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  • Out of residency, Where do I go from here?

    Anesthesiologist, almost 1 year out of residency. Income and job are expected to remain stable now that income has ramped up over the first year All 1099 Income from a level playing field group practice, S corp filing of each partner required by group. It’s a lifestyle friendly job at my current workload, I could take on more call if desired, but not planning on it. I use a bookkeeper and tax accountant that run the books as do most of the partners.

    Quite new at all this so I realize I may have a major oversight and am open to all critics or encouragers.


    I’m 35, one wife with no income, one baby, probably have another someday.

    Debt: $178,000 Federal student loans. All in covid interest free forbearance likely until September this year. Will look into refinancing this year. Thinking a 7-10 year repayment at ~1500-2000 a month.

    Monthly income ~36k. Minus monthly tax payments, health insurance, malpractice = 26k

    Predicted effective tax rate is ~24% (edit: scratch that more like 28-32%)

    Cash = $101k in Checking/Savings. Emergency funds designated to be ~6 months expenses = $40k

    My Fidelity Retirement = 108k
    • HSA 7k (FSKAX)
    • Roth IRA 25k (16k FSKAX total market, 9k Fidelity 2050 target retirement)
    • SEP IRA 52k (28k FZROX, 24k FSKAX)
    • UC DCP 22k (Fidelity 2050 target retirement)
    Wife Retirement = 18k
    • SEP IRA = 18k (Vanguard total stock market)
    Taxable Acct
    Individual Stocks = 1.8k I bought as a kid.
    Desired Asset allocation: Don’t know, I’ll just keep buying low cost total market index funds



    One year out of residency, Net Worth = 229k - 178k = POSITIVE 51k starting to see some light.


    Budgeting:

    Income - taxes - 20% savings = Spending (36k - 9k - 7k = 20k)


    It gets gobbed up pretty quick...(or more with vacay or cars)
    • 4000 = Rent and Utilities
    • 1100 = Insurance (Own Occ DI, term life, car)
    • 1700 = student loan repayment over 10 years
    • 1000 = Kids college savings fund
    • 1200 = food, shopping, fun whatever stuff
    • 1000 = vacation or replacement used car

    That leaves about 10k a month (and 60k in cash savings) to figure out what to do with…?


    I lean toward saving for a house DP instead of paying off student loans. We live in a pricey part of CA (like everywhere here) so a 1.3M home would be pretty modest, like 1500-2000 sq ft. That would put us with 150k (~10%) for a downpayment Summer 2022 or obviously more for summer 2023.


    We thought about trying to jump into the housing market now felt some pressure from family because of low interest rates, but its so frickin hot right now and with my 1099 income I would have a hard time getting a great loan with minimal down something over 1M. Best thing is my wife definitely does not have house fever, what a blessing, we really like our rental and neighborhood.


    So buy a house in a year or two? Be more aggressive with retirement savings? (more than 20%?) Pay off low interest free debt?

    Also, with this budget it makes me think I can afford a 10,000/mo for PITI (?!)... but that's more than most recommendations.
    Last edited by ihavenonickname; 06-10-2021, 09:18 PM. Reason: formatting and tax rate %

  • #2
    Buying a house in the coming few years is a reasonable goal. After the 20% to retirement, I would put the rest in a savings account towards a down payment for a house.

    Refinancing the student loans in the next few months would also be a good plan. Doing that sooner reduces the risk that rates will rise, but doing it when the interest payments come due will give you a free ride for a few more months. It is your call (anyone's guess) which of those might work out better. If it was me, with only a few more months of being interest free, I would likely jump into a refinance at an attractive rate now.

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    • #3
      24% effective tax rate as a CA resident earning $430k?

      Comment


      • #4
        Originally posted by ENT Doc View Post
        24% effective tax rate as a CA resident earning $430k?
        Yeah, that doesn't make any sense. Especially if you're 1099 - presumably, you have to pay employer tax as well as employee. What are we missing?

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        • #5
          Hmm, my short hand math was just wrong I calculate it to be 28% Honestly I could still be off, tI'm not sure if some of my figures are after I've paid some employer portion or SS taxes.

          Comment


          • #6
            Originally posted by ihavenonickname View Post
            Hmm, my short hand math was just wrong I calculate it to be 28% Honestly I could still be off, tI'm not sure if some of my figures are after I've paid some employer portion or SS taxes.
            Did some rough math and come out to 33%. 25ish for fed/state, rest for SS/Medicare employer + employee.

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            • #7
              I would often be 22-24% fed effective in similar income range, CA was about 5% additional.

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              • #8
                sounds like you're off to a pretty good start.

                i'd have a hard time buying a 1.3M house while I still had 6 figure loans, although you'll probably be ok.

                if your wife is fine in the rental and the housing market is insane right now, why not drop 60k on the loans, set a 1-2 year payoff goal, and then consider a doctor loan for house?

                if you have $10k/mo of wiggle room you'd be out of debt in a year right? that would be a pretty attractive option for me. and keep in mind that wiggle room is likely to go down as your kid gets older and/or you have more.

                one other note: i would not be saving 1k/mo for kid's college while you still have loans. pay off your education before saving for someone elses.

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                • #9
                  Originally posted by Sigrid View Post

                  Yeah, that doesn't make any sense. Especially if you're 1099 - presumably, you have to pay employer tax as well as employee. What are we missing?
                  Well, he is organized as an s-corp, so that definitely saves some FICA. We don’t know the other business expenses, either. But I agree the rate is low.
                  Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                  • #10
                    Move some of the vacation, car, kids college, and fun whatever stuff to student loans. I understand it's in forbearance so maybe in September refinance and take big hacks out of it. Really you should be able to take care of it in 24 months (or less!) without cramping lifestyle too much.

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                    • #11
                      Originally posted by White.Beard.Doc View Post
                      Buying a house in the coming few years is a reasonable goal. After the 20% to retirement, I would put the rest in a savings account towards a down payment for a house.

                      Refinancing the student loans in the next few months would also be a good plan. Doing that sooner reduces the risk that rates will rise, but doing it when the interest payments come due will give you a free ride for a few more months. It is your call (anyone's guess) which of those might work out better. If it was me, with only a few more months of being interest free, I would likely jump into a refinance at an attractive rate now.
                      Thanks for looking it over, its nice to hear given how often new attendings and residents are told how terrible buying a house would around here. Thanks for the tip to start refinancing now, I'll get that ball rolling.

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                      • #12
                        Originally posted by MPMD View Post
                        sounds like you're off to a pretty good start.

                        i'd have a hard time buying a 1.3M house while I still had 6 figure loans, although you'll probably be ok.

                        if your wife is fine in the rental and the housing market is insane right now, why not drop 60k on the loans, set a 1-2 year payoff goal, and then consider a doctor loan for house?

                        if you have $10k/mo of wiggle room you'd be out of debt in a year right? that would be a pretty attractive option for me. and keep in mind that wiggle room is likely to go down as your kid gets older and/or you have more.

                        one other note: i would not be saving 1k/mo for kid's college while you still have loans. pay off your education before saving for someone elses.
                        Yeah so that’s pretty much the rub - pay off low interest debt and use a higher interest higher principle Physician loan for a home in a couple years, or save the cash and use get a traditional loan with a better rate and lower principle. A few years from now I’ll have the same amount of debt either way… I do t see why that is such a popular opinion for people much smarter than me.

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                        • #13
                          Originally posted by MPMD View Post
                          one other note: i would not be saving 1k/mo for kid's college while you still have loans. pay off your education before saving for someone elses.
                          Came here to say precisely this

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