F U account

[deleted171991]

OK, so let's suppose a stock appreciates 4% yearly and makes another 4% as dividends.

Let's calculate the profit from the stock growth in the 3 scenarios. For simplicity, I will not recalculate
1. Taxable IRA: We start with $100 invested, which produces $906 profits, which is taxed at 20% once = $724 net profits.

2. Taxable non-retirement account: The $100 account will grow to only $851 (the dividends are already taxed, yearly), and we will have to pay another 15% tax on the $453 capital gains from the stock growth. $683 in net profits.

3. Roth IRA: We start with $100-current income tax=$72. That will grow to $724, including dividends. Net profits $624.

Taxable IRA wins again.

P.S. There might be mistakes in my calculations. Please take them with a big grain of salt.

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[thinkorswim]

In a dividend reinvestment model, you would lose 15% of the dividends yearly, instead of just losing 15-25% or whatever your tax rate will be in retirement once.

Suppose I have a $100 stock which pays $4 dividends yearly, and I reinvest the dividends once a year:

1. In a taxable retirement account, in 30 years, it will make $224 in profits, which will be taxed let's say at 20%, and the net profit will be $179.

2. In a taxable account, you will lose 15% of the dividends as tax every year (that's money that would grow for another 1-29 years), ending up with a total of $172 in net profit.

Now if you multiply these numbers by 1,000, the difference is $7,000. If you now work in a state with income tax and, at retirement, you move to one with no income tax, the difference would be catastrophic. If you add an extra loss of just 5% yearly, as state income tax, to the second situation (taxable account), you would end up with a profit of only $157 after 30 years. In the first situation, you would avoid paying a state income tax, just by moving to a "retirement state", so the profits would be unchanged.

3. In the case of a Roth, you start with $100 from your paycheck and pay 28% federal tax now, making it really a $72 investment. After 30 years at 4%, you end up with only $233, including your initial investment, i.e. $133 in net profits. Ouch, and we haven't even counted the state tax!

The greatest friend of the investor is (compounding over) time. The greatest enemy are taxes.

You more or less just said the same thing I did. Dividend stocks belong in taxable and tax-deferred accounts. Roth accounts should be used for growth and greater risk since the higher yields will be tax free.

I actively manage my Roth account and consistently yield 20-25% annual return without taking on too much risk. I only peek at my tax deferred account once a month and rebalance every 6 months, and this account generally performs in line with the broader market.

 

[thinkorswim]

It has been shown time and time again that dividend paying stocks grow more long term than non dividend paying stocks. It has also been shown that companies that reinvest profits instead of paying dividends return less value to their shareholders than if they had paid out the dividends in the first place. Since dividends are taxed as capital gains, you end up with better long term stocks to own.

Stating the calculated loss from taxes on 4% dividend annually ignores the growth in the price of the stock being even beyond what a non dividend stock would return.

You're forgetting that companies that do not pay dividends are generally in their growth phase where reinvestment of profits will lead to further growth. Dividend stocks are generally limited with their potential future growth and are typically cyclical in nature. This is like comparing apples and oranges. I would never hold a growth stock for >10 years but I may be inclined to keep a dividend stock that long, although even then probably not.

 

[Mman]

You're forgetting that companies that do not pay dividends are generally in their growth phase where reinvestment of profits will lead to further growth. Dividend stocks are generally limited with their potential future growth and are typically cyclical in nature. This is like comparing apples and oranges. I would never hold a growth stock for >10 years but I may be inclined to keep a dividend stock that long, although even then probably not.

The "growth" of stock price of dividend paying stocks generally outperforms the "growth" in stock price of "growth stocks". People call a stock a growth stock because they expect massive increases in growth of the company, but the price of the stock generally already has those gains priced in so the stock price rarely keeps skyrocketing. Exceptions occur, but as a broad rule companies that don't pay out dividends return less value to stockholders than companies that do, whether you look at 2 years or 10 years or whatever. People always are on the lookout for the next big thing, but the majority of those don't pan out and drag down the overall return.



Companies that retain earnings for themselves do a better job of enriching their CEO than they do their stockholders.

 

[deleted171991]

Again, the best friend of the long-term investor is (yearly) compounding. The greatest enemy of the investor are (yearly) taxes. That yearly 15% really adds up over 30 years to more than what you'd pay once at retirement.

