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  • taxable account? What Next?

    Good Morning All,  We are 2 employed physicians.

    We have a question about the "next" step.

    We have paid off our loans!

    We are maxing out our 401Ks.

    We funded the backdoor Roths.

    We are funding the 529s for 3 kids.

    We only have low IR mortgage and plan on paying that off in 4 years.

    Any recommendations on what to do next? We have 100k+ cash in plain old bank accounts serving as emergency fund.

    Not sure if we need professional help at this point. Have been following WCI for about last year and has been profoundly helpful.

  • #2
    Congrats on the loans and total picture.

    Next step, start a taxable account using low expense ETFs.

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    • #3
      Correct. The next step is starting a taxable account. I would also advise you guys to sit down and make a forecast about when you want to retire and how much you need to retire. If you're meeting those goals, I would suggest that you use extra money to enjoy the fruits of your labor (whether that be travel, hobbies, experiences, etc.).

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      • #4
        Wow.  That's quite an accomplishment.  Must feel awesome.  Go to vanguard and open a regular brokerage account and start transferring money in as often as you want.  It's very easy to set up and you can instantly start purchasing shares same day you transfer.
        The key to investing in a taxable account is tax efficiency.  I am just learning about this stuff too, but from what I've read and been told here and elsewhere, a total stock market fund like VTI or equivalent is very tax efficient and really all you need to keep in there.  Don't use REIT funds or total bond market funds in a taxable or anything else that pays a lot of dividends frequently.  Also, buy and hold.  Shouldn't be a problem for you, but if you try to sell too soon you'll be taxed more heavily (short term vs long term capital gains).

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        • #5
          Why such a rush to pay the mortgage? What would the term otherwise be? Given that if your mortgage is properly structured, its interest may be near-zero or less if adjusted for inflation, and unless one of you plans on stopping working, your money would probably be better invested than paying off the mortgage.

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          • #6
            1. sit back and open bottle of fizzy.

            2. consider disney celebration trip ????

            3. make sure 529   are structured to your liking

            4. three-four fund boglehead kis strategy

            5. agree with @dmfa.  two income physician, you have paying off your single best tax advantage.  you can skew investments or a completely separate mortgage fund to cover the mortgage.  play the investment calculator over the loan lifetime vs payments and see the for yourself...then factor in tax advantage.  caveat:  you cant blow the savings on repeated #2 cycles!

            6. get a retirement specialist and review all goals and estate plan.  fire potential, single income and reduced work scenarios, and wealth management setup for kiddos....along with insurance revisited.

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            • #7
              Take the money you have been paying towards loans, and you were planning on using for mortgage, and put into taxable account in low-cost stock index funds.
              Otherwise you didn't say how old you are, how long until you retire, and how much is in your retirement accounts. It sounds like you are doing great!
              Lastly 100k sounds like a lot for a two-earner couple for an EF. You could put at least half of that into taxable investments, unless your expenses are extremely high which sounds unlikely.

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              • #8
                We like the idea of not owing anyone anything, thus the plan to pay off the mortgage. And one us is looking to go part time or change careers while we are still young (mid 40s). I am still trying to better understand a taxable account. Would a tax exempt investment make sense, ie Vanguard INtermediate Tax exempt Bond Fund ?

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                • #9
                  Ok, sounds like you want to be very conservative mode, which is fine too, just have to save higher which doesn't sound like an issue.

                  Peoplengere Would be able to give a lot more specific options if you specify likewise.

                  If high state income tax like ny or cali, yes tax exempt Muni is a very good option. We have 80% of our mortgage fund in state munis and that easily outperforms our mortgage and safe from natural disasters compared to our hard asset home.

                  Being in forties, you (like us) are in very comfortable position. Really would rec that you make sure all the things around the financials are correct as a good time to revise things like trust now with the three kids. We last touched our living trust 14 years ago before this spring to update now kids in teens

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                  • #10
                    WCI has written about the advantages of a taxable account, and I have more money in mine than all other accounts combined. You don't need a tax exempt fund; index funds like Total Stock Market (VTSAX) and Total International (VTIAX) are very tax efficient.

                    I like bonds in my 401(k), personally. I keep stocks in taxable which will give you more tax loss harvesting opportunities.

                    You probably don't need a professional if you've done this well on your own. You can save a lot of money if you choose to DIY successfully.

                    Cheers!

                    -PoF

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                    • #11
                      My taxable account at vanguard is much larger than tax protected. Retirement accounts are limited so extra money should flow into a taxable account. I personally have a significant amount of muni bonds in there as well as stock indexes. If you want the debt free feeling then pay off the mortgage. I paid mine off in my 40s also.

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                      • #12
                        11 Reasons You Need a Taxable Account also explains what we mean by "taxable account". Just remember that your retirement accounts are protected assets in the event of lawsuit or bankruptcy but a taxable account is not. That is not a reason to bypass investing in one but it is a reason to have adequate umbrella insurance coverage.

                         
                        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                        • #13




                          Good Morning All,  We are 2 employed physicians.

                          We have a question about the “next” step.

                          We have paid off our loans!

                          We are maxing out our 401Ks.

                          We funded the backdoor Roths.

                          We are funding the 529s for 3 kids.

                          We only have low IR mortgage and plan on paying that off in 4 years.

                          Any recommendations on what to do next? We have 100k+ cash in plain old bank accounts serving as emergency fund.

                          Not sure if we need professional help at this point. Have been following WCI for about last year and has been profoundly helpful.
                          Click to expand...


                          I don't know that you need professional help necessarily. You're certainly doing well. Have you considered spending some money on something that will make you happy? Are you investing enough to meet your retirement goals? If not, you can always invest more in taxable. Don't forget about HSAs if eligible.
                          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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