Need a lot of help with IRA, Roth, HSA...

[Vizeor]

Hi all,

 

Incoming long, potentially frustrating post because of how incompetent I am going to sound, but here we go...

 

I am completely dense when it comes to finances and I am in the process of trying to play catch up in knowledge.  I am trying to read as much as possible, learn, etc.  Up until this point I have just pretty much listened to what my family members have told me, as well as what some of my partners have told me.  But, I feel overwhelmed right now and feel as if I am not doing a good enough job securing my family's future.  I am on the brink of hiring a financial planner and someone to manage my money, but I want to give this whole self-directed investing thing a chance before completely giving up.  So here we go.

 

A little background: I am in my early 30s and I am an attending.  I have no student loan debt, and the only debt I have is for our house and a car I recently bought (I got a very good interest rate).  I am currently maxing out my 401k.  Along the way I have created multiple retirement accounts (again, per my family's recommendations) which I just recently consolidated.  I have close to $40k in a Roth IRA, but this money is NOT INVESTED.  It is sitting in a "cash" investment earning exactly 0% interest.  I have another $28k in a traditional IRA, also earning 0% interest.  I am maxing out my company 401k at this point, with that money invested in a target date Vanguard fund.  I also have an individual investment account, to which I am contributing close to $4k a month.  This $4k is split between a diversity of mutual funds, including large, mid, small cap funds, foreign markets, etc, with a tilt towards being slightly aggressive given my age (I got these recommendations from a partner of mine).  I also have an HSA which I have been maxing out as well, but that money is also NOT INVESTED right now.

 

So here is my issue.  I have a lot of money literally doing nothing for me (between my traditional, Roth, and HSA), but I am too scared and too uninformed to invest this money without guidance.  This literally weighs on my mind every single day and I feel really lost and overwhelmed.  Because the amounts I am dealing with are fairly significant, I am paralyzed by fear of making a wrong investment choice and having it cost my family and me dearly.  As I said before, I am on the verge of hiring a financial planner and shelling out the 0.5-1% a year to get some help, but I really feel like I am doing myself a disservice since I feel like I should be able to understand this stuff, and I am throwing away a significant amount of money.

 

Any help and guidance would be greatly appreciated.  Thank you all...

[Faithful Steward]

I agree that you need to put your cash to work. But, it's probably a good thing that you've been cautious and not fallen prey to any bad investment ideas. 0% is better than a loss.

Hiring an advisor might be appropriate; but, before you do, make sure they are a fiduciary. Also be sure you understand all fees and what services will be provided. i would suggest working with an advisor with experience serving the needs of physicians.

On the other hand, if you have the time and inclination, you are certainly capable of going the DIY route. You could read a few books on investing and gain the knowledge to do it yourself.

Either way, it sounds like you have the right habits for financial success. You just need to gain some knowledge or get some guidance. Either way, congratulations on what you've already achieved.

[q-school]

I think maybe a one time visit with financial planner would be good start for you to make sure you are comfortable with plan and that you understand your own risk tolerance.

No worries though. You are young and have no debt. You will be fine with a little attention. More than fine.

[cgossage]

It seems like you are putting your money in the right type of accounts which is the most important step but fearful you will make an investment mistake.  I would suggest dipping you toe in the water to get comfortable with investing and handling times when the market is down.  Remember, you are investing for a long period of time so try to not focus so much on the temporary fear of losing money.  You will never be jumping in at the perfect time.  I would start by trying to start investing 10% of your cash each month so that you aren't jumping in on day one and panicking if there is a market sell-off.

[jz]

I suggest a fee-based advisor to hand hold and get you started.  Once started, and live through your first bear market, I suspect you will flourish.

[Doctor Money Matters]

I second the thought of slowly investing the funds over the course of a year to 18 months. Im not sure you need an advisor, but you may feel better with one. Read through this site, bogleheads, listen to some podcasts, (including mine)  . But remember that the money you have in the accounts now will be dwarfed by what you put in over time. If you make a mistake now the dollar cost is small compared to mistakes later on.

 3 fund portfolio bogleheads  

The 3 fund portfolio is a good place to start.

Good luck, you will do fine.

[djohnflatfeecfp]

If you meet with a financial planner (fiduciary) ask for an investment policy statement and be sure it reflects your risk tolerance.

