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  • Where to start?

    I am a PGY2 Emergency med resident in a 3 year program.  29 year old newly married

    Other than my 401k plan established through my residency I have no other retirement or investing accounts. After reading WCI's book and coffee house investor I am ready to get my feet wet.

    My question would be, with limited finances available at this time, maybe 3k to get started and then about 500/mo to allocate to investing post taxes, where should my focus be? I am between Index funds or funding a Roth IRA, I will eventually transition to both by the end of my PGY3 year and continue to bolster my portfolio as an attending obviously.

    I guess my question is, does it matter where I start?

     

    Thanks.

  • #2


    I am between Index funds or funding a Roth IRA
    Click to expand...


    You can do both now. Fund a Roth IRA with index funds.

    If you have a retirement account with an employer match, start by contributing enough to get the match if you can. Some residencies have this; some don't.

    Cheers!

    -PoF

    Comment


    • #3
      Congrats on the marriage! Welcome - thanks for posting.

      I'd start with an emergency fund and a Roth IRA (if you and your spouse aren't over the income limit, now that you'll presumably file tax returns together). Do you have either of these already? In the Roth, I'd put the money in some index funds. A review of any debt would be good too.

      As for does it matter where to start, there are 2 points I'll raise. 1. There is certainly a mathematically "best" approach. Some work with spreadsheets can help here. 2. The mathematically correct answer doesn't always mean the best answer. As humans, we have to account for out behavior too. For example, the snowball approach to paying off debt is a powerful motivator, although not usually mathematically "best".

      Another good way to learn a bit is to see which fund(s) you currently hold in your 401k. It might be good to review those too.

      Comment


      • #4
        Congratulations on getting married and getting started with investing during residency.

        You are correct as a resident to use a Roth IRA instead of your (probably traditional) 401(k). You can invest in index funds within your Roth IRA (you'd probably want to use ETFs because the lowest fees on index mutual funds usually require a $10,000 minimum). You can use the coffeehouse portfolio or another index fund portfolio that you like.

        -WSP

        Comment


        • #5
          lots and lots of reading first! you already read the WCI book which is great, so go the bogleheads forum and read their book list as well.

          your comment about index funds vs a rIRA is not the right way to look at it. you should invest in index funds everywhere: 401k, rIRA, taxable, HSA, etc. the question is which bucket first

          i would say to get started:

          1) emergency fund, just a pile of cash. things happen. you can do the dave ramsey approach and start at 1K or whatever is comfortable.

          2) consumer debt. Credit cards in particular. get rid of those first. no reason to save if you are paying 20% APR on something.

          3) depending on where you live you can vote 401k vs rIRA. for example, in CA its hard to pass up the extra state tax savings with a 401k vs. you are in the lowest tax bracket you will ever be in so that would favor the rIRA.

          --NEVER DO A TRADITIONAL IRA. if you dont know why, see the 1st line about reading more.

          --you can post your options here if you are confused as to what to pick. would rec either vanguard or fidelity for the rIRA.

          --if your spouse is not working dont forget your income qualifies her for a rIRA as well.

           

          good luck! dont forget, work hard and get a good attending job. thats the hard part. investing is pretty easy after that.

          Comment


          • #6




            I am a PGY2 Emergency med resident in a 3 year program.  29 year old newly married

            Other than my 401k plan established through my residency I have no other retirement or investing accounts. After reading WCI’s book and coffee house investor I am ready to get my feet wet.

            My question would be, with limited finances available at this time, maybe 3k to get started and then about 500/mo to allocate to investing post taxes, where should my focus be? I am between Index funds or funding a Roth IRA, I will eventually transition to both by the end of my PGY3 year and continue to bolster my portfolio as an attending obviously.

            I guess my question is, does it matter where I start?

             

            Thanks.
            Click to expand...


            You know you hold index funds *in* a Roth IRA, right?  Why would they be mutually exclusive?

            Debts?  Student loans, CCs, car, personal, etc?  Renting or mortgage?  Spouse income?  Family expenses?  Insurances?  It's kind of a whole package, and investing is just one part of it.

            Prob not a *wrong* answer here, so to answer your question, would prob do index ETFs in a Roth IRA (VTI, if you use Vanguard), unless your 401(k) has matching in which case I'd strongly consider using it.

            Well done on getting started!  Cheers

            Comment


            • #7
              Congrats on tying the knot and over 1/2 way done with residency!

              #1.  Emergency fund / transitional fund -- the 1-2 months going between residency and attending/PP/whatever there can be a lag in income stream.   Plan for that.   That's the main cause of concern -- Roth IRA is nice, but it's gone x 30 years unless uber emergency access.

