How much and how to save?

[wolfwife]

OK.

My husband and I are both physicians.  It took us a long time to climb out of the 400K or so debt we owed for medical school plus multiple years working in labs earning almost nothing in our early 20s.....long story short we are now both 40. We only have access to straightforward 401K/W2s.  We max this out (40K or so in 2019).  Our only debt now is our mortgage -- 30 yr at 3.50% for a house worth 675K (we owe 450K on it there is no penalty for overpayment). We have about 300K total in Roth and 401Ks.  We have 50K in a taxable fund.  We own our cars.

Kids are in public elementary school.  We have 529s for each child at around 100K total.

I don't really want to "retire" as in not work, but we would like to have the option of doing missionary work abroad once our kids are out of the house, and we would like to not worry about how they will pay for college etc with minimal income coming in.

Take home after taxes is about 250K.  Hopefully as long as we are healthy we plan on working FT for about 15 more years.

Do we just start throwing money into the taxable account?  Or pay down the house?  Or buy property?

I have EU citizenship through my dad so we are also considering retirement in Europe where COL and QOL are higher than US.  I estimate our retirement needs will be around 60-80K, yr to live really well.  How much do we need to get to to achieve that goal?

Thanks

[ysette9]

Read through this and then see what questions you still have. This should address a lot of what you bring up.


https://forum.mrmoneymustache.com/investor-alley/investment-order/

[waltworks]

At 80k/year spend, you'll want to have around $2 million to retire. So you're a ways out. But at 250k/year post-tax, you could probably get there fast if you wanted to badly enough. What's your current annual spend? How much do you anticipate spending on college for the kids?

In terms of where to put the money, read the investment order sticky.

-W

[Dr Kidstache]

Proper insurance is as important as investing/saving for physicians (I'm a former physician). Do you both have individual disability insurance policies? If not, that should be an absolute priority. Also making sure that you have umbrella insurance (very inexpensive).

[wolfwife]

Yes we both have own occupation disability, term life at 2M each, and umbrella.

[Dr Kidstache]

Excellent! You guys are ahead of a lot of your peers already.

[tamuaggie2011]

I have EU citizenship through my dad so we are also considering retirement in Europe where COL and QOL are higher than US.  I estimate our retirement needs will be around 60-80K, yr to live really well.  How much do we need to get to to achieve that goal?

I would work on tracking expenses to settle on a more concrete number as you get closer to retirement but to give you a ballpark answer: for 60k a year at a 4% withdrawal rate you would need $1.5MM and for 80k a year you would need $2MM.

You have $100k each for the kid's college in a 529 plan. That should be more than enough to cover college expenses by the time your kids reach college age (assuming another 10 years at roughly 8% growth a year you should have over $215k by the time all is said and done for each child.

As to your personal retirement/Financial Independence goals:

1. General Advice is to avoid paying off the house faster as your return (assuming you invest the difference) will be significantly better than 3.5% interest you are paying on the loan. This should be weighed of course against how much you and your spouse hate having debt and the "need" to continue saving vs. just having more assets in the bank. Everyone's situation is different but from your first paragraph it sounds as though there is a very strong dislike towards debt from you.

2. You have 300k in ROTHs and 401k and 50k in taxable so 350k total.  Taking your numbers and doing simple "back of the napkin math" If you take home 250k post tax (I'm assuming this doesn't count your 401k and ROTH savings either) minus your 80k spend gives you 170k to save each year so in 10 years that's $1.7MM to add to your 350k giving you $2.05MM (With no growth of course)

3. This is of course way oversimplified but I just wanted to illustrate that you and DH are in great shape and simply continuing to plug along you will reach your FI numbers well before you thought. (Approximately 8 years from now based on current numbers given) and if you continue to work then great that money can be saved as "cushion". As for how to invest it, I would definitely recommend just selecting Index funds based on your preferences and then building a massive stache with that.

[Freedomin5]

Read through this and then see what questions you still have. This should address a lot of what you bring up.


https://forum.mrmoneymustache.com/investor-alley/investment-order/

^This.

Also, realize that you do not have to fully fund your retirement nest egg if you plan to do missionary work for a number of years before retiring. For example, if you want $2M at age 65, and you’re 40 right now, you only need to have $370k saved right now. After 25 years, that $370k will have grown to $2M (assuming 7% interest). So when you move abroad for missions, you only need enough to cover your living expenses. And there are many creative ways to cover living expenses in the mission field. You could work one day per week at a clinic, and spend the other four days on mission work. You could purchase a rental property now and use the cash flow now to pay off the mortgage, which means by the time you move abroad the property will be paid off and you can use the cash flow to cover living expenses. There are likely other ways to fund as well — those were just the ones that I could think of off the top of my head.

[Calvawt]

Your take home seems low for two physicians with that much experience.  Do you get offered retention bonuses or an y other incentives for productivity or extra shifts?  those can be very lucrative.

Physicians have so much work flexibility its crazy.  You can dial back to 2-3 days a week and still be saving a lot.  As long as you keep an active license you can work for locum firms, part-time with multiple places, etc.  When you do contract or locum work you can name your time frames and be able to take 2-3 months off at a time to do mission work, and you could still make $300k combined working 6 months of the year!

I think you will see real growth over the next few years with spending $80k and bringing home $250k (plus 401k contributions).  You can stop funding the 529 plans and put more to after tax investments.  I would not pay off the house at an accelerated pace and just build up an after tax account.  Your portfolio can grow from $50k to $250k in two years and then really start growing quickly.

Congrats on your success and keep focused on enjoying life and saving for your goals.  Giving back is also a great goal, I applaud you for trying to find a way to make it happen.