Roth is the worst, unless you are in a low tax bracket when contributing to it. This is why they say that the first rule of investing is "don't lose money". It's much more difficult to recover what you lost initially to high taxes.

 

[Mman]

Again, the best friend of the long-term investor is (yearly) compounding. The greatest enemy of the investor are (yearly) taxes. That yearly 15% really adds up over 30 years to more than what you'd pay at retirement. Roth is the worst, unless you are in a low tax bracket when contributing to it.

It's only 15% of the dividend, so it isn't 15% of your total return. It cuts a 4% dividend to a 3.4%. And given the overall higher return, you still end up well ahead of nondividend paying stocks in the long run.

If you have stocks in a portion of a taxable account, in the long run you end up better if they pay a dividend than if they don't.

 

[deleted171991]

It's only 15% of the dividend, so it isn't 15% of your total return. It cuts a 4% dividend to a 3.4%. And given the overall higher return, you still end up well ahead of nondividend paying stocks in the long run.

If you have stocks in a portion of a taxable account, in the long run you end up better if they pay a dividend than if they don't.

I should rewrite everything with formulas, so that people could calculate which is better, based on various hypothetical stock and dividend growths, and hypothetical taxes now and at retirement. Shame on me for not thinking about this earlier!

 

[thinkorswim]

The "growth" of stock price of dividend paying stocks generally outperforms the "growth" in stock price of "growth stocks". People call a stock a growth stock because they expect massive increases in growth of the company, but the price of the stock generally already has those gains priced in so the stock price rarely keeps skyrocketing. Exceptions occur, but as a broad rule companies that don't pay out dividends return less value to stockholders than companies that do, whether you look at 2 years or 10 years or whatever. People always are on the lookout for the next big thing, but the majority of those don't pan out and drag down the overall return.

Companies that retain earnings for themselves do a better job of enriching their CEO than they do their stockholders.

Again, apples and oranges. The stocks have entirely different valuation metrics by which the market analyzes them. I understand your point on a macro scale, but you have to realize that there are a lot of companies that are barely profitable and poorly run, yet have sky high valuations. These are the ones that will ultimately fail and drag down the average.

Buying established large cap "growth" stocks today will certainly yield you better results than the traditionally established dividend stocks over the next few years. The key is to realize when the growth is tapering off and the stock is transitioning into a cyclical one. An ideal portfolio will have some blend of both growth and dividend stocks. It goes without saying that the growth aspect of every portfolio should be managed much more closely.

 

[deleted126335]

It has been shown time and time again that dividend paying stocks grow more long term than non dividend paying stocks. It has also been shown that companies that reinvest profits instead of paying dividends return less value to their shareholders than if they had paid out the dividends in the first place. Since dividends are taxed as capital gains, you end up with better long term stocks to own.

Stating the calculated loss from taxes on 4% dividend annually ignores the growth in the price of the stock being even beyond what a non dividend stock would return.

Partly agree. Dividend stocks are a way of capturing exposure to value stocks and the associated value premium. They are not the most efficient way to do this.
http://www.etf.com/sections/index-i...ends-a-value-strategy-.html?fullart=1&start=2

 

[Mman]

Again, apples and oranges. The stocks have entirely different valuation metrics by which the market analyzes them. I understand your point on a macro scale, but you have to realize that there are a lot of companies that are barely profitable and poorly run, yet have sky high valuations. These are the ones that will ultimately fail and drag down the average.

Buying established large cap "growth" stocks today will certainly yield you better results than the traditionally established dividend stocks over the next few years. The key is to realize when the growth is tapering off and the stock is transitioning into a cyclical one. An ideal portfolio will have some blend of both growth and dividend stocks. It goes without saying that the growth aspect of every portfolio should be managed much more closely.

In theory that idea works. But nobody has ever been able to make it work long term (30+ years). Growth stocks, even the best picked by "experts", tend to underperform long term. In the long run every dollar that a company keeps for itself to grow returns somewhere in the neighborhood of 50 cents of value to the owners of the company (shareholders). And while it'd be great to get out when the time is right, nobody ever times it just right every time. The other unfortunate aspect for an investor is that chasing growth companies tends to result in a higher amount of turnover in a portfolio with transaction costs along the way.

