Early in career, interested in feedback

[MtnRunner]

I recently started reading and learning more about finances, and I'm interested in feedback on my current situation/plan:


Stage of Life: early career associate general dentist (me); he (my fiancé) graduates radiology residency this spring and then will do a 1 yr fellowship
Social Situation: Getting married in May, both work, 0 kids.
(I’m answering most of these questions with my independent finances, but we will combine finances after we get married. He has a 401K he maxes out for employer match during residency and an emergency fund.)


Gross annual Income: ~160K (me alone; anticipate combined net annual income ~220K during his fellowship year)
Net Worth: ~270K (soon to be -20K)
Tax Bracket: 28% (mine last year: 24% federal, 4% state)

Insurance Policies:

• High deductible health insurance
• Disability through Mass Mutual
• Renter’s insurance
• Auto insurance
• Malpractice policy covered by employer

Debts:

• None currently
• Soon to be ~290K (his med school)

Assets:

• 401(k): $36K (from my previous employment)
• Roth IRA: $37K
• Taxable: $58K
• Emergency fund: 20K (5-6 months living expenses)
• Not invested: $120K

Portfolio size: ~150K

• 401(k): 24%
  • 24% Fidelity Freedom 2050 Fund, FNSBX 2050, ER 0.65%
• Roth IRA: 25%
  • 25% Vanguard Target Retirement 2055 Fund, VFFVX 2055, ER 0.08%
• Taxable account: 51%
  • 9% Fidelity Fund (large cap growth), FFIDX, ER 0.47%
  • 12% Fidelity Nasdaq index composite fund, FNCMX, ER 0.29%
  • 3% Fidelity Select Software& IT Services Portfolio, FSCSX, ER 0.70%
  • 15% Fidelity 500 Index Fund, FXAIX, ER 0.02%
  • 14% Fidelity Government Money Market fund, FZCXX, ER 0.32% (considering it my emergency fund)
• Desired investment asset allocation (this would be my asset allocation if I started my taxable investments from scratch after learning more about portfolio diversification; I realize my portfolio doesn’t reflect this currently)
  • Continue maxing out backdoor Roth annually
  • Taxable investment allocation
    • 20% total stock indexed fund (VTSNX, ER 0.08%)
    • 20-25% total international stock index (VITSX, ER 0.03%)
    • 50% S&P indexed fund (VSPGX, ER 0.08%)
    • 5-10% total bond market index (VBTLX, ER 0.05%; We could plan to increase % portfolio bonds later in career after med school loans paid off)

Financial goals:

1. Pay off medical school loans within 3 yrs out of training
2. Maintain 3-6 month emergency fund (with preference being toward 6 months)
3. Have money ready to buy cars (likely within 1-2 yrs; when my 2007 or his 2000 Honda civics break)
4. $125,000 for down payment on house by 3-5 yrs out of training (2026-2028)
5. $3M saved by Jan 1, 2052 for retirement

Questions:

1. Is there a tax-advantaged retirement option I'm missing? I’m a W-2/employee currently, and my employer does not offer a retirement plan to associates. I’m maxing out my backdoor Roth annually. I'm considering starting an HSA.
2. I recently started learning more to get on top of my financial landscape and in doing so, I now realize that I can get lower ERs through Vanguard and a broader diversification with different funds than I'm currently invested in. That said, I contributed to my Fidelity funds over time, and now I’m concerned that selling to pursue an investment strategy reflecting only my ideal asset allocation wouldn’t be beneficial. Could it make sense to keep the Fidelity funds to avoid paying tax after selling and just start making future investments in more ideal funds with Vanguard? I’m hesitant to sell funds that I’ve been slowly adding to over time, especially with current market dips. I’m aiming to avoid the pitfall of “over-managing”/tinkering with investments to our detriment, but I also don't want to unnecessarily keep myself invested in funds that have higher ER.
3. What’s a typically reasonable “lump sum”/percentage to invest at a time? I think have too much money not invested currently (>100K in a checking account). After concern that I may have chosen a non-ideal spread of funds early on in investing (see question #2), I’m trigger shy on selecting funds and investing.
4. Our debt plan is to keep a low cost of living to try to pay off med school loans 3 yrs out of training. Any downsides I’m missing to this plan? We don't want to completely neglect investing in an effort to pay off debt, but we'd like to get out of debt asap. (Likely no opportunity for PSLF, but still tbd depending where he ends up working).

[CordMcNally]

Fidelity has plenty of very low fee options, you just didn’t pick them (except for the 500 index fund). Honestly, it isn’t a lot of money in the grand scheme so I’d probably sell the ones I’ve held for a year to have the lower capital gains tax rate and then sell off the rest as they reach the point you’ve held them for a year. Now is going to be the best time to get everything how you want it.

You need to decide if you want to lump sum or dollar cost average. It’s usually best to lump sum but if you decide to DCA then just do that over the next 3-12 months.

