Author Topic: First World Problems  (Read 5710 times)

skscott7

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First World Problems
« on: March 04, 2014, 12:45:43 PM »
My wife will finish her ER medical residency shortly and start earning big doctor money, and I am already making good money at my job.  We're incredibly frugal and we like the idea of early retirement, but my wife sincerely loves practicing medicine and has said she would never want to retire altogether.  She will always work at least a shift a week and therefore earn more than enough to pay our expenses just from that.  We do have some debt but it will be paid off shortly after she finishes residency.

How would you approach retirement if you were married to such a woman?  Would you work to build a huge 'stache or would you just buy insurance to cover any lapse in income?  Would you retire before the 'stache was earned or wait until afterward?  Would you favor taxable accounts that would generate dividends you didn't need (and increase your tax bill) or would you opt for qualified retirement accounts (like IRA's or 401(k)'s)?  We are in our late 20's, so we wouldn't be able to access retirement money for 30 years, but on the other hand it would maximize our overall wealth by minimizing our taxes to utilize those types of accounts.  WWMMMD?

jfer_rose

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Re: First World Problems
« Reply #1 on: March 04, 2014, 12:55:59 PM »
Would you favor taxable accounts that would generate dividends you didn't need (and increase your tax bill) or would you opt for qualified retirement accounts (like IRA's or 401(k)'s)? 

If your combined income is as high as you are suggesting, you will probably be able to do both. I don't have a six figure income, but I am able to max out my workplace requirement account (limit 17,500 per year) and my IRA (limit 5,500 per year) and still have enough left after that to save about $800 per month in taxable accounts.

This is my first year maxing out my workplace retirement account and I was pleasantly surprised at how little my paycheck shrunk in comparison to the growth in amount saved per month (yay, not paying taxes on that income!).

skscott7

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Re: First World Problems
« Reply #2 on: March 04, 2014, 01:07:06 PM »
That's great, congratulations on doing that.  She is going to be self-employed, which means that she can withhold up to $52,000 in an IRA and another $50k or so in a retirement plan, all pretax.  Should we max those out or save post-tax money?

mgreczyn

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Re: First World Problems
« Reply #3 on: March 04, 2014, 01:09:55 PM »
Doctors need airplanes. You know, to fly them to their non-profit 3rd world medical projects and stuff.  Airplanes need pilots.  It's a match made in retired husband heaven.

JohnGalt

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Re: First World Problems
« Reply #4 on: March 04, 2014, 01:17:33 PM »
That's great, congratulations on doing that.  She is going to be self-employed, which means that she can withhold up to $52,000 in an IRA and another $50k or so in a retirement plan, all pretax.  Should we max those out or save post-tax money?

You should probably figure out the "how do I approach retirement" question before trying to answer the retirement account question...

Since you asked what I would do in that situation, I'll give you that answer.  I would max out any tax advantage options available first then save in post tax accounts until I hit enough that Savings * .04 = my annual living expenses.  After that, she cuts back to whatever amount of work pleases her and you get involved with whatever pleases you (in my case it would probably involve earning money of some sort).  Live off the income, let the savings grow until you guys get tired of working.  If you already have the savings to cover your expenses, you can stop earning whenever you feel like it and it doesn't sound like it would take long to get to that point for you. 

MDM

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Re: First World Problems
« Reply #5 on: March 04, 2014, 01:19:03 PM »
That's great, congratulations on doing that.  She is going to be self-employed, which means that she can withhold up to $52,000 in an IRA and another $50k or so in a retirement plan, all pretax.  Should we max those out or save post-tax money?
If you can do invest it pretax, that is the way to go.  Let it accumulate while living on what's left (and investing some of that as well if possible).  Set a reminder to check your pretax account 10 years from now, then reevaluate.

AlanStache

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Re: First World Problems
« Reply #6 on: March 04, 2014, 01:39:49 PM »
pay off debt, max out tax deferred, put remainder into taxed accounts.  continue living frugally.  wake up in five years and see what you two feel like doing now that you dont have to work. 

Only caviot would be if you wanted to buy a house then maybe keeping a bit more in the taxable accounts to be available for a down payment.  But do the math on this for yourself.

Do you want to be a stay at home dad, kids might heavily factor into all this.

Planes can cost 20-30k per year to own.  Piloting is really not that much fun or worth the effort/cost IMHO, much better hobbies on the ground.

skscott7

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Re: First World Problems
« Reply #7 on: March 04, 2014, 01:45:52 PM »
That's great, congratulations on doing that.  She is going to be self-employed, which means that she can withhold up to $52,000 in an IRA and another $50k or so in a retirement plan, all pretax.  Should we max those out or save post-tax money?

You should probably figure out the "how do I approach retirement" question before trying to answer the retirement account question...


