Where to start when starting late.

[Franky1882]

I am fairly new to WCI and while it has given me some great info I can't help think that I am never going to achieve financial security that many have gained or are on their way to achieve.

Here is my situation
- I am in my early 40's and became a physician later in life; my income is relatively low in comparison to a lot of people on here generating around 180K.
- I have about 150K in a 401 but right now I'm only contributing 5% (just so I can get the match) and using all available funds to pay off my student loan before the 0% rate ends.
- I have no other debt apart from a mortgage (2.5k/month)
- I am paying about 7K a month towards the student loan with 50K remaining so should be done in about 7 months.
- I have 2 young children and have nothing saved for them.

I really have no idea what to do after paying off the student loan. It seems that the majority of people on here have a much greater salary, started earlier and have more in retirement at my age. My modest plan (after paying off student loan) is to increase 401K contributions to 20% and start 529's for my kids - Hopefully I can work another 20 years or so. To be honest don't know if this is a sufficient plan or not: Any input would be appreciated.

[jfoxcpacfp]

Welcome to the forum! This can be done - the most important area to focus on is your spending, believe it or not. That is controllable and, if you are living in a HCOLA causing you to have higher living expenses than you can support, then consider moving. Tough advice, I know, but you can certainly get to FI. Maybe not by 55, but perhaps by 60 (of course, there is a lot of missing info here).

Cold hard fact #2: Your kids’ education comes last. That may not be a luxury you can afford and it may be better to hire tutors now so they will get great test scores instead of paying the full ride for college. And, in case you hadn’t noticed, there are no scholarships for retirement. Take care of yourselves first so you won’t have to ask your children to take care of you later.

Keep diving deeper and asking questions. There are many great teachers around here!

[tylerjw12]

I'd consider lowering your student loan payment to increase your 401k contribution. If you have extra cash, I'd also consider making a 2020 401k contribution. You have until April to do so. The student loan balance/interest rate figures isn't an emergency, despite what other big personal finance personalities may say.

You have some catching up to do for retirement, but overall you should be alright given your income level and attitude towards working into your 60s. Anything you can do to supplement your income now would be worthwhile, if family situation is amenable to extra work hours.

Welcome to the forum!

[Tim]

+1 for Johanna's response.
Compensation -taxes - retirement = spending.
In your case, retirement has priority over everything but taxes. You will be actually doing your kids a big favor, much more beneficial than being a burden. Regardless of the schools or housing or lack of funds, you can always be a great parent and lead them to achieve their own goals.
Off the top of my head you should be shooting for 30-35% retirement savings to make up for lost time. I would slow the student loan repayment (make sure it is refinanced at a good rate) and kick the can down the road on the kids education. The only way out of the retirement deficit is to fund your retirement.
The benefits are that your lower standard of living will require a smaller retirement fund as well. This path will benefit both your kids and you in the future.
Tough choices, but that is the math.

[CordMcNally]

Don’t compare yourself to those on the forum. This is an unusual slice of physicians.

[Nysoz]

I am fairly new to WCI and while it has given me some great info I can't help think that I am never going to achieve financial security that many have gained or are on their way to achieve.

Here is my situation
- I am in my early 40's and became a physician later in life; my income is relatively low in comparison to a lot of people on here generating around 180K.
- I have about 150K in a 401 but right now I'm only contributing 5% (just so I can get the match) and using all available funds to pay off my student loan before the 0% rate ends.
- I have no other debt apart from a mortgage (2.5k/month)
- I am paying about 7K a month towards the student loan with 50K remaining so should be done in about 7 months.
- I have 2 young children and have nothing saved for them.

I really have no idea what to do after paying off the student loan. It seems that the majority of people on here have a much greater salary, started earlier and have more in retirement at my age. My modest plan (after paying off student loan) is to increase 401K contributions to 20% and start 529's for my kids - Hopefully I can work another 20 years or so. To be honest don't know if this is a sufficient plan or not: Any input would be appreciated.

