Opinions on our financial plan

[Anesthesia84]

We are a dual MD couple, anesthesia/ cardiology in our mid 30s, with 3 kids and a fourth due this winter. I finished residency 3 years ago and have been working since then with most of my income going towards bills and student loans. My husband just finished fellowship so we finally got to see a big increase in our income and just wanted some other opinions from people as to how you would approach the debt we have left.

Income: our total base salaries (both employed) =600k. Some bonus money, defined benefit plan, profit sharing, pay for extra call.... but nothing we are putting into our budget at this point. We will just use the extra as it comes to pay down debt.

Debt:

-student loans: combined total of 390k (down from almost 600k when I finished residency 3 years ago!!) variable, now ~3.3% but will refinance again once my husband has a few more paychecks to show SoFi. Right now we pay 6k per month split between them with about 5 years left.

-mortgage: 360k at 3.5% 15 year mortgage

Savings/ Retirement:

-250k in 403b/ 401k/ Roths

-18k in HSA (no option for putting in anything but cash unfortunately)

-20k E-fund

We have life insurance, our own occupation disability, and umbrella insurance.

 

We have a couple of short term goals which the next few paychecks (paying off the zero interest credit card and home improvement loan that we took out when we bought the house a few months ago and were cash-poor) but those will be gone very quickly. After that, our plan is to keep maxing our retirement accounts (with the profit sharing etc, we can put about 100k in per year) and continue paying our student loans down quickly....

At this point we aren't sure if we should start 529s for the kids (oldest is 7 year old) and/or open a taxable account. Part of me thinks we should but I also want to just get rid of the student loans so that we have some flexibility in the future if one of the kids needs me to stay home for awhile or one of us gets sick and can't work. We could very easily live on one salary if the student loans are gone. We don't necessarily want to retire super early but would love to have the ability to both go part time in our 40s (which I think is doable). I also want to be able to say F-you to my job if the contract changes which is unfortunately something that I think will happen in the next 5-10 years. (Right now I don't have to take call but there is a lot of talk of that changing....)

thanks for any input!

[mobilehomegurl]

Since the rates are pretty low on the student loans, you may want to at least open and contribute a small percentage for the kids' college fund. Starting and contributing early will help to increase the amounts over time. Vanguard is a pretty good option if you're looking at different companies. Hope this helps!

[jhwkr542]

Don't forget the backdoor Roth IRAs. For us (dual physician couple fresh out of training too), we're dumping money towards student loans first before kids' college funds. We'll just bankroll college, which I'm guessing you may be able to do in time unless your kids all go to private schools. Do you get a state tax break on your 529 contributions?

[MPMD]

First of all it sounds like you are doing very well. I admire you discipline to spend so little on a house.

I'm confused by your salary. Your husband is a fellow, you are an attending, and your salary is 600k? Are you making 500k by yourself? Making 400k in cardiology is not particularly difficult by my understanding. Is your salary about to jump to $1M?

[AnotherSecondOpinion]

I think you guys are on the right track, nice job!  I agree that you should put as much as you can toward paying off student loans, but it may not hurt to cut back on that slightly to start the 529 plan.  Even a conservative portfolio has been bringing in double what you're losing with your low interest student loans, so don't miss out on this opportunity.

Start small and then increase as your debt shrinks--college for 4 kids will be expensive!  Plus with those genes, you can't tell me there is not a future doctor in the family.

[MDHubby]

MPMD wrote:

First of all it sounds like you are doing very well. I admire you discipline to spend so little on a house.

I’m confused by your salary. Your husband is a fellow, you are an attending, and your salary is 600k? Are you making 500k by yourself? Making 400k in cardiology is not particularly difficult by my understanding. Is your salary about to jump to $1M?

Click to expand...

I think she is implying her husband's first attending job post-fellowship will bump them to a combined 600k salary.

[treesrock]

You're only three years out of residency and your husband just finished fellowship.  You have three kids with a fourth coming.  Despite this, you have paid off $210k+ in student loans and have $250K in retirement accounts.  Honestly I'm not even sure how on earth that math works out, but job well done!

You're doing an excellent job, and with your savings rate, it probably doesn't matter which track you choose.  Your student loans will be gone fairly soon regardless of whether you start funding 529s/taxable account right now or in a few years once the loans are gone.

So I would pick whichever option would make you happiest.  If you're anything like me, that means getting rid of the student loans ASAP and starting the 529s/taxable afterwards.  But either way you'll be fine.

[Dr. Mom]

Dual MD's also.  The way we did it:  Paid off our student loans first.  Then took the same amount we were paying monthly to our loans ($6000 in your case) and divided it into the kids 529's.  The oldest got more of the monthly amount since the youngest had more time for the 529 to grow.

[VagabondMD]

Regarding the HSA, if you want to use it as a long term (stealth) IRA-type vehicle, you can transfer the funds to a company that allows you to invest more aggressively. Otherwise, you are better off reimbursing yourself for medical expenses as you go.

