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  • Invest or Down Payment

    Coming into a 6-figure lump sum next month. I have 1 year of training left before starting first job (interviewing now, looking at ortho private practices). I won't be retiring for 20-25+ years. Here's what I'm thinking the options are:

    1) Invest all in the market (VTI/VOO/VXUS). Will likely still be on discount next month (although we never know for sure) or could DCA (I'm usually more inclined to just buy all at once with lump sums such as this).

    2) Invest in a HY savings account (hopefully these become more "high yield" with the rate increases of late) and save for down payment on home August 2023. I have considered renting for the first 1-2 years and will continue to consider it, but my concern is that the rural places that I may end up may not have a lot of decent options for family rentals. If I decide to invest it all with aim of renting, but then can't find a rental we like and decide to buy, then I'm stuck with the taxes of selling enough from taxable account for a downpayment.

    3) Invest part of it and save the other part for down payment. It would leave a smaller amount for down payment, but I could go with a doctor's loan and make a down payment less than 20% - is less than 20% a bad idea if I have the means to pay more? Our dream is to build a house one day, so the first house would probably be a 5/1 or 7/1 ARM.

    4) Could buy land (cash), rent, then build a house on the land if I decide to stay at my first practice long term. If it doesn't work out, then I could sell the land. But this relies on ability to find a decent rental. And I may lose out on the 25 year gains from the market discounts we're seeing right now.

    5) Ferrari (jk...)

    FWIW, I'll likely find a FFS financial advisor to discuss this with in detail this summer. My only debt to this point is student loans that have been in COVID forbearance. I'm going to refinance once they lift the forbearance for good. IRA's are maxed every year. Have 529's started for our kids. Work 401a is maxed to the match. Have a decent taxable account too. I'll probably buy some I-bonds as well since their rates are so good right now. I'll also reserve some for a nice vacation at the end of training.

    Thoughts on what you would do in this situation?

  • #2
    Invest. Total US market. All of it, ASAP.

    Depending on where in the six figures, this money in 20-25 years could easily make up a majority of your nest egg.

    Your backpack just got a lot lighter. Don't swap it right back out for a heavier one.

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    • #3
      Originally posted by bovie View Post
      Invest. Total US market. All of it, ASAP.

      Depending on where in the six figures, this money in 20-25 years could easily make up a majority of your nest egg.

      Your backpack just got a lot lighter. Don't swap it right back out for a heavier one.
      Plus 100.
      If you park it and just run your finances and life on your income, you will be much better off in 10-15 years.
      Last edited by Tim; 05-09-2022, 08:11 AM. Reason: Invest and spend your personal capital .

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      • #4
        In a very similar situation, also Ortho finishing residency applying to jobs. Planning on putting 25% in HY savings (1.25% right now), remainder in VTI. If that investment tanks in a yr when buying a house, will do 0% down physician loan

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        • #5
          I would do a few things:
          1. Invest this lump sum immediately. I think I would just invest it all in VTI / VXUS

          2. Rent. Do not rationalized buying. You can find a rental and suck it up and live like a resident for a year or two and make sure the job is stable. Look for a home slowly starting in 6 mo from after you are loving the new attending job.

          3. Make a student loan plan. What is the plan? It needs to be gone or you need to be arbitraging the low interest rate to do 1 above. Things were much simpler when I was paying mine off back in 2005-2009. Loan forgiveness was not a thing. Low rates were not a thing. My rate was consolidated at 6% and a guaranteed 6% looked pretty dang good and I worked extra to kill it. I did not get going hard core until 2008 but by 2010 I was done with that crap and it felt good. You need a plan that has it gone (forgiven or paid) before you are 50.

          4. Do something fun to celebrate. Dude, Awesomeness! You are in a very select group of people who have achieved an amazing really cool thing. Very cool!