Welcome to the forum. Please take any advice as constructive criticism and also realize that everyone's situation is different so what works for one person might not work for another. Personal finance is personal.

Your salary is on the lower end of the spectrum for physicians. One of the most important things about saving money towards retirement is savings rate. Either make more money, spend less, or ideally both. This is sometimes possible, sometimes not.

Do you have a partner/spouse earning money or is it only your salary? Take home pay should be around $10-11k a month. Create a detailed budget of where money goes. Seems like your current mortgage and loans essentially depletes the majority of your take home pay so you're hopefully on the more frugal side of things.

Your mortgage is a decent amount. Have you calculated if refinancing makes sense if you haven't yet?

When the student loan interest rates are 0% that's the last thing you should be paying off. Instead of paying off the free loan, you should be maxing out a backdoor roth IRA and your 401k as you can, then taxable account. Invest in index funds/target date retirement funds. Once the student loans are accruing again, then you can decide to pay them off or refinance to a lower rate at that point.

Worry about your retirement first before worrying about your kids. You don't want to be a burden on your kids when you're older if you don't have enough saved later on. General rule of thumb is 20% of your gross pay, try to aim for more since you're starting late. 20% of $180k is $36k. $6k IRA, $19.5k 401k, then start up a taxable account for the rest.

Seems like you have $7k extra to invest/pay off loans. Say that will all go towards investments from here on out. Even if you didn't have anything saved right now, $7k a month saved for 20 years earning 7% interest ends up with $3.4M. Even if you only got to work 15 more years, you end up with $2.1M. That's the magic of compound interest and steady saving.

[Franky1882]

Many thanks for the comments. My thoughts in regards to the student loan was to just get it cleared whilst it is still at 0% and before it returns to 6.8%. I appreciate the note on kids education - it is difficult to know what to prioritize.

[MPMD]

Don’t compare yourself to those on the forum. This is an unusual slice of physicians.

heavily endorse this.

OP you are in really good shape, great income, crushing your debt, and thinking about how to get rich.

Cord is right, don't compare yourself to the lunatics on here (self included) for anything other than inspiration.

[Shant]

7k a month is 84k a year going towards your net worth. 84k is 46% of gross income. That's a huge shovel. You will also have pretty decent Social Security with that many years working and it will replace a large percent of your 180k income. If you can keep on the path you're on now you'll be in great shape.

[Franky1882]

Some great points Nysoz.

To answer a few questions

- I feel like I'm generally already very frugal: I work as much as I can to already get that 180K so I don't think there is currently much room to make more money and decrease spending.
- I do have the option of partnership in 6 months which would potentially increase my salary to around $230K but of course comes with a buy in cost.

- My partner is in low income position; collectively we make about 210K

- My mortgage has been recently re-financed; its actually at 1.8K/month but we make extra payment on the principle.

- I understand what you are saying about a 0% loan: I know its not logical but I have been working so hard to get rid of this thing and its hard to stop when its relatively so close to be cleared.

[Peds]

I am fairly new to WCI and while it has given me some great info I can't help think that I am never going to achieve financial security that many have gained or are on their way to achieve.
-- welcome.
- you are in the top 5% or whatever of household incomes in America. so any failings you feel might be related to lack of education of how to best optimize your resources, and trying to compare yourself to the top <1% of households here on this board.

Here is my situation
- I am in my early 40's and became a physician later in life; my income is relatively low in comparison to a lot of people on here generating around 180K.
- I have about 150K in a 401 but right now I'm only contributing 5% (just so I can get the match) and using all available funds to pay off my student loan before the 0% rate ends.
-- personally would not be my plan.
-- goal is 20% to retirement. so ~36K. 401k is 19.5, and 2x rIRA is 12K = 31.5K. plus call it 5K to taxable. so do that first.
-- loans are 0% until oct or whatever. i would pay $0 until that changes. if then rates resume, refinance and pay off over 2-5 yrs. if it gets prolonged, you stay at 0. you have better use of your money.
- I have no other debt apart from a mortgage (2.5k/month)
-- refinance if its been a while. you dont list % but again, would not pay extra if <3-4%.
- I am paying about 7K a month towards the student loan with 50K remaining so should be done in about 7 months.
- I have 2 young children and have nothing saved for them.
-- not a priority. your retirement first. then excess to loans, then their education is last.
-- now if you live in a state with 529 deduction that might be worthwhile to start sooner, but only after retirement first.
I really have no idea what to do after paying off the student loan.
-- really? you just complained about it the whole thread: you are behind, so more to retirement, your kids so 529, im assuming youll buy a car, go on vacation, upgrade the house, so taxable......its not harder than that.