[Kamban]

Since the medical school loans are at a low interest rate I would continue to try and pay it over 5 years as you are planning but also start 529 plans for all 4 kids ( including the one due this winter when he/ she is born). Unless they are lucky to get full scholarships they have to pay for college. The earlier you start, the better the compounding effect.

And there is nothing wrong with planning to work till you are 60. It is unlikely (for practical reasons, not financial) you can retire before the youngest goes to college which will be 17 years away.

[MPMD]

MDHubby wrote:

MPMD wrote:

First of all it sounds like you are doing very well. I admire you discipline to spend so little on a house.

I’m confused by your salary. Your husband is a fellow, you are an attending, and your salary is 600k? Are you making 500k by yourself? Making 400k in cardiology is not particularly difficult by my understanding. Is your salary about to jump to $1M?

Click to expand…

I think she is implying her husband’s first attending job post-fellowship will bump them to a combined 600k salary.

Click to expand...

That sounds very low then unless they are high COLA.

[Anesthesia84]

Thanks for all the responses.

To answer questions - combined income after with my husband's attending job is 600k. Yes, it's probably low for an anesthesia/ cardiology couple but we chose to live in an area of the country that we love (not HCOL but not the super LCOL.... property taxes are 15k/ yr here) and we both chose jobs that are 4 days per week with minimal or no call so we took large paycuts compared to our high earning peers .

We have been doing backdoor Roths for the last 5 years. We will keep on doing that.

We do not get a tax break in our state for 529s which is one reason we've been leaning towards just paying off student loans ASAP. Plus, it would feel so good! Do people usually open a 529 for each kid or just have one that they then put all the money into and take it out as needed for whoever is in college?

Thanks for the HSA tip, will look into transferring funds to another company. Any recommendations?

As for a plan - I guess you're all right that it probably doesn't matter! Continuing to save and pay off debt is most important in the end and we are not big spenders so it makes it pretty easy. But I like to hear what others have done before us or would do in our situation.

[Dr. Mom]

My husband and I also both worked part time.  It is awesome to both be home more during the kid years.  Our last is 16 now.  We opened separate 529s for each child.  The younger kids will need less direct funding as theirs will have longer to grow.  You could also superfund and be done if you wanted. Stick with any of the Vanguard plans. Be mindful of not overfunding though.  You will have expenses that are not considered qualified distributions from the 529 while they are in college so plan to cash flow those.  We found having about 90-100K apiece in the 529 at college entry worked well as ours ended up in public college on scholarships.

[FIREshrink]

My personal opinion:

 

Max 403b/401k/401a

Max backdoor Roth IRA

Max HSA

 

Make sure you both have excellent disability and malpractice

 

Despite your comments about being able to survive on only one salary, I would get at least $1M in life insurance each. Don't underestimate the impact of a spouse's death on the surviving spouse. The money helps. There may be childcare involved, extended time off work, a move.

 

Then I would throw everything else at the student loans. Yes, they're only 3.3%, but you only have 5 years left on them, and a 5 year treasury is currently paying under 1.8%. And with stocks at near record high valuations (not prices, valuations), I think 3.3% guaranteed is very good. I'd take it. I think you could pay them off in 2.5 years.

 

At any point during the payoff period, if stocks get cheap you can turn off the accelerated repayment and just buy stocks. At this time they're not compelling at all.

[llessac15]

My two cents:

1. I agree with most all the above. You have many options going forward and none are wrong. You are already on track to be well ahead of most of your physician co-workers.

2. The first step I would take is paying off student loans. Getting that debt off your plate is very liberating for physicians since it has become the biggest limiter to young physicians making steps toward wealth early in their career. You could have it paid off in 18-24 months, even faster if you guys got ultra motivated and took some extra call.

3. Once that is gone, my preference was to start funding my taxable account with 25% of my taxable income.

4. If there is any leftover, then I would put some money into 529's. The kiddos college savings just isn't something that I see as a major priority. The reason I say that is because when that time comes, you'll have many options to pay for it. You could work longer at a part-time rate. You could tap your Roth's. You could just use your taxable account to pay for it. Also, this one seems taboo in the doctor world for some reason, you could have the kids work or take out loans to pay for their own college.


Congrats on finally reaching the end of your education path as a couple. Make smart choices now (as you are already doing), and you will be a big winner in 1-2 decades. I'm only 5 years into my career and most fellow docs are floored when they hear how much I have saved and invested already.

One last thing, keep on improving your financial education. Consider reading books that teach things different from the WCI and Boglehead philosophy just to see things through a different lens. Not that you should quit following WCI principles, it's just good to see and learn different routes to wealth. Sometimes reading about alternative routes (real estate, small business, etc...), just helps solidify why you are following the path to wealth that you are already on.