[Hatton]

You will be fine because you are becoming financially literate at a young age. I agree with Cord that in the great scope of your financial life the capital gains tax you pay to get out of the high ER fidelity funds is trivial. I would do it. Try to balance investing with debt payoff.

[FIREshrink]

I cannot imagine it taking you 30 years to get to $3 million in retirement. With two medical incomes that's probably more like a 10-15 year goal.

[JBME]

agree with others but taking it a step further. Sell everything in taxable and put 100% towards those student loans. As this might be your plan, sell it now just in case the market drops further between now and the next few months. I assume your to-be-husband won't be going for PSLF. He should consolidate and refinance. Consider the $120k not invested and put aside maybe $20k for your car replacement and $20k for his car replacement and the rest towards hi loans. That gets his balance down to $150k.

Fully max out tax-advantaged space (you're well on your way if he's already maxing a 401k in residency), meaning 401ks/403bs and Roth IRAs. After that, instead of putting more in taxable to get to 20% retirement savings, I'd plow through the rest of his loan and then save up for a down payment for a house. That'll probably take 2-3 years. Once those objectives are achieved, bump up savings to 20% and restart a taxable account.

[xraygoggles]

I see you have all growth stocks in taxable account - yes, growth has done phenomenally well last decade, but doesn't mean it will continue its outperformance. I would suggest either consolidating all of them into 1 or 2 low-cost index ETFs (maybe Nasdaq and one sector one if you want), or add a value ETF to counterbalance (like VTV).

Otherwise, you will do fine going forward. You are already financially literate with high cash flow in 1 year.

[Random1]

Your first 4 funds in the taxable growth , all have very similar holdings - aapl , msft, amzn, tsla, goog, googl , there is not much diversification , which might not be a bad idea, but make sure that is what you want.

[bovie]

Sell everything in taxable and put 100% towards those student loans.

I would not do this, unless you are exceptionally debt-averse.

[MtnRunner]

Thank you for this feedback! I appreciate all the input as I’m getting our financial groundwork in order.

Looking at fidelity fund options again, I don’t know how I overlooked the lower ER funds when I was first invested.
The 0% ER fidelity funds now of course caught my eye...Honestly, zero cost for investment in a mutual fund almost seems to good to be true. From what I'm reading, it looks like there's no inherent issue with them but most haven't outperformed similar funds that have a low but non-zero ER, and it's still early to tell long-term performance. Curious to know others' opinions on 0% ER.
At any rate, it makes sense to sell high cost funds and purchase a lower ER funds while my portfolio is small.

[jhwkr542]

No need to have a total stock fund and s&p fund. Just use total stock and TLH with s&p fund as necessary.

[bovie]

Fidelity Zero funds are fine.

[Tim]

I suggest you start constructing your “future self”
Your income: 20% to retirement savings
His income: 20% to retirement savings

Your AA for all accounts, then the three index based types you want to use.
Pick your 3 funds. TSM or S&P, Intl, Bonds
Then target the tax efficiency for what goes where.

You know much more now, set your targets and then decide the path to get there. Resetting taxable will payoff sooner than later.

You have goals, a lot of short term goal.
Wedding, payoff debt, cars, house (short term).
These aren’t investments, these are spending.

Spoiler alert, on $500k you will only have 50% to live on and reach your goals.
Build a top level budget from gross, taxes, 20% retirement savings, your goals prioritize, and see what is left for living. The path from here to there you will have trade offs.

I think you will find an EF and bonds aren’t investments, don’t let bonds go over 5%.

I think you will find a lot of competition for cash the next 5 years. You and your spouse will benefit by having a plan.
Not sure when
5. $3M saved by Jan 1, 2052 for retirement
will happen.
Good job on starting out. Make an IPS (investment policy statement) and use the Fidelity planner to run some numbers.

Oh, almost forgot. Hope the May wedding turns out grand! Welcome to the Forum.

[MtnRunner]

Thanks for the input; it's helpful as we're ironing out our plan.

[Kamban]

agree with others but taking it a step further. Sell everything in taxable and put 100% towards those student loans..

Hate to be a party pooper but I would not do that. You are not yet married, and just getting married in May. Everyone goes in thinking till death do us part, but unfortunately many marriages break up early on. If that happens, I don't see a legal way of getting back the money you put towards his loans.

So sell it and put in low ER funds that you control. Once he finishes his fellowship he will earn enough money to pay it off in a year or two. As you finances equalize, you can think of merging investment finances fully.

[bovie]

Hate to be a party pooper but I would not do that. You are not yet married, and just getting married in May. Everyone goes in thinking till death do us part, but unfortunately many marriages break up early on. If that happens, I don't see a legal way of getting the money you put towards his loans.

So sell it and put in low ER funds that you control. Once he finishes his fellowship he will earn enough money to pay it off in a year or two. As you finances equalize, you can think of merging investment finances fully.

I wouldn’t do it anyway, regardless of that consideration. Let it grow.

But you bring up a very good point which makes this a no-brainer.