big bucks hopefully soon as a surgeon - but only the first few years is guaranteed. It looks like there are a few concerns.
By drawdown im assuming this is a loaner income. Thus your 200k may need to be paid back-meaning you work more years to pay it off. This is ok but -what happens if you leave or get sick? How about the terms -do you have to meet certain rvus to pay the 200 back?
Also, Im a bit surprised at the lower income for the first few years-surgical residents are usually paid higher starting salaries. Regardless just make sure this is on par with mgma incomes for your field.
Next, are you part of pslf? Or are you w a private firm? If private know that you have greater risk than a nonprofit hospital.
3. Which brings me to- With all the potential risk associated are you comfortable investing and having to pay back in a downturn if you do have to leave.
1. I do plan to live below my means. But living "like a resident" is a little different in the higher COL area where I'm at now as opposed to residency. In residency I bought a newly-flipped 3BR/2BA house for <$100k and my mortgage/tax/ins was about half what my rent is in a major metropolitan area. My other expenditures haven't increased though.
2. Its not really a loan that I have to pay back, at least not by my contract. I work in a large private practice in which the basic financial information from partners is available when you sign the contract so that you can choose an appropriate salary for yourself. Most new surgeons in the group are "out of the red" within 3-5 quarters with higher draws than me. I'm taking a lesser-than-average draw to make that happen sooner and also because it forces me not to spend more than I should. I was also fortunate to fill in for a guy that retired the month after I started, so I've already inherited a lot of his referral base. And I also didn't hire a PA which will cut down on my direct overhead significantly right off the bat. All that being said, I'm fairly confident it won't take long for my professional fee revenue to outpace my overhead expenses. $200k is low for my specialty, but as soon as I make that up in collected revenue then I'll get quarterly distributions for everything above and beyond my draw (eat what you kill). I chose this specific job because it is close to my hometown where my friends/family still live and has a lot of potential growth and some brick & mortar investment opportunities for ancillary income.
2.5 Its private practice and I refinanced the majority of the loans to get the lower rate at 3.45% variable (previously 6.8% fixed), so I'm no longer a candidate for PSLF.
3. I'm fairly comfortable investing the full amount in HSA/401k/Roth IRA annually right away. I probably won't start a taxable account until my earnings prove to go up significantly and my loans are being paid down at an accelerated rate.

jayk238
Posts: 41
Joined: Tue Jan 31, 2017 1:02 pm

Re: First "real" job with 401(k), HSA and higher income. Any advice?

Post by jayk238 » Wed Nov 15, 2017 8:38 am

Very good to hear and congrats on your success.
Looks like you have your ducks in a Row!

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