 

[Mman]

Partly agree. Dividend stocks are a way of capturing exposure to value stocks and the associated value premium. They are not the most efficient way to do this.
http://www.etf.com/sections/index-i...ends-a-value-strategy-.html?fullart=1&start=2

I would never advocate buying individual stocks for somebody without the time and inclination to do loads of research on them. The vast, vast, vast majority of people should be in low cost indexes or mutual funds with their money.

I do it on a small time basis to see how my returns compare to S&P over time. If I remain successful for a long enough time frame I will gradually grow my personal exposure to individual stocks.

 

[deleted126335]

Roth IRAs: lots of variables- current tax rate, expected future tax rate, tax efficiency of the asset class, do you wish to leave an inheritance to your heirs so they can enjoy the continued benefit of future tax free growth?

What's in my Roth? 1/3 emerging markets, 1/3 us small value, 1/3 international small value.
Reason? these are the assets with just about the highest expected return, are tax inefficient, and these are the last dollars I hope to spend or ideally pass on to my children.

 

[deleted171991]

So here's the retirement calculator for the 3 options.
1. Traditional IRA (also applies for rollover from 403b)
2. Taxable brokerage account
3. Roth IRA (this option assumes a one-time Roth IRA conversion at time zero, with no yearly contributions; the other two can be used even with regular yearly extra contributions)

My initial manual calculations were slightly off, but the idea is the same: the best, in general, looks to be traditional IRA for high income earners like us (unless you get to convert to Roth in a really low income year). Taxable seems to be the worst for us. You can play with the calculator at your risk, but please don't assume it's correct. You can check/edit the formulas yourselves.

 

[Mman]

So here's the retirement calculator for the 3 options.
1. Traditional IRA
2. Taxable brokerage account
3. Roth IRA

My initial manual calculations were slightly off, but the idea is the same: the best, in general, looks to be traditional IRA for high income earners like us (unless you get to convert to Roth in a really low income year). Taxable seems to be the worst for us. You can play with the calculator at your risk, but please don't assume it's correct. You can check/edit the formulas yourselves.

A traditional IRA is almost pointless for a "high earner" as you are limited to 5000 per year. You could do anything you want with 5K a year and if you are saving more than 100K per year total it doesn't matter.

 

[deleted171991]

A traditional IRA is almost pointless for a "high earner" as you are limited to 5000 per year. You could do anything you want with 5K a year and if you are saving more than 100K per year total it doesn't matter.

Sorry, I meant both traditional and rollover IRAs (they are taxed similarly).

You can rollover your 403(b) into an IRA, and that's what most people who want to invest in individual stocks do. Actually, even if you don't invest in individual stocks, chances are that the hidden annual fees of your 403b are worth rolling over whenever you leave an employer.

This entire discussion is beyond my (and many others') pay grade. For personal financial education, I strongly recommend reading the bogleheads.org forum. They have only 2M posts about 100K subjects.

My conclusion remains: do not put dividend paying-stocks in a regular investment account where the dividends are taxed annually, before being reinvested!

 

[The White Coat Investor]

I'm not sure what an FU fund really is. Is it an emergency fund of 6 months of savings that allows you to say FU to an employer and go get a new job before you run out of money? Or is it a $2 Million portfolio that allows you to quit your job for good? If it's the first, I call that an emergency fund, and I don't really care much what it's earning. I'm getting 0.86% out of Ally Bank without worrying about hiring someone for 8 basis to watch for when some other bank offers 0.88% and switch me. If it's the second, I call that my retirement portfolio, and I don't keep any of that in an "investment" with an expected return under 1%. It's all in stocks, real estate, and bonds.

I guess it's better to pay these guys 8 basis points than leaving all your money in your checking account paying 0.1%, but it doesn't take that much sense to keep your emergency fund in a 2% CD or a 1% high yield savings account or I Bonds or something like that.

 

[deleted171991]

At least for mutual funds, there is this great article I found through whitecoatinvestor.com, which might clear up where to put each asset class and why: Principles of tax-efficient fund placement.

