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New attending and starting a (late) taxable account

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  • New attending and starting a (late) taxable account

    Hi all,

    I've started reading the blog/forums and wish I had back in residency or med school. I'd appreciate some advice or pointers on starting a taxable account to go with my other savings.

    Background: I went the MD/PhD route so on the plus side I have zero student debt (or any other type of debt), but on the minus side I'm 35 years old and only just started my first attending job this year, so I'm getting a late start on a taxable account. I'm unmarried, have no kids and no plans for them. I do have a Roth IRA which I've had for ~15 years now; I have a 401(a) from residency that is allocated into a university-specific target date fund but won't get any more contributions as I'm not there anymore. My new job is with a County system and has a 457(b) plan which I will contribute the $18k max to as well as a real pension plan on retirement. I live in a relatively expensive city, that said (Los Angeles).

    If I have no major life changes, the main goal would be to save enough for potential retirement in ~20 years.  My Roth IRA is at Vanguard and at ~80% 500 Index Fund Admiral Shares (VFIAX), 10% Inflation-Protected Securities Fund Investor Shares (VIPSX), and 10% REIT Index Fund Admiral Shares (VGSLX). I've seen a couple of opinions on the plusses of having international funds but don't currently have any. I'd like to hear people's folks on what kind of asset allocation would make sense for starting a taxable account, or if I should be re-allocating what I have in my Roth IRA.

    Thanks in advance for the input!


  • #2
    I would decide on what you want for an overall asset allocation, and adjust accordingly. Taxable is a great place for a total international fund, as you will get the benefit of the tax credit for foreign taxes paid, which is essentially forfeited in a tax-advantaged account.

    So if you want to be 60% US / 20% international / 10% REIT  / 10% bond (which is my allocation), start buying exclusively international in taxable, and perhaps buy a different taxable fund in your Roth IRA. As you build up the taxable account, you can start exchanging out of the international funds you bought in Roth to stay in balance.

    Use different funds to make future tax loss harvesting without an inadvertent wash sale easier.





    • #3
      Your tax-protected ( Roth ) account with 10% TIPS is worth questioning.   There are two ways to beat inflation:  1) TIPS, or 2) high % stocks.  I'd recommend a higher portion of stocks, both US and international.

      A taxable account should include munis for bonds, and both US, foreign, and emerging market equities.  I recommend  ETFs over mutual funds for the tax efficiency.


      • #4
        i hope you recognize that the benefit of zero student/consumer debt as your start your attending life is probably going to balance out your "late" start due to MD/PhD.

        i'm just about exactly your age and have averaged $50k/year of loan repayment over my first 5 years of practice. that's a new loaded Ford Explorer every year.

        It's like you've already saved a quarter million dollars relative to many of your peers just by not being in debt.


        • #5
          Make sure you read the Tax Managed Funds blog post on this site from last week. Great information and be sure to read the comments. Physician on Fire touched on what quite a few people do for taxable accounts - buy Berkshire Hathaway.