Author Topic: NEWB with questions  (Read 1932 times)

undrtow

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NEWB with questions
« on: February 26, 2016, 08:07:16 PM »
If this is not the right section, mods feel free to move it.

For the past few months I've been doing lots of reading both here and at jlcollinsnh and I've learned a ton. I've tried to go about things the best I could, but am just looking for any advice I can get from you guys. I'm sure this kind of stuff gets posted a ton, but again, any help would be awesome.

I'm 31 and currently an RN making about 48k a yr. I should be graduating with my nurse practitioner degree soon and hope to find a job making at least 80k. My wife is also an RN but stays home with the 2 kids. She may work a little after my graduation, but we can ignore that. We have a small home that we owe about 100k on. We would love to be FI by our 50's, but we haven't made any hard goals (I know we should). Our accounts are currently:
    Savings of about 20k
    401k of about 34.5k
    IRA of about 13k

    Student loans- 35k at about 6.5%

My company matches 4.5% of 401k contributions and I have been putting in 10%. I have split that into 5% typical pre-tax contributions and 5% ROTH contributions into the same account. I recently changed it to all be pre-tax contributions, not sure if that was appropriate. The IRA is just something I put a lump sum of 1k into a few years ago, not really knowing what I was doing.

My 401k funds:
     Vanguard VIIIX- Institutional Index Fund Institutional Plus Shares (essentially the SP 500)- 30k (exp ratio 0.02%, 86% of portfolio)
    Small company value fund PRSVX- 2,800  (exp ratio 0.96%, 8% of porfolio)
    Bond fund PTTRX-  1,800 (exp ratio 0.46%, 6% of portfolio)

We also max out our HSA each year.

The other funds available are awful, so I won't bother listing them. Anyway, I have seen MDM's investment rules of thumb and feel that it is a great place to start. Accordingly, my plan is to graduate/find a job, drop 401k contributions just to get company match (this may obviously change if I end up changing employers), then pay off student loans as quick as possible while still maxing out the HSA each year. Does that sound about right? Is the exp ratio of the small company value fund high enough that you would just roll that into the Vanguard fund even though I wouldn't have any small/mid cap exposure? My options may change based on what happens in the near future, but I was just wanting to see if I'm on the right track. Any input would be greatly appreciated!

Financial.Velociraptor

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Re: NEWB with questions
« Reply #1 on: February 26, 2016, 08:15:32 PM »
With your current glidepath and 80k salary in near future, I think you can retire well before 50 (you didn't mention your current age though?)  You seem to be firing on all cylinders.  Gogogogogogogo!

MustacheAndaHalf

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Re: NEWB with questions
« Reply #2 on: February 27, 2016, 09:31:00 PM »
You might check out the "White Coat Investor" book or website, if you're okay with doctors spilling over from your work to investment life.

Treat your student loans as your "risk free rate".  It's very hard to beat a risk free rate of 6.5%, so I'd suggest:
1. Invest up to the company match.  No investment or debt payment beats +50% or +100% free money.
2. Pay off student loan debt of 6.5%.  Note that bonds earn near 2%, so you should pay your student loan off before going near bonds.
3. Investing in stocks means you're willing to gain and lose 20% a year, and hope it averages out better than 6.5%.

GrowingTheGreen

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Re: NEWB with questions
« Reply #3 on: February 28, 2016, 08:22:18 AM »
You might check out the "White Coat Investor" book or website, if you're okay with doctors spilling over from your work to investment life.

Treat your student loans as your "risk free rate".  It's very hard to beat a risk free rate of 6.5%, so I'd suggest:
1. Invest up to the company match.  No investment or debt payment beats +50% or +100% free money.
2. Pay off student loan debt of 6.5%.  Note that bonds earn near 2%, so you should pay your student loan off before going near bonds.
3. Investing in stocks means you're willing to gain and lose 20% a year, and hope it averages out better than 6.5%.

I like the order of operations that MustacheAndaHalf has.

undrtow

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Re: NEWB with questions
« Reply #4 on: February 29, 2016, 08:48:48 PM »
Ok, sounds good. I'm thinking I'll just max out my 401k contributions currently to take advantage of the market and then drop it to the company match after loan repayments start. Then I'll get my loans paid off as quick as possible. When I start the new job, I'll probably follows the rules of thumb a little closer as outlined by MDM. And I'll have to check out that book recommended by growingthegreen. I have no problem with doctors, unless they're pecker heads with huge egos, although you see those people all over in the hospital setting, doctor or otherwise. I realize my master's doesn't really compare to their M.D./D.O. + residency/fellowship. I appreciate the input!

Woody Viet

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Re: NEWB with questions
« Reply #5 on: March 01, 2016, 07:23:10 AM »
I also think Mustacheandahalf's ordering is spot on. Do you mind sharing your annual expenses right now (minus your mortgage and other interest payments)? I think you guys could probably retire in your 40s with a decent savings rate. Also what do you think your net pay will be after the raise?

Also what's the interest rate on your mortgage? Approximate equity in your home? Lots of questions I know but the more in information you give us the more we can give back!

Definitely shift all of that bond allocation in your 401k to stocks. As others have said it's about to be offsetting debt charged at 6.5%, not a pleasant situation.

I think you're fine shifting out of the active fund. As someone who invests very heavily in this sector (directly through stocks), I can tell you a lot of the investment products are very poorly designed. The devil is in the details.