Stock funds can be tax-inefficient if they generate a lot of capital gains, particularly short-term gains; they are also less efficient if they pay high dividends (although under current tax law, if most of the dividend stream is a "qualified" dividend, the tax burden is reduced.)

Here is another interesting article, also linked from there: Tax Efficiency: Relative or Absolute? It explains how to calculate which type of asset (stocks vs. bonds) you should put in which type of account (taxable vs. tax-advantaged) based on variables like the current bond yields and tax rates. That kind of thinking can also apply when you decide between other asset classes.

Which one of these two investments is more tax efficient?

• A stock mutual fund is expected to earn 7% a year; its returns are taxed at a 12% rate.
• A bond mutual fund is expected to earn 2% a year; its returns are taxed at a 30% rate.

Answer: the latter. Read the article to find out why.

 

[BLADEMDA]

Any suggestions on Fixed rate income? I'm looking at putting $500K into CDs. My Ally Bank and Barclays accounts are savings at 1.00%.
FYI, FDIC insurance is $500K for a married couple per bank/institution. Or, $250K per person per bank. This makes it difficult to keep CDs, savings, etc at the same bank (for me anyway).

My Brokerage accounts pay crap on CASH/MM and my local bank pays 0.12% per year.

 

[BLADEMDA]

CIT Ramp up CD (4 year) is paying 1.9% right now. But, you get the option of a one time rate ramp up during the life of the CD when rates rise (they will eventually go up).

Any comments about this CD? If anyone has dealt with CIT please post your opinion about the bank as I'm likely to put $500K in their 4 year CIT ramp up CD.


https://www.bankoncit.com/rampup-cd

 

[BLADEMDA]

CIT Ramp up CD:

• Available in 3- and 4-year terms
• Minimum deposit of $25,000 for the 3-Year RampUp™ CD or $50,000 for the 4-Year RampUp™ CD
• Option to increase your rate once during the term of your CD if our rates go up
• Enjoy the security of a CD and stay in your original rate until maturity, if our rates go down
• No account opening or maintenance fees
• Daily compounding interest to maximize your earning potential
• FDIC insured**
• Exercise your rate increase option at any time by calling 855-462-2652

 

[BLADEMDA]

FYI, I've been using www.personalcapital.com for the past 9 months and am quite pleased with the web site. It's free and I'm able to track/see all my investments, Checking, savings, etc in one place along with a breakdown/analysis of my portfolio. Their software is outstanding and their security is first rate.
I do NOT recommend their paid advisory service just the FREE online software.

https://www.personalcapital.com/financial-software

 

[Mman]

FYI, I've been using www.personalcapital.com for the past 9 months and am quite pleased with the web site. It's free and I'm able to track/see all my investments, Checking, savings, etc in one place along with a breakdown/analysis of my portfolio. Their software is outstanding and their security is first rate.
I do NOT recommend their paid advisory service just the FREE online software.

https://www.personalcapital.com/financial-software

I too have enjoyed using their portfolio analysis. I find it does well at tracking returns over time while ignoring new deposits (not showing my monthly addition as part of the overall return of the portfolio). A few minor problems that I have to get around, though.

Their "you index" (in holdings) which tracks your holdings over time literally tracks how your current holdings have done going backwards. For someone like me that tries to buy low, it makes my return look worse retrospectively if I make new additions. They compare it to indices like the S&P. Even if I beat the S&P it can make it look like I underperformed. I get around it by going to their "performance" section which shows your actual performance. Unfortunately you can't compare to the S&P in that section. What I have to do is look at the holdings section and look retrospectively at the various benchmarks and just remember what they are and then go to performance and compare my own to it. Mildly annoying, but it tracks things far more accurately than most I've used. For example, my Google Finance portfolio thinks my monthly deposit is growth in the portfolio. No it isn't, it's a deposit. I don't like seeing it displayed as part of my return.



On a related note, I've now actually gone ahead and started funding traditional IRA to roll into Roth. Small potatoes in the overall scheme of things, but might as well avoid as much tax as possible.

 

[aneftp]

You more or less just said the same thing I did. Dividend stocks belong in taxable and tax-deferred accounts. Roth accounts should be used for growth and greater risk since the higher yields will be tax free.

