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  • New Attending Couple- life planning

    Hey all, I've been a long time reader of WCI and personal finance blogs in general, and finally reached the stage where I can put it to use. My questions span several subforums so though I'd post it here.

    Social Situation: Wife & I are newly minted subspecialty attendings (with 1 young child, planning more). Currently renting in M-HCOL suburb with no rush to buy.

    Annual Income: I am on a 2 year partnership track position with currently salary ~300k, expected to double once partner (but obviously not making plans based on that). Wife is in a 1099 moonlight/part time gig that should net anywhere from 150,000-200,000k pretax.

    Debts: Thankfully we have very generous families and only have $150k med school loans between us (Federal ~6.8%). No car loans (leasing) or outstanding CC debt.

    Spending: About 10k a month including rent, 2 cars, all insurances etc. I don't see this changing significantly soon, especially with travel limited now.

    Insurance Policies: 1 million term life for me, with another 600k through work. 13k disability for me. Nothing in my wifes name.

    Assets: 30k cash (emergency fund ish), 35k in residency 401k between us (in index funds), 35k in my roth IRA (index).

    -Current employer 401k has a match (3% of 6%, after 1 year), as well as roth contributions AND post-tax contributions for a mega backdoor roth IRA (Fidelity). I'm currently doing 10% for the rest of the year and then need to mess with it to hit 19.5k year.
    -Have a HDHP with an HSA, currently maxing contribution (employer contributes about 15% of total).

    1. I'm maxing the 401k pretax and HSA.. but wondering how much I should be putting towards the post-tax contribution toward the backdoor roth.This is the context of 150k loans, wanting to open a 529 and save for a house in next 2-3 years. Employer also has profit sharing that contributes to the 401k once partner but unsure of the amount.

    2. How aggressive towards the 150k loans? Currently not consolidated, and paying $0 [comment removed -peds] . I'm hesitant to go crazy paying it down with the current climate and "talks" of forgiveness.

    3. First time having a 1099 job in the family. What's the best way to navigate tax mitigation? Something I can read up on my own, or should I get an accountant? Something to do now or just near tax time?

    Thanks for your time.


    Last edited by Peds; 09-19-2020, 08:39 PM.

  • #2
    Welcome to the forum! First of all, congrats on the new journey.

    Couple of things you may want to consider:
    1) refinance student loans. The 6.8% is killer.
    2) pay off student loans ASAP.
    3) 10k a month expenses is a lot. You like in M-HCOL and it’s still this high. Take a look at expenses. Leasing cars is dumping money away
    4) open solo-401k for wife with plans to do mega backdoor Roth and maximize.
    5) max backdoor Roth for you and wife.
    6) keep maxing pre-tax and HSA.
    7) live like a resident for at least 5 years. Trust me, you’ll be glad you did. And watch the lifestyle creep.


    good luck!

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    • #3
      Get 1MM term for your wife ASAP to account for child-rearing expenses. Buying 20 year term when they are born works well.

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      • #4
        Insure your wife. Track your expenses. Never lease another car. Refinance and aggressively pay off loans.

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        • #5
          •Wife needs DI + Term Insurance
          •Retirement s/b @20% of gross
          •Refinance loans
          •Payoff loans before saving for house.
          •Consider 10% of gross for loans/cars/house downpayment and savings.
          •Mortgage no more than 2x gross. That’s max.
          No other debt. Adjust your timeframe, and spending as needed.

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          • #6
            Dual doc couple should easily be able to fund bd Roths. For 1099 income of $150k - $200k, you should at least talk to a CPA experienced in these areas.
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

            Comment


            • #7
              Originally posted by ttc56 View Post
              Hey all, I've been a long time reader of WCI and personal finance blogs in general
              -- im always....perplexed....by this comment.

              Annual Income: I am on a 2 year partnership track position with currently salary ~300k, expected to double once partner (but obviously not making plans based on that). Wife is in a 1099 moonlight/part time gig that should net anywhere from 150,000-200,000k pretax.
              -- so call it 500K. thats 100K for retirement.

              Debts: Thankfully we have very generous families and only have $150k med school loans between us (Federal ~6.8%). No car loans (leasing) or outstanding CC debt.
              -- why are you leasing?

              Spending: About 10k a month including rent, 2 cars, all insurances etc. I don't see this changing significantly soon, especially with travel limited now.

              Insurance Policies: 1 million term life for me, with another 600k through work. 13k disability for me. Nothing in my wifes name.
              -- so her work is not worth insuring?

              Assets: 30k cash (emergency fund ish), 35k in residency 401k between us (in index funds), 35k in my roth IRA (index).

              -Current employer 401k has a match (3% of 6%, after 1 year), as well as roth contributions AND post-tax contributions for a mega backdoor roth IRA (Fidelity). I'm currently doing 10% for the rest of the year and then need to mess with it to hit 19.5k year.
              -Have a HDHP with an HSA, currently maxing contribution (employer contributes about 15% of total).
              -- and it has in service distributions?