It seems that the majority of people on here have a much greater salary, started earlier and have more in retirement at my age.
-- yup. and.....? if you makes you feel better, im unemployed.....there, all good?

My modest plan (after paying off student loan) is to increase 401K contributions to 20% and start 529's for my kids - Hopefully I can work another 20 years or so. To be honest don't know if this is a sufficient plan or not: Any input would be appreciated.

again, welcome.

36K to retirement. then efund, savings, etc. loans are last priority right now. pick up more shifts, go hunting for a different job if you want a bigger shovel

you will be successful at 180K by literally doing nothing stupid. no you cant get 2 teslas, a nanny, buy a vacation house and go to italy for 2 weeks.......yet.

[Nysoz]

- My mortgage has been recently re-financed; its actually at 1.8K/month but we make extra payment on the principle.

- I understand what you are saying about a 0% loan: I know its not logical but I have been working so hard to get rid of this thing and its hard to stop when its relatively so close to be cleared.

It sounds like you're debt adverse. It's not bad but will slow down overall retirement growth at first. Definitely consider paying the minimums on very low interest debt (likely mortgage and if you choose to refinance student loan) and max out retirement accounts at the minimum. Every bit you contribute to your 401k is less in taxes you have to pay. Every bit you contribute to your and your partner's IRAs compounds tax free.

Like others have said, just by being interested in your finances you're probably in the top 10-20% of physicians. Some/most of the active people on here are in the top 1-5% easily.

[PedsCCM]

OP, first of all congratulations! You've developed excellent habits and you're working hard toward increasing your net worth. Agree with everyone above who said please don't compare yourself to a lot of the regular posters on this forum. It's a really niche, small subset of physicians and other high income folks who lean kinda hard toward FIRE and nerding out on finances.

Second, I'm happy to be the contrarian as far as where to put your money. You're not buying universal life or wakeboats, you've chosen to pay down debts and then focus more on retirement savings. That's great! Maybe you end up with $2.0MM instead of $2.1MM in retirement by waiting 7 months to start saving that "wealth accumulating" money in retirement instead of paying debt. If paying off the debt is an important goal and psychologically motivating, then do that. The markets could go up a bunch or could be down in 7 months. We don't know. From your post, I would guess you would get fairly discouraged if you put the money into retirement, the market went down and your loans were still $50k.

I'm going for the emotional and psychological win here every time and ignoring the very small math difference. That said, I would plan on maxing 401k by dramatically increasing my retirement savings in the last couple months of the year. 401k maxed. Loans paid off. Great way to keep moving forward.

[jhwkr542]

Many thanks for the comments. My thoughts in regards to the student loan was to just get it cleared whilst it is still at 0% and before it returns to 6.8%. I appreciate the note on kids education - it is difficult to know what to prioritize.

I wouldn't be doing this. Once it returns to 6.8%, just re-finance it to half that rate (or less). You need to prioritize your own retirement more, which means maxing 401k, Roth IRA (backdoor), and HSA (if applicable). Right now, that's an interest free loan that you can take advantage of.

[Hatton]

I will echo the comment to not compare yourself to others on the forum. There are several very high net people who post here. Remember that time is your friend when accumulating wealth. You will see that older posters have more because their money has compounded longer. You make more money than me BTW (I am retired). Salaries vary around the country and between specialities. I would also echo to focus your money on maxing the retirement accounts first.