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Old 05-20-2010, 09:22 AM   #21
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BTW I am really glad I posted here this is some great and comforting advice!
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Old 05-20-2010, 09:23 AM   #22
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Do have an emergency fund, but it was based on 3 month salary during our residency, so I had planned to build that up to equal 3 months of our new salary?
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Old 05-20-2010, 09:50 AM   #23
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Just a few quick notes:

1. Figure out a way to minimize taxes. Could involve paying a CPA by the hour to come up with some ideas. Some have had success setting up corporations and generous defined benefit pension plans to "hide" income (or more accurately, defer taxes on that income). At the least, make sure any taxable investments are tax efficient. Vanguard has a line of "Tax efficient" mutual funds for some asset classes, and some asset classes are tax efficient naturally.

In the end though, don't let the "tax tail" wag the investment dog. I know I have read in some investment books that low fee variable annuities may be an appropriate investment choice for high income, high tax bracket individuals. These may be appropriate in your case, but I have not looked into them personally.

2. Refinance your house? Mortgage rates are much lower than the 6-8 percent rate you are paying now. I recently refinanced into a 5/5 Adjustable rate at Pen Fed Credit Union (a perennial favorite here) at 3.75% fixed for 5 years, then up to 5.75% fixed for the next five years. And a HELOC at 4.25% fixed for 5 years, then up to 6.25% fixed for the next five. These deals are still available in roughly the same interest rates. Sounds like you could easily pay off a mortgage in 5-10 years based on the principal balance and your income.

3. If your student loans are federal loans, like Stafford, then they have a built in "life insurance" component to them. You die, the balance is forgiven. My wife and I have six figures of student loan debt, and we are paying less than the 2% you are paying. Locked at 30 years, with tax deductible interest and a "life insurance" component. You would definitely be crazy to repay these things early!

4. LBYM. Don't waste a bunch of money. Enjoy life. You could probably retire comfortably in 10-12 years if you really wanted to.

5. Make sure you are well insured. Home and auto liability policies and an umbrella policy.
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Old 05-20-2010, 10:17 AM   #24
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Why would two young married physicians even need life insurance? In the unfortunate event that either passed away, each on their own would still have a great income to support themselves on.
If one of them dies, the expected $500-600k income becomes $200-300k. If they plan on working 20-30 years, that's a heck of a lot of lost income. Term life insurance is so dirt cheap for someone in good health at 30-35 years old that it would be stupid to not have it. Even a 30-year term policy for $2 million of coverage would only be $1,000-1,500/year, which is nothing when you're making that kind of income.

On that note, I would tell you that the absolute most important insurance you can have at this point is DISABILITY, DISABILITY, DISABILITY! You just spend $200-300k on student loans for each of you to get through med school. Your greatest asset is your income earning potential. Don't take the risk of losing it to disability. As someone mentioned earlier, a good disability policy with true own-occupation definition is what you need. Guardian is an A++ rated mutual company and has one of the best disability policies around. They have a special program for young doctors too and can help guarantee future increase in coverage (as your income increases) with no evidence of insurability.
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Old 05-20-2010, 11:31 AM   #25
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Originally Posted by coalcracker View Post
Do have an emergency fund, but it was based on 3 month salary during our residency, so I had planned to build that up to equal 3 months of our new salary?
I would recommend at least 6 months of your expenses, not your salary. As I posted earlier it takes time to get credentialled for a new position, especially if you have to move to a new state.

DD
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Old 05-20-2010, 02:10 PM   #26
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Bottom line, this stuff makes my head hurt. Ideally I would love to entrust my finances to a competent planner, but I feel as though the planners I have spoken to always have ulterior motives of some kind (i.e. trying to sell me something). I know how much training it takes to be an expert in a given field, and I am worried I don't have the time or knowhow to fully manage my own investments.
I've been reading about investing for about five years, but it really doesn't need to be complicated to do well at it. You could probably do better than most financial planners with just one weekend of reading. I'd suggest you pick up a copy of the "Boglehead's Guide to Investing" and give it a read before talking to a financial planner.

If you wanted you could also just go buy the appropriate Target Retirement fund from Vanguard. You will most likely do better than most financial planners just by doing this.

It really can be that simple.
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Old 05-20-2010, 02:26 PM   #27
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........................If you wanted you could also just go buy the appropriate Target Retirement fund from Vanguard. You will most likely do better than most financial planners just by doing this.

It really can be that simple.

I agree in a 401(k) or IRA. But with a taxable account it is worthwhile to limit bonds to tax favored accounts and use index funds in the taxable account. One could simply use the target fund as a template and buy bonds and equities proportionately in the taxable and tax sheltered accounts.
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Old 05-20-2010, 03:14 PM   #28
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Investing is simple, but after reading one of the referenced books, you may realize that fine tuning investment decisions takes time.

Strangely though, even a weekend of reading the basic investment principles (and then sticking to your plan) will leave you in better shape than using most financial advisers, especially the ones who come up to you with "special" offers. This is because, unlike many other professions, there is no fiduciary relationship between "financial advisers" (financial product salesmen) and their "clients". Trust between professionals is expected, it does not need to be earned, but with financial advisers, it is quite the opposite, because they are truly salesmen (usually).
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Old 05-26-2010, 10:00 PM   #29
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i'm also a healthcare geek..
my significant other and i earn a similar income as the OP...
we finished training @ age 30 also (i'll be 35 this year)
we thought 10 years of working hard...holding off on the ferrari....would bring us to our goals
(i do 60+ hrs/wk...~48 wks a year)

roughly, we "save" 50% (after expenses) for uncle sam...and invest the other half in income producing real estate....
..i think we could technically do the ER thing now. (the cashflow would pay bills)

real estate isnt for everyone..but for us it was/is the most predictable.
btw, search for anything by "william nickerson" on amazon. ..his books =gold.
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Old 05-27-2010, 08:58 AM   #30
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Well the unfortunate reality for doctors coming out of training today involves lots of debt and ever-declining reimbursements. For us, medical school loans total about $300k. My wife decided to do what she loves (pediatrics), and makes less than many high paid nurses. If I were to bite the dust, that would leave her with loan debt not to mention paying our mortgage, bills etc, which would leave her with less to live on than she had during residency.
In that case, perhaps each of you, or at you alone should buy a 10 year guaranteed renewable level premium term policy.

You did not consolidate your loans together did you? I believe that if you are the sole signer on a governemnt student loan it dies with you. Things like community property status etc. may complicate this, but the whole picture should be easy to fill out.

Ha
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Old 05-27-2010, 10:06 PM   #31
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Terrific advice already. DH and I were in same situation 20 years ago. You both do need term life insurance and at least the higher paid person needs own ocupation disability. I would suggest not delaying these issues. You will hopefully not need these policies but I have had friends and colleagues develop medical problems which affected their insurability. Your peace of mind is worth the money spent!
You are in a good situation despite the debt because you have found this forum so early in your careers--wish I had found it sooner!!
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