          5. Make an IPS that includes your insurance plan(s), (disability, umbrella, life, renter's health, etc.), housing plan (rent), investing plan (I like simple VTI / VXUS) etc. etc. : https://www.whitecoatinvestor.com/ho...nal-statement/

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          • #6
            As far as investing the lump sum immediately, wouldn't it make more sense to DCA over several months? Obviously can't predict the bottom of the market, but seems like a volatile time to put it all in at one price point

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            • #7
              Originally posted by Jumbocup View Post
              As far as investing the lump sum immediately, wouldn't it make more sense to DCA over several months? Obviously can't predict the bottom of the market, but seems like a volatile time to put it all in at one price point
              Vanguard’s research shows that lump sum beats DCA two out of three times and DCA wins one out of three times. Time in the market…

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              • #8
                Originally posted by Jumbocup View Post
                As far as investing the lump sum immediately, wouldn't it make more sense to DCA over several months? Obviously can't predict the bottom of the market, but seems like a volatile time to put it all in at one price point
                Cord is correct, but it if lets you sleep easier at night in what appears to be a down market, DCA over the next say 6 months isnt unreasonable.

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                • #9
                  If you can get a doctor's loan and can put all of the windfall into Vti, do it. Market is ~20% down, so lump sum is not as scary as a few months ago. Also statistically better than DCA for long term growth (more short term vol though).

                  Otherwise take the minimum out into savings for the house, then plow rest into Vti (& Chill).

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                  • #10
                    My fellowship offers 403b and 457b options, both Traditional and Roth for each. Up to 20,500 in each. 100% vested immediately for both, but no employer match or contributions.

                    There doesn't seem to be much difference between the two. Outside the specific investment options within each plan, any reason to invest or not invest in either one of these?

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                    • #11
                      Basically been said: VTI all of it stat. Anchors aweigh!

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                      • #12
                        Originally posted by DynamicHipScrew View Post
                        My fellowship offers 403b and 457b options, both Traditional and Roth for each. Up to 20,500 in each. 100% vested immediately for both, but no employer match or contributions.

                        There doesn't seem to be much difference between the two. Outside the specific investment options within each plan, any reason to invest or not invest in either one of these?
                        403b first. Your money from day one.

                        Distribution options on the 457b?

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                        • #13
                          Originally posted by Tangler View Post
                          2. Rent. Do not rationalized buying. You can find a rental and suck it up and live like a resident for a year or two and make sure the job is stable. Look for a home slowly starting in 6 mo from after you are loving the new attending job.
                          In regards to this, sometimes honestly renting isn’t a good option. It’s definitely the smarter financial option but some rural locations just won’t have anything decent to rent.

                          The area I worked in had no apartments and “homes” for rent were trailers. I suppose you can try to find the houses for sale and ask to rent but not sure how successful that can be.

                          So if the area is anything like mine was then sometimes you just have to buy. But buy reasonable like 0.5-1x salary before upgrading to a doctor house.

                          But yes, another vote for vtsax and relax.

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                          • #14
                            Originally posted by Nysoz View Post

                            In regards to this, sometimes honestly renting isn’t a good option. It’s definitely the smarter financial option but some rural locations just won’t have anything decent to rent.

                            The area I worked in had no apartments and “homes” for rent were trailers. I suppose you can try to find the houses for sale and ask to rent but not sure how successful that can be.

                            So if the area is anything like mine was then sometimes you just have to buy. But buy reasonable like 0.5-1x salary before upgrading to a doctor house.

                            But yes, another vote for vtsax and relax.
                            With some of the areas I'm looking into, to find a decent house that is 1500+ square ft is nearly impossible. Hard enough to find one to buy, but for rent is almost non-existent unless I'm willing to drive 45+ minutes to the office/hospital (maybe I'll have to at first). We're renting 1500 sq ft now and it will be fine for a year, but I'm not sure if we can do it long term with 2 kids and a dog, especially if we consider adding another child in a couple of years. And the 1500 we're in now is in a prime area in the middle of a metropolis so it was easier to make that downsize. Not the same as 1500 in the country.

                            I'm trying to figure out what to do in the interim if I get one of these jobs that doesn't offer a lot of housing options. We're thinking we'll build our "doctor house"/dream house in 5-10 years. Its either rent for 1-2 years -> mid-size house -> build or mid-size house -> build.

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