 

Also, you probably don't need to shell out on a percentage fee every year.  As others have mentioned, you have the basic framework there.  You just need some guidance to finalize everything and that doesn't require an assets under management fee.

[G]

q-school wrote:

I think maybe a one time visit with financial planner would be good start for you to make sure you are comfortable with plan and that you understand your own risk tolerance.

No worries though. You are young and have no debt. You will be fine with a little attention. More than fine.

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I'd probably change those "NOT INVESTED" to invested.  A generic approach like DMM suggests will serve you well.  Also agree with Q-school, a one-time visit might help figure out how to tweak to your personal situation/tolerance.

The good news is that there are now like 473 financial advisors that seemed to have joined the forum (or resurfaced) in the past week.

[DMFA]

• Great job on your relative lack of debt - just a mortgage and a car note is def not the worst place in the world to be.


• A target-date fund is *not* a bad idea, esp if you want simplicity.  It's a good place to start for your IRA and HSA while you figure things out.


• Consider rolling your TIRA over to your 401(k) if it accepts incoming rollovers.  That way, you can get another $5,500 of tax-advantaged "backdoor" Roth IRA contributions each year.


• You're going to need to get over your paralysis by fear.  Every investment will lose at some point.  There is no "risk-free" gain.  Even the AAA bonds have some credit and risk.  You will not gain without taking some risk.  I'm not saying you need to be 100% stock funds (may not be a bad idea if done properly), but if you want this money to do any work for you, that's the hurdle you've got to surpass.


• A planner can be an OK idea.  I'd go for a time-based instead of money-based fee-only CFP.  0.5-1% for you is going to be quite a bit, vs a few hundred per hour.  You probably wont need more than a session or two to get your feet under you to start understand how this stuff works.


• As long as your spending is under control and you're continuing to earn and invest, the rest is just details: asset allocation, small/large, US/int'l, stock/bond, growth/value, etc are the small stuff.  People who spend less and save more do fine.

[DMFA]

G wrote:

The good news is that there are now like 473 financial advisors that seemed to have joined the forum (or resurfaced) in the past week.

Click to expand...

No joke.  They've really come out of the woodwork.  Good for them, I guess.  Nice to have professionals around to bounce ideas off of.

[Hank]

DMFA wrote:

G wrote:

The good news is that there are now like 473 financial advisors that seemed to have joined the forum (or resurfaced) in the past week.

Click to expand…

No joke.  They’ve really come out of the woodwork.  Good for them, I guess.  Nice to have professionals around to bounce ideas off of.

Click to expand...

I'm not so sure.  The glut of new financial advisors on the forum looks like a decidedly mixed bag.  Hopefully we get some folks who stick around and offer insightful advice tailored to the needs of the members of the forum, like Johanna and some of the other long-term participants.

I'm concerned that we've attracted a whole mess of annuity and whole life salesweasels who are looking to score a quick commission in a target-rich forum full of doctors and dentists.  It's kind of impressive how many self described "financial advisors" have offered advice that was generic or flat out wrong.  Many of the physicians on this forum have offered accurate, more detailed advice even though their day job is pulmonology or emergency medicine rather than financial planning.

[jfoxcpacfp]

jz wrote:

I suggest a fee-based advisor to hand hold and get you started.  Once started, and live through your first bear market, I suspect you will flourish.

Click to expand...

Small edit - fee-only, not fee-based. See "The F-word scam" Don't feel bad, even WCI has made this mistake. The exact reason that "fee-based" was invented is to confuse consumers.

To @Vizeor - you are way ahead of the game with no student loans. You are stuck in analysis paralysis, but that is a very minor issue you are beating yourself up with unnecessarily. When investing, my recommendation is not to do something quickly (that could have long-term implications), but take your time. That is exactly what you are doing. Over the long term, these few months in cash will have almost zero impact. Looking at these accounts daily and fretting about what you are missing out on is creating undeserved stress.

I agree with the recommendations of others to hire a fee-only financial planner. This doesn't have to be a life-long commitment and you don't have to pay AUM fees. Many of us have flat-fee models and focus on education. With the right planner, you won't be "throwing away your money" but your results will more than pay for the fees you pay.

