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Can we go 4-5 years with no retirement saving to accelerate student loan payoff?

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  • Dru
    replied
    OP here - NOT A BUMP,  just a chance to say thank you to all who gave input. We are thinking about this in a whole new light. This has created the most fruitful discussion Mrs Dru and I have had around finances in a long time. We're making no immediate changes to retirement contributions, but adjusting budgeting and expense tracking. I'll update in a couple years (net worth should be >$0 by then!)

    Dr Dru

    Leave a comment:


  • Live Free MD
    replied
    My take:

    1. You're motivated and knowledgeable, so whatever you do, you will be financially successful.

    2. You like your job.  This is huge.  There's no need to go completely crazy and try to retire in 10 years, so give yourself some leeway.

    That being said, if you want to accelerate things, here is what I recommend:

    1. Reduce your expenses.  Yes, I know you said you were already at a spartan level of spending.  If you want it bad enough, you will find ways to reduce spending.

    2. Take advantage of other ways to increase your income (urgent care shifts, telemedicine, online chart review). Again, potentially difficult with a family and a full time primary job, but if you want it bad enough it might be worth it to you.

    3. Continue to contribute to 401k, 403b and backdoor Roths.  Use it or lose it!

    4. Target a gross savings rate of around 40% (I would say 50% but that probably isn't possible with 2 children and daycare in a HCOL area).  Assuming a 300K gross income, this would be a savings of around 120K per year.  Approximately 80K would go to taxes (very rough estimate), so that would leave around 100K for living expenses.  Of the 120K saved, 18k would go to your 401k, 18k to your wife's 403b, and 11k to 2 backdoor Roths.  That leaves 73k per year to loans, which would be loan payoff in around 5 years, an aggressive but potentially very satisfying goal.  How bad do you want it again?

    Best wishes on your financial journey!

     

    Leave a comment:


  • Hank
    replied
    Just a thought or two on the question of whether the lower earning spouse should work or not:

    I think it can be useful to have your spouse work if only to have more space for tax deferred investments.  Getting an extra $18K into qualified funds, getting a good match from the employer, picking the better of two healthcare plans or other fringe benefits all can be advantageous.  If the lower earning spouse can top out a 401(K) or other plan while working half time or quarter time, then that might not be a bad plan.

    Even a modest teacher's pension or government pension can be worth quite a bit because of inflation protection and access to free or highly subsidized healthcare while working or in retirement.  Guard or reserve military time can be good deal too if you work for the government or for a stereotypical big business.  Deployments can be a killer as a single parent or as a business owner who is expected to make payroll for employees and pay for rent and a practice acquisition loan.

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  • GXA
    replied
    If I were in your shoes, I would continue to max out the retirement accounts.  The debt was an investment in your future, it has already been assumed and is really a sunk cost.  Continue to pay it off as soon as you are able, but not at the expense of your tax deferred retirement accounts.

    I understand the psychological boost, but the debt should not be viewed as entirely negative.  Your debt was necessary to achieve your personal goals.

    Congratulations on your ability to think this stuff through and outline the issues at hand.  That is more than half the battle!

    Leave a comment:


  • wideopenspaces
    replied





    I also think that people are too quick to tell women to stop working and just stay at home 
    Click to expand…


    I think people’s recommendations regarding this are being interpreted the wrong way (it wasn’t a rec I made, though I did mention evaluating her job satisfaction and desire to work vs. the marginal income provided).

    He asked a financial question and provided extreme detail on the finances.  People provided responses based on the numbers.  The numbers indicate that it may not be a good financial decision for her to work in the short term if their goal is to cut costs dramatically and find alternate ways to get income.  That’s impacted by things such as her ability to go back to work, and separate from whether she wants to work, which obviously is a fairly big component to changing things.  Plenty of couples with one person making low income and high childcare costs choose to have one person stay at home and keep the kids at home.  Because of society that’s more often the guy, but that’s not universal.

    Had this been a woman posting and saying her husband was in the much lower paying job, on this forum I am quite sure people would have asked whether the husband would consider being a stay at home dad.

    Frankly we’re in almost the same situation as the OP with my wife’s income/work status/daycare costs, and my wife gave strong consideration to leaving  the work force for a few years.  However the difficulty in getting back to work (large supply of people and very few ideal job setups) when she was ready and losing the retirement savings and a few other things definitely impacted the decision to go from full time to part time instead of just quitting.

    While I can understand it is a sensitive issue because assigned gender roles often get mixed into the equation, I really don’t think that’s the tenor of the conversation here.

    I acknowledge that as a guy my opinion may not not have as much personal weight behind it since I’m really never on the bad end of gender discrimination, but it’s something our family has dealt with quite recently (my wife went part-time this week).
    Click to expand...


