Advice on my situation

[SiR99]

DMFA wrote:

What are you doing with so much cash sitting around? How did all that get there? Why hasn’t it been earning you money?

Every dollar you don’t contribute to your employer retirement account, if it would be matched, is leaving even more money on the table. You should contribute 20-25% of gross income to retirement.

Buying a house fresh out of residency is fraught with risks, not least among which is leaving your first job within a couple years. Massive closing costs would erode any equity you might have built up in that short time. Don’t let realtors and HGTV sell you on the idea; it’s a complex decision.

Convert any traditional IRAs to Roth now, while you’re in a low bracket. That minimizes the taxes due. Take some of that cash sitting around and max a Roth IRA this year. This early on, your primary assets should be low-cost stock index funds, like total stock market and S&P 500 funds.

You’re at a very good starting point with no debt and cash on hand. However, there are a lot of vitally important concepts that you don’t seem to know. Read the resources mentioned above and consider sitting down with a financial planner.

Click to expand...

Thanks for the advice.

I will definitely max a Roth IRA out within the next couple weeks (any suggestions on if I should stay with Fidelity or use another company? Anything to look out for with Roth IRAs?)

As for the rest of my money, I was just saving it in hopes of investing or buying a house. I would love for that money to be earning me more money, but I just wasn't sure what to do with it (and I was worried I might lose it if I invested it poorly). Besides the Roth IRA, what other options do I have to invest in that will be safe and give me a little bit of earning potential?

[jfoxcpacfp]

Sure. You're a 2nd year resident and weighing the contribution to a Roth against the goal of buying a nice house in an expensive area. I simply think you should get a better plan in place first and concentrate on long-term goals, such as growing wealth over your career, before planning for a house you probably won't live in forever. That's just me RBTL, though.

As for the custodian, contrary to the opinion of the majority here, choice of custodian has far less impact on long term growth of wealth than does your investing behavior. Choose the custodian that you are most comfortable with (I like Fidelity and TDA, don't care for Vanguard, for example) and put together a properly diversified equity fund portfolio, dictated by the goals in your plan. Rebalance annually.

[Sneezy]

Johanna is tough so don't feel bad   .  I agree with her and others that you don't need to be in too much of a hurry to buy a house, but saving for that is evidence of a lot better priorities than spending it on, say, a luxury car.

I use both Vanguard and Fidelity and both are fine.  Fidelity index funds are very similar to Vanguard and their customer service is generally better

[DMFA]

Fidelity is fine. All the standard fund choices and they just reduced their expense ratios to compete with Vanguard.

What is your employer-sponsored retirement account like? 403b? 401k? How does the matching work? What fund options do they have?

[SiR99]

Hi everyone, sorry for the late response I had a lot going on with my rotations and service exam so everything was put on hold.

My employer sponsored retirement account won't really serve me that well. I'll have to look into it further, but from what I understood, it is institution or state specific and once I finish and move I'll have to cash it out or transfer it to another IRA.

As of right now, I'll be transferring my rollover IRA money to a roth IRA, then I will max out both 2016 and 2017 contributions.

DMFA, I know you said my primary assets should be low-cost stock index funds, like total stock market and S&P 500 funds. Can anyone be more specific on what I should buy, should I do 100% of one, or 50/50? I'm not too sure what I should put this money into.

I also think I will just be leaving this money for retirement instead of using it as a down payment on a house as the return seems to be better long term. Is this the better option?

Is there any other investment options you guys can recommend for the rest of my money I currently have just sitting in my savings account? (This money is to be used as a down payment for a house or possibly a new practice in the future).

 

Thanks for everyone's help, you guys have been really great.

[jfoxcpacfp]

Read Simple Wealth, Inevitable Wealth (latest version, not available on Amazon).

[SiR99]

Thanks, I'll definitely look into that book, but I won't be able to get through it fast enough since I have my board exam coming up in a couple months.

 

I'm currently ready to max out my roth IRA for 2016 and 2017, does anyone have any recommendation on what low-cost stock index funds (total stock market, S&P 500 funds, etc) I should buy and how much of each I should buy?

Thanks

[Lithium]

You need to make your own asset allocation.  No one here knows exactly what your long-term investing goals or risk tolerance are, and you're best equipped to design something you stick with for the long haul.  Once you know what allocation you want, maybe then others can help you select the best mutual funds or ETFs to implement it.

You can read the WCI series if you aren't sure where to start:

https://www.whitecoatinvestor.com/designing-your-portfolio-part-1-goal-setting/