              #2.  Debt - make sure all those are all refi and organized correctly in right vehicles

              #3.  Spending -- Live like a resident as long as you can! -- but do take a memorable honeymoon.

              #4.  Retirement:  Roth all the way - Index funds to KIS.

               

              Comment


              • #8
                1) Go to Vanguard.com

                2) Open Roth IRA

                3) Buy some Vanguard ETFs

                 

                Comment


                • #9
                  500 month might be tight on your residency salary, but definitly a good amount to aim for. When I started saving in residency I picked a lower number closer to 300/month to just grow into it and to get used to throwing money to future self. After getting comfortable with it for a few months I started to increase my savings amount by 50-100/month. You're married though so I'm sure 500 is perfect for you but once you've adjusted to it then save more.

                  Comment


                  • #10




                    1) Go to Vanguard.com

                    2) Open Roth IRA

                    3) Buy some Vanguard ETFs

                     
                    Click to expand...


                    Craigy why Vanguard ETFs?  For someone new to investing, and having little to invest at this time, wouldn't it be easier to just go with index funds in the Roth?  What makes you recommend ETFs instead?

                    Comment


                    • #11







                      1) Go to Vanguard.com

                      2) Open Roth IRA

                      3) Buy some Vanguard ETFs

                       
                      Click to expand…


                      Craigy why Vanguard ETFs?  For someone new to investing, and having little to invest at this time, wouldn’t it be easier to just go with index funds in the Roth?  What makes you recommend ETFs instead?
                      Click to expand...


                      Good question

                      I'm assuming a brand new account with not a lot of money.

                      Most mutual funds have a minimum investment (at Vanguard, generally $3,000 for investor shares and $10,000 for admiral shares).  Whereas you can buy a single share at a time of an exchange-traded-fund for a hundred dollars or so, depending on the ETF.

                      For example, in my personal Roth, I hold Vanguard's small cap value index fund (mutual fund), whereas in my son's Roth, he holds shares of Vanguard small cap value index ETF (exchange traded fund), since he has only a few hundred dollars in his account.  Both are virtually the same investment product (a small cap value index) but they are bought and sold differently (you can probably find articles that explain this more eloquently than I can).

                      The reason I suggest Vanguard over the competition is that they arguably offer the best index funds, you can buy and sell Vanguard products in a Vanguard account with zero fees or commissions, I generally like their website and customer service, and Vanguard is the pioneer of the whole low-expense index fund to begin with.

                      Comment


                      • #12










                        1) Go to Vanguard.com

                        2) Open Roth IRA

                        3) Buy some Vanguard ETFs

                         
                        Click to expand…


                        Craigy why Vanguard ETFs?  For someone new to investing, and having little to invest at this time, wouldn’t it be easier to just go with index funds in the Roth?  What makes you recommend ETFs instead?
                        Click to expand…


                        Good question

                        I’m assuming a brand new account with not a lot of money.

                        Most mutual funds have a minimum investment (at Vanguard, generally $3,000 for investor shares and $10,000 for admiral shares).  Whereas you can buy a single share at a time of an exchange-traded-fund for a hundred dollars or so, depending on the ETF.

                        For example, in my personal Roth, I hold Vanguard’s small cap value index fund (mutual fund), whereas in my son’s Roth, he holds shares of Vanguard small cap value index ETF (exchange traded fund), since he has only a few hundred dollars in his account.  Both are virtually the same investment product (a small cap value index) but they are bought and sold differently (you can probably find articles that explain this more eloquently than I can).

                        The reason I suggest Vanguard over the competition is that they arguably offer the best index funds, you can buy and sell Vanguard products in a Vanguard account with zero fees or commissions, I generally like their website and customer service, and Vanguard is the pioneer of the whole low-expense index fund to begin with.
                        Click to expand...


                        Some ETF's have lower expense ratios than similar mutual funds too.

                        Comment


                        • #13
                          Vanguard is a nice easy first step site that knows to KIS.  Low entry bar, low fees, easy funds, and simple layout for no frills folk.

                          Once the investor gets more time and funds to extend their reach and get bennies from size of funds, move to other places and play their bonus transfer games  for a few years.  Until funds simply large and you again return to KIS lifestyle

                           

                          Comment


                          • #14
                            Check to see if your job has a roth 401k plan. Get your match in the 401k. Max roth ira contributions. Go back and max 401k.

                            Of course any credit card debt should go away before investing.

                            Good to be thinking of this now but your first year of attending money will make these efforts seem small. It is still good to learn as much as you can before the checks roll in.

                            Don't buy expensive cars. Don't buy a house, especially your dream home. These are the traps you will fall into in the next few years that will ultimately make the big difference.

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