    My comment was meant to be a more general statement as I run into this advice on a pretty regular basis in my day to day life (both in real life and online). And while I get that it's not meant to be a gendered comment, the fact is that with the wage gap and with the social/cultural expectations, women make less and work less than their partners a majority of the time, thus are usually the ones being told their work/salary isn't worth it from a financial point of view. So that can be a discouraging message to hear over and over. And I know that on a financial forum in particular, that is going to be the main focus, so I see why it was suggested. I personally think that working is important for people for many reasons besides the money that is paid for the work so that should not be the sole reason to stop working. Which is basically what OP and his wife took into consideration when making this decision for themselves, which is great. There are usually many different ways to go about solving a financial problem and some of those ways will work for some people and not others. I like to hear what problems people are running in to and how they choose to solve those problems in the context of their lives. I also like it that so many people are willing to chime in with ideas, even the ones I'm not particularly fond of, or that I would not consider myself (like living with parents-yikes!)

    Leave a comment:


  • RogueDadMD
    replied


    It also allowed us a pretty awesome lifestyle of us both working part time as opposed to one doing all the financial lifting.
    Click to expand...


    Yes, I think that's a big reason to do it as well.

    The investment in future career is part of it for everyone -- that's what the student loans represent as well!

    Leave a comment:


  • Dr. Mom
    replied




    Dr. Mom — unless Mrs Dru’s work status changing as an option was asked and answered (maybe it was and I missed it), it’s still a math question to decide if it’s even worth considering. It sounds like she has reason to stay working that aren’t related to short term finances. I have female colleagues from my peds residency who finished training and almost immediately became stay at home moms. That’s fine — every situation is different.

    The marginal utility goes the the other way too. If she’s working 30 hours a week to contribute nothing to disposable income (though the retirement savings are significant), having one person at home instead can change the math dramatically by reducing costs beyond daycare and opening up ways for Dr Dru to make more money on an hourly basis elsewhere. That lifestyle may be more or less preferable depending on the viewpoint.

    As I said we JUST went through this and my wife stayed at work (and I encouraged her to stay at work). She also is a Masters level healthcare professional, and staying at home was almost the choice for lifestyle reasons. I think making this a gender debate is off base. Had she quit I could’ve made that money back doing an extra shift a week (maybe less), but the lifestyle as a whole would’ve been worse since I would be gone a lot more. I think that’s where the marginal utility comes in — balance.

    My original advice was just to snowball the debt and have Dr Dru work extra and throw all the cash at the loans since they really want to kill them off, as I didn’t think slashing retirement savings was a good idea. I’ll stick with that and bow out before I get censored again.
    Click to expand...


    Rogue-  Purposefully stayed away from lifestyle debate in my comments.  I didn't even recall that you were one of the posters who mentioned Mrs. Dru staying at home.  There were several.  It was the volume of the suggestion that caused my first response.  As to the marginal utility question which is where I am trying to stay to keep this financial, I see it as high marginal utility in their situation.   I am not extrapolating it beyond the example of this post.  I wanted to voice a different opinion on how I view the financial benefit to them of her working.  To me, the math favors her working given their negative net worth and the income level of a general pediatrician.

    For me, the years I was in residency cost us money if you assigned all daycare costs and home upkeep costs to me.  But, it was an investment in my future earnings.   It also allowed us a pretty awesome lifestyle of us both working part time as opposed to one doing all the financial lifting.  Different strokes for different folks.

    Leave a comment:


  • Zaphod
    replied
    I would strongly argue against putting off retirement money. Its just bad math and not in the long term view at all. I know its super approved here, but it really is poor long term. Time value of money, simple vs. compound interest, etc...I mean even the tax differential initially makes this a poor overall move. Let the powers of time, interest, tax deferral, inflation, etc....do the work.

    As far as working, mom likes it so that is a whole other issue along with her retirement, social security, etc....However, if you do the math you might see you are paying to work which is pretty terrible with the added stress it brings everywhere else in your life. Its definitely less at their income level than a higher paying specialty but still worth considering so they can see the value and maybe restructure their life to better maximize value according to whats important to them.

    Leave a comment:


  • Miss Bonnie MD
    replied
    I'm in a somewhat similar situation. Finished residency at age 38. I had just over $200k in debt. Making low end for Derm. By combined we make a good amount but he isn't paying my loans off.

    I maxed out retirement pretty much from the very beginning- I have 403b,457b, tiny pension plan that's employer funded and Roth IRA. I max out all those and still siphon a good amount towards loans. Perhaps forgo your 457b but I'd max the 403b and Roth IRA on both sides if possible and throw the rest at loans.