              1. I'm maxing the 401k pretax and HSA.. but wondering how much I should be putting towards the post-tax contribution toward the backdoor roth.This is the context of 150k loans, wanting to open a 529 and save for a house in next 2-3 years. Employer also has profit sharing that contributes to the 401k once partner but unsure of the amount.
              -- your sentence makes no sense.
              -- the 401k should be 100% trad. then you should be doing bdrIRAx2. then if your plan allows it you should do mbdr.
              -- because again....you are aiming for 100K (100-57-12=31 still left for wife to contribute)....
              -- then after that you start the other savings.


              2. How aggressive towards the 150k loans? Currently not consolidated, and paying $0 [comment removed -peds] . I'm hesitant to go crazy paying it down with the current climate and "talks" of forgiveness.
              -- why would you pay any extra towards something with a 0% rate?
              -- once that ends refinance then decide.


              3. First time having a 1099 job in the family. What's the best way to navigate tax mitigation? Something I can read up on my own, or should I get an accountant? Something to do now or just near tax time?
              -- have you not heard of quarterly taxes? solo 401k? sounds like yes to a CPA.
              Thanks for your time.
              so you make 500K.....have 70K in retirement, 30K in cash, and leasing a car? wheres the money going?

              Comment


              • #8
                You seem a little light on the insurance end. $1.6M for you with salary 300-600K over next few years at the beginning of your career seems low to me. Agree with Peds that spouse needs life insurance as well given significant contribution to family coffers. Disability insurance?

                Comment


                • #9
                  Expenses way too high for newly minted attendings.

                  Leasing cars? You haven't been paying attention all this time you've been reading WCI and other personal finance blogs. Throwing money away on a depreciating asset is probably no no number 1 (close second is never buy whole life insurance).

                  Most likely need disability and life insurance on wife.

                  agree with Johanna, you should talk with cpa about 1099 pitfalls and opportunities, including how a SEP IRA mixes with a backdoor roth ira (it doesn't).

                  What are your goals? FI, FIRE, just plod along like most sheep/docs?

                  By the way - welcome!

                  Comment


                  • #10
                    I would approach things in this order

                    1. Get term life & disability insurance for your wife 2. Max out your 401k & HSA
                    3. Set up solo 401k for wife's 1099 income (tax deferred) - with her $19.5k employEE + employER contribution, she can likely put away the max tax deferred ($57k) or at least get close (maybe not this year if it's just a half year of attending earnings though)
                    4. Backdoor Roth IRA for you and wife $12k
                    5. Mega-backdoor Roth IRA at your 401k
                    6. Save up for a down payment on a house (I think it's fine to do this before paying off the student loans, particularly if your job is stable/make partner & you can refinance the loans to a low rate)
                    7. If you have extra money, pay down the student loans

                    Your spending is relatively modest so you might be able to do everything above this year. If not, I would focus on maximizing retirement accounts over student loan pay down - retirement account space not used is retirement account space lost forever. If you have a good handle on your spending/savings habit, you will be able to wipe out the student loans in about 3 seconds once you get the bump to partner level pay.

                    Also, as noted above, you should refinance the student loans - your rate is high.

                    Also, as noted above, don't lease cars ever again- that's a big no no... If you can't pay cash, you can't afford it.

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                    • #11
                      Lack of DI on wife immediately jumped out

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                      • #12
                        you have a great amount of retirement space between the two of you, not even thinking about the 457. You both can max out 401ks at $57k instad of $19.5k. You should make that a priority as well as the backdoor Roth IRAs.

                        But only do that once you have DI and term for your wife and you two stop leasing cars. Those were the most problematic areas

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                        • #13
                          I think everyone is making a bit too much of the leasing cars.

                          Yes, it's suboptimal. Should they stop doing it, probably.

                          But at these income levels, the difference between buying and leasing, assuming no other major leaks is not going to make much difference 30 years down the road. They should have plenty either way.

                          That being said, don't consider this an endorsement of leasing. It's not.

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                          • #14
                            Thanks for the replies. Biggest takeaways is DI & life for the wife, and a CPA for 1099 stuff + solo 401k, quarterly taxes. My wife was debating how much to work post training so that's why I didn't insure immediately. Also to the comment on our current savings, we literally started our jobs <1 mo ago after being unemployed 3 mo post training, after living in VHCOL area. I thought we did pretty decent given circumstances, and the loans we paid off.

                            I know the traditional belief against leasing cars, but I value current car safety/autopilot tech (I would rather not own a car >5yr old) and can navigate leases well enough to make them relatively affordable (leasehackr anyone?, one my current cars is worth several thousand more than payoff amount, will likely buy out/sell to carmax and rinse-repeat). Consider it a splurge.

                            Comment


                            • #15
                              dude, you and the wife are dominating! and yes with this additional advice, you guys are well on your way to accomplishing your financial goals! In terms of solo 401k I have one myself at Fidelity which is simple to open, they guide you through the process, and they accept rollovers from other 401k and IRA plans WHICH VANGUARD DOES NOT- just wanted to point out that is the the main advantage of a fidelity vs vanguard solo 401k.

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