Good luck. Pat yourself on the back for achieving your current net worth and get some help.

[adventure]

Vizeor wrote:

I am completely dense when it comes to finances

Click to expand...

Welcome! - and well, no longer. You asked! That phase is over. I can provide the following. I agree with the above that talking with a planner is a good step. You can also do learn to do it yourself. And, don't be too hard on yourself - you haven't lost $ (some opportunity, fine, but not any capital). Yesterday is over, there will not be an M&M. Today is good.

Here are my suggestions. You can: take them, discuss them with a planner, or scroll past and completely ignore them. Costs you no $, just some reading time. Some thoughts to consider though.

1. Do you have an emergency fund? Can you pay 3-6 months of bills from some cash type account?

2. Put the Roth in these three funds.

If at Fidelity:Assist from @DFMA's post.

DMFA wrote:

FSTVX (Total market), FTIPX (International), FSITX(Bonds) imo

Click to expand...

If at Vanguard, these 2 are solid. @jfoxcpacfp

jfoxcpacfp wrote:

For asset allocation I am planning on 70/30 stocks/bonds

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You are only 28. I can think of no good reason to flatten out your potential growth with bonds unless you plan to begin liquidating your Roth within the next 5 years.

The problem you have run into is one reason I am not a fan of Vanguard.

VTSMX and VGTSX are fine to begin, maybe add a 15% REIT component.

You might want to read this 2-part series on PoF: Part 1 and Part 2.

Click to expand...

You'll want to learn about the ER (expense ratios). Like golf, lower is better.

You can split the Roth between those 3 buckets (Total US Market, International, and Bond), based on your risk. I'm mostly in US, some in International, and none in bonds. Up to you. Starting with something is good though. You can always change it. Also, remember, this is there to grow until you're old. Doesn't matter if it tanks next year (your emotions aside), it'll go back up at some point.

 

3. Same for the $28k traditional IRA.

4. Your 4k/month. I assume this is a taxable account? If not, feel free to correct this assumption. If you own any individual stocks, consider selling them. (consider capital gains or loss here). A range of mutual funds is probably fine to start with. I prefer something simple (total market, etc), and a looowwww ER.

5. HSA. Not all HSA providers allow for investing. Some do. If you have funds available to invest, I'd use the same strategy as #1.

6. Consider putting less into your taxable account, and pay off that car. Even if you have a great low rate, you could be paying less interest (read: none) if you paid it off. You're likely to feel better too.

7. Make a net worth spreadsheet. Include all assets, and debts. You should know what you're worth.

8. Insurance review. You'll need #6 to have this conversation with someone.

 

That's a start. Feel free to ask other questions here!

[nachos31]

Lots of good suggestions here so I will offer two broad ones:

1) There is more than one way to skin this cat, or as WCI/Bogleheads like to say, "there are many roads to Dublin." There is no one perfect strategy. Find one that's solid and good enough and you'll do great. This may take time for you to come to accept as it did for many, myself included.

2) No need to rush right now. Especially if you want to DIY. Spend a few weeks (maybe even a month or two) learning, digesting, processing, and formulating a plan that you can then execute. It'd probably be worse for you to make a change now, then change your mind next week and change again, and keep repeating that, mostly because you have an individual investment (taxable) account and can incur taxes and trading costs there. That being said, deploying your Roth accounts early and making changes is not a big deal in terms of no tax consequences--just don't get in the habit of churning.

WCI's "get started" or "back to basics" series and the Bogleheads wiki are good places to start: https://www.bogleheads.org/wiki/Getting_started

Their respective forums also boast a wealth of knowledge in existing posts and kind folks willing to lend a hand.

Good luck!

[Vizeor]

Wow!  Thank you SO MUCH to everyone for taking the time to reply.  I am going to slowly go through each and every suggestion given and try to digest it all.

 

I really appreciate all your guys' advice, it really means a lot to me and I am somewhat relieved that I haven't completely doomed my family.

 

One question though:  What do you all feel about straight up paying off my car loan?  The rate I have is 1.49% over 48 months.  I can comfortably afford to pay off the entire thing and still have >12 months of emergency funding available.  I was saving money to potentially buy another property (for investment purposes) but it is unclear when exactly that will happen.