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  • What to invest in next

    As with many physicians, I feel like I am behind the game of retirement savings because I only started saving during residency. So, my goal is to save 25% of my current attending salary. I maxed out my 403(b) and have been doing the max for the backdoor Roth.  My employer provided health insurance disqualifies me from an HSA. And, I'm not too excited about becoming a landlord. I also have about 4 months salary saved away in a money market that I can get quick access to if an emergency arises. So, where should be the next place that I put my retirement savings in so that I can limit my expenses and taxes?

  • #2
    Do you only have one source of income?  Employed with W2 or what?

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    • #3
      Also, if married- be sure to look into spouse's options. But if you've exhausted everything tax-advantaged, and still need to save more for retirement, there's always the good old non-qualified/taxable account.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • #4
        Yes, full time with one employer (W2). I may eventually work on getting that consulting job on the side, but I'm only a couple years out of Fellowship so just working on building up my practice for now.

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        • #5
          Also, not married, so no spouse savings options.

          I'm meeting with a Fidelity rep in a couple weeks who thinks she may have additional tax-efficient options for me but WCI and everything else that I've read have made me sufficiently wary of investment advisors.

          If I go with a taxable account with Fidelity or Vanguard, what exactly is the kind of account that I open?

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          • #6
            I'm not exactly sure I'm answering your question, but first you have to decide on your master plan for asset allocation.  See https://www.whitecoatinvestor.com/150-portfolios-better-than-yours/ .

             

            Then as you have money to invest you maintain that plan.  To maximize tax efficiency, you put your least tax efficient holdings into your tax-free or tax-advantaged accounts (401K, etc) and you put your most tax efficient holdings into your taxable accounts.  See:   https://www.bogleheads.org/wiki/Principles_of_tax-efficient_fund_placement  .  Basically you are trying to put the holdings that generate the most taxes into your tax-free accounts.   There are arguments about this but generally put your bonds and bond funds into the tax-advantaged and stock funds into the taxable.  There are several exceptions so don't take that as gospel.

             

            But you still maintain your overall plan.  Just because you max out your tax-advantaged accounts doesn't mean your plan changes and you start buying oil wells - you keep your master plan and just try to divvy things up to maximum advantage.  Obviously the more tax-advantaged places you can stash money the better and that is also discussed at WCI.

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            • #7
              Taxable, with Vanguard.  It's been awhile since I signed up, but it's pretty straightforward.  Create an account, confirm a bank account, buy into fund(s).  A "taxable" account is the most flexible account you can have.  Tax drag will be in the range of 0.5 to 0.8% per year, depending on dividends and your marginal tax rate.  On the plus side, you can Tax Loss Harvest, access the money anytime you want, donate to a donor advised fund without incurring capital gains, and ultimately pass along the $ to heirs at a stepped up cost basis.

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              • #8
                Vanguard calls it an "individual account"

                https://investor.vanguard.com/investing/joint-account-individual-account

                 

                Also the fidelity guy may try to sell you whole life insurance or something similar, be wary.  You don't have much options once you max out the 401k with only one employer.

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                • #9
                  I believe everyone saving for retirement should have a taxable account to supplement traditional retirement accounts. Reasons are:

                  1. Taxes are lower. You'll be taxed at your top marginal rate for IRA withdrawals and can use lower LTCG and dividend rates for a taxable account.

                  2. Step-up in basis at death.

                  3. Total flexibility - use it when you want, invest in what you want, how you want.

                  4. Not required to split in event of divorce as you are with retirement accounts.

                  5. Don't have to list spouse as beneficiary without signing a release. Can divide between other family members if you wish.

                  6. Can gift to charity and get deduction for value not basis.


                  Your financial plan will dictate how you set up and fund this account, of course.
                  Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

                  Comment


                  • #10




                    Taxable, with Vanguard.  It’s been awhile since I signed up, but it’s pretty straightforward.  Create an account, confirm a bank account, buy into fund(s).  A “taxable” account is the most flexible account you can have.  Tax drag will be in the range of 0.5 to 0.8% per year, depending on dividends and your marginal tax rate.  On the plus side, you can Tax Loss Harvest, access the money anytime you want, donate to a donor advised fund without incurring capital gains, and ultimately pass along the $ to heirs at a stepped up cost basis.
                    Click to expand...


                    I think that's too high. Many people can have less tax drag than that. Consider TSM with its 2% yield. At 15% LTCG/Dividend rates that's only a 0.3% drag, plus any costs when you eventually sell (which will get it into the range you're talking about, but it's highly dependent on the length of time you held the investment.)
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                    • #11




                      I believe everyone saving for retirement should have a taxable account to supplement traditional retirement accounts. Reasons are:

                      1. Taxes are lower. You’ll be taxed at your top marginal rate for IRA withdrawals and can use lower LTCG and dividend rates for a taxable account.

                      2. Step-up in basis at death.

                      3. Total flexibility – use it when you want, invest in what you want, how you want.

                      4. Not required to split in event of divorce as you are with retirement accounts.

                      5. Don’t have to list spouse as beneficiary without signing a release. Can divide between other family members if you wish.

                      6. Can gift to charity and get deduction for value not basis.


                      Your financial plan will dictate how you set up and fund this account, of course.
                      Click to expand...


                      Sure, it would be nice if everyone had a taxable account. But are you suggesting they skip out on 401(k) or backdoor Roth IRA contributions in order to get it? Of course not, and that's the issue.

                      I think you also get the full value when you donate tax-deferred (or even tax exempt) money to charity anyway, no? What do you only get to deduct the basis with?
                      Helping those who wear the white coat get a fair shake on Wall Street since 2011

                      Comment


                      • #12


                        Johanna Turner wrote: I believe everyone saving for retirement should have a taxable account to supplement traditional retirement accounts. Reasons are: Taxes are lower. You’ll be taxed at your top marginal rate for IRA withdrawals and can use lower LTCG and dividend rates for a taxable account. Step-up in basis at death. Total flexibility – use it when you want, invest in what you want, how you want. Not required to split in event of divorce as you are with retirement accounts. Don’t have to list spouse as beneficiary without signing a release. Can divide between other family members if you wish. Can gift to charity and get deduction for value not basis. Your financial plan will dictate how you set up and fund this account, of course. Click to expand… Sure, it would be nice if everyone had a taxable account. But are you suggesting they skip out on 401(k) or backdoor Roth IRA contributions in order to get it? Of course not, and that’s the issue. I think you also get the full value when you donate tax-deferred (or even tax exempt) money to charity anyway, no? What do you only get to deduct the basis with?
                        Click to expand...


                        Absolutely not. If you'll read up through the thread, the original question was about what to do next after maxing out tax-advantaged accounts.

                        I am having trouble understanding your 2nd question, sorry - could you restate?
                        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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