    Leave a comment:


  • RogueDadMD
    replied
    Dr. Mom -- unless Mrs Dru's work status changing as an option was asked and answered (maybe it was and I missed it), it's still a math question to decide if it's even worth considering. It sounds like she has reason to stay working that aren't related to short term finances. I have female colleagues from my peds residency who finished training and almost immediately became stay at home moms. That's fine -- every situation is different.

    The marginal utility goes the the other way too. If she's working 30 hours a week to contribute nothing to disposable income (though the retirement savings are significant), having one person at home instead can change the math dramatically by reducing costs beyond daycare and opening up ways for Dr Dru to make more money on an hourly basis elsewhere. That lifestyle may be more or less preferable depending on the viewpoint.

    As I said we JUST went through this and my wife stayed at work (and I encouraged her to stay at work). She also is a Masters level healthcare professional, and staying at home was almost the choice for lifestyle reasons. I think making this a gender debate is off base. Had she quit I could've made that money back doing an extra shift a week (maybe less), but the lifestyle as a whole would've been worse since I would be gone a lot more. I think that's where the marginal utility comes in -- balance.

    My original advice was just to snowball the debt and have Dr Dru work extra and throw all the cash at the loans since they really want to kill them off, as I didn't think slashing retirement savings was a good idea. I'll stick with that and bow out before I get censored again.

    Leave a comment:


  • Hatton
    replied
    Mrs. dru is a masters level health professional who loves her job. If she was burned out and felt that she was missing out on her children's milestones then it would be reasonable to have her stay at home. I think it would be unfair to pressure her to quit. This couple will be fine.  I think they should continue to fund retirement and pay down loans as they are doing.

    Leave a comment:


  • Dr. Mom
    replied
    As I see it, financially the marginal utility of Mrs. Dru's income is very high, perhaps the highest it will ever be for them.  Dru makes a pediatrician's salary, not a orthopedic surgeon's. Right now she is contributing about 20% of their combined income. Her opportunities for income growth are likely higher than his as a pediatrician.  Let's remember she is not even full time.  Also, with a very negative net worth, her income is far more valuable than if their net worth were 5M. Marginal utility of income and wealth requires both income and wealth.  It can change over time.

    Leave a comment:


  • RogueDadMD
    replied


    Because of society that’s more often the guy, but that’s not universal.
    Click to expand...


    That's clearly a poorly written sentence -- more often the guy that works is what I'm trying to say

    Leave a comment:


  • RogueDadMD
    replied


    I also think that people are too quick to tell women to stop working and just stay at home
    Click to expand...


    I think people's recommendations regarding this are being interpreted the wrong way (it wasn't a rec I made, though I did mention evaluating her job satisfaction and desire to work vs. the marginal income provided).

    He asked a financial question and provided extreme detail on the finances.  People provided responses based on the numbers.  The numbers indicate that it may not be a good financial decision for her to work in the short term if their goal is to cut costs dramatically and find alternate ways to get income.  That's impacted by things such as her ability to go back to work, and separate from whether she wants to work, which obviously is a fairly big component to changing things.  Plenty of couples with one person making low income and high childcare costs choose to have one person stay at home and keep the kids at home.  Because of society that's more often the guy, but that's not universal.

    Had this been a woman posting and saying her husband was in the much lower paying job, on this forum I am quite sure people would have asked whether the husband would consider being a stay at home dad.

    Frankly we're in almost the same situation as the OP with my wife's income/work status/daycare costs, and my wife gave strong consideration to leaving  the work force for a few years.  However the difficulty in getting back to work (large supply of people and very few ideal job setups) when she was ready and losing the retirement savings and a few other things definitely impacted the decision to go from full time to part time instead of just quitting.

    While I can understand it is a sensitive issue because assigned gender roles often get mixed into the equation, I really don't think that's the tenor of the conversation here.

    I acknowledge that as a guy my opinion may not not have as much personal weight behind it since I'm really never on the bad end of gender discrimination, but it's something our family has dealt with quite recently (my wife went part-time this week).

    Leave a comment:


  • wideopenspaces
    replied
    I agree with other posters that you're in pretty good shape financially-or at least you're on a path that will get you there. I personally like the idea of saving for retirement and loan repayment at the same time. Maybe 10% of salary to retirement, the rest to loans? In 3 years, you're going to get a major raise with the kids in school and you can throw that extra money into retirement or loan repayment or both. I also think that people are too quick to tell women to stop working and just stay at home. That's great if that's what the woman wants, but being at home is not for everyone, and working isn't just about money.

    Leave a comment:

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