Thanks.  Is there a thread about this?  Can you point me toward it?

mgreczyn

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Re: First World Problems
« Reply #8 on: March 04, 2014, 01:51:53 PM »
Yeah, the pilot response was semi tongue-in-cheek.  If the 'stache was big enough and my wife wanted to keep working, I'd probably do it. ESPECIALLY if you could work out a deal where it was used for business purposes and owned / depreciated through the business.

AlanStache

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Re: First World Problems
« Reply #9 on: March 04, 2014, 02:09:11 PM »
Quote
tongue-in-cheek

figured :-) but I cant resist taking digs at private piloting - work with them and getting into it was probably my least MMM move.

foobar

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Re: First World Problems
« Reply #10 on: March 04, 2014, 02:28:42 PM »
Max out tax deferred, pay off debt. You don't ever get to back in time and defer money. You can always pay down debt.

and you can always figure out some way to suck money out of a 401(k), ira early if you need it. Heck even paying the 10% penalty will probably be a win as the money is probably going in at a 28%+ rate.

Frankly I would make any plans for someone that hasn't spend time working in the field. After 10 years of ER work, she might be ready to live on the beach.   Doing all that CME and board certification work might not sound so appealing after a while.:)

pay off debt, max out tax deferred, put remainder into taxed accounts.  continue living frugally.  wake up in five years and see what you two feel like doing now that you dont have to work. 

Only caviot would be if you wanted to buy a house then maybe keeping a bit more in the taxable accounts to be available for a down payment.  But do the math on this for yourself.

Do you want to be a stay at home dad, kids might heavily factor into all this.

Planes can cost 20-30k per year to own.  Piloting is really not that much fun or worth the effort/cost IMHO, much better hobbies on the ground.

MrsPete

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Re: First World Problems
« Reply #11 on: March 04, 2014, 04:18:31 PM »
Key point:  She's just about to finish her education and begin her career.  She's still young and idealistic.  Of course she's excited about her work!  Of course she can't wait to begin doing all the things for which she's prepared for years, and of course she can't imagine wanting to stop.  And I do hope she'll love it, but as time goes by, she will discover the negatives of her job -- not that she won't still like it overall, but she will discover that no job is fun all the time.

If you've stashed away money, you're set for the day that her job is no longer worth it -- for the day that the bad moments begin to outweigh the good ones.  I like my job too, but free time is more fun. 

Also, if you stash away money now, you're set in case one or both of you NEED to quit.  Things happen:  Sickness, accidents.  A smart person will earn money (and save and invest) while he or she is young and has the opportunity.  Not all of us have that opportunity forever. 

Finally, stash away money now so that if she wants to stay home with children in the future, it'll be a choice. 

JohnGalt

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Re: First World Problems
« Reply #12 on: March 05, 2014, 08:10:56 AM »
That's great, congratulations on doing that.  She is going to be self-employed, which means that she can withhold up to $52,000 in an IRA and another $50k or so in a retirement plan, all pretax.  Should we max those out or save post-tax money?

You should probably figure out the "how do I approach retirement" question before trying to answer the retirement account question...


Thanks.  Is there a thread about this?  Can you point me toward it?

This thread seems like a good place to explore that.  There really isn't an answer to go look up, it's all about figuring out what will make you happiest given your specific situation. 

As others have pointed out, she's young and just getting started.  She may love the job now but who knows how she'll feel 5, 10, 20 years down the line.  If you guys save now, you'll be prepared  if that happens, no matter when it is.  So, my advice is to do the saving now - while she enjoys the job that pays the big bucks - to ensure that you have the most possible options down the road, particularly since it sounds like you're already not spending much and are happy that way.  It seems like it will just naturally happen for you. 

skscott7

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Re: First World Problems
« Reply #13 on: March 05, 2014, 08:17:08 AM »
Thanks MrsPete, that's a great insight.  I'll show this thread to her and see what she says.

HappyHoya

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Re: First World Problems
« Reply #14 on: March 05, 2014, 08:20:12 AM »
Key point:  She's just about to finish her education and begin her career.  She's still young and idealistic.  Of course she's excited about her work!  Of course she can't wait to begin doing all the things for which she's prepared for years, and of course she can't imagine wanting to stop.  And I do hope she'll love it, but as time goes by, she will discover the negatives of her job -- not that she won't still like it overall, but she will discover that no job is fun all the time. 

I'll second this. My husband (who is the high earner in our family) enjoys his career path overall, but there was definitely a "honeymoon phase" with his current high-paying job. Jobs that compensate people well typically expect a lot in return, in my experience, and we're looking forward to the day it becomes a choice to go to work (and it's not as clear to us now what choice he'd make).

golfer44

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Re: First World Problems
« Reply #15 on: March 05, 2014, 08:30:35 AM »
It's funny how we imagine our future selves being so similar to our present ones in some ways, and entirely different in others.

That being said, it's a coin toss if she'll really want to work until she dies, but why not prepare for her wanting to retire early?

If I missed the alternative to not saving in your accounts, what is it? Spend it all?