I actively manage my Roth account and consistently yield 20-25% annual return without taking on too much risk. I only peek at my tax deferred account once a month and rebalance every 6 months, and this account generally performs in line with the broader market.

If u average 25% the past 15 years you are doing great.

But on average the Market went no where from 2000-2010 (tech bust (2000-2001 and housing bust (2007-2009).

So to say you yield 25% annually without a lot of risk you have to include the years you been investing.

Because any Tom dick and Harry has made a killing in the market from mid 2009- 2015 overall.

 

[aneftp]

CIT Ramp up CD:

• Available in 3- and 4-year terms
• Minimum deposit of $25,000 for the 3-Year RampUp™ CD or $50,000 for the 4-Year RampUp™ CD
• Option to increase your rate once during the term of your CD if our rates go up
• Enjoy the security of a CD and stay in your original rate until maturity, if our rates go down
• No account opening or maintenance fees
• Daily compounding interest to maximize your earning potential
• FDIC insured**
• Exercise your rate increase option at any time by calling 855-462-2652

In my opinion. Unless you got so much money or near retirement. (Or both). CD rates are paying so low it's not worth it.

Better off with preferred shares ETFs that pay 5-6% like PFF.

But that's just my opinion.

Now if CDs were paying 5-6% like in 2007 I'd do it.

 

[Mman]

If u average 25% the past 15 years you are doing great.

But on average the Market went no where from 2000-2010 (tech bust (2000-2001 and housing bust (2007-2009).

So to say you yield 25% annually without a lot of risk you have to include the years you been investing.

Because any Tom dick and Harry has made a killing in the market from mid 2009- 2015 overall.

Your smart reply deserves kudos. Nobody makes 25% annually without taking a lot of risk unless they were scooping up value stocks at the bottom of downturn when you probably did very well the last 5 years without a ton of risk. Average return the last 15 years is right around 5% for equities.

It's all about balance. If you want returns above 10% long term, you need riskier investments. Nobody gets 25% annually long term.

 

[thinkorswim]

If u average 25% the past 15 years you are doing great.

But on average the Market went no where from 2000-2010 (tech bust (2000-2001 and housing bust (2007-2009).

So to say you yield 25% annually without a lot of risk you have to include the years you been investing.

Because any Tom dick and Harry has made a killing in the market from mid 2009- 2015 overall.

Your smart reply deserves kudos. Nobody makes 25% annually without taking a lot of risk unless they were scooping up value stocks at the bottom of downturn when you probably did very well the last 5 years without a ton of risk. Average return the last 15 years is right around 5% for equities.

It's all about balance. If you want returns above 10% long term, you need riskier investments. Nobody gets 25% annually long term.

OK, I will concede that I do perhaps take on more risk than I am willing to admit by day trading, but I'm holding about 90% of my portfolio in cash at the end of each day. I don't typically hold positions for more than a couple hours.

Now I agree that keeping up such high returns over the long term isn't feasible as my portfolio grows, but that absolutely does not mean you can't make money in a down market. A lot of people don't realize there is money to be made as stocks fall as well.

 

[Mman]

OK, I will concede that I do perhaps take on more risk than I am willing to admit by day trading, but I'm holding about 90% of my portfolio in cash at the end of each day.

If you have anything to do with day trading you are taking an extreme amount of risk for a retirement account. Massive. Enormous. Such behavior has literally no place in saving for retirement for anybody. Even the most intelligent investors on the planet that make money with arbitrage schemes and what not don't day trade their retirement savings.

Day trading has possibly been profitable for some people the last 4 years under market conditions that have mostly been shooting skyward. That's a pretty rare market, though, and certainly not what will prevail long term. And day trading leads to massive losses when it goes bad. Hell, even the profits are problematic and lower than you'd guess because of tax rates and transaction fees.

 

[Mman]

Now I agree that keeping up such high returns over the long term isn't feasible as my portfolio grows, but that absolutely does not mean you can't make money in a down market. A lot of people don't realize there is money to be made as stocks fall as well.

There is huge money to be made in a down market by buying stocks for the long haul. That's when you make money: buy low, sell high.

 

[thinkorswim]

If you have anything to do with day trading you are taking an extreme amount of risk for a retirement account. Massive. Enormous. Such behavior has literally no place in saving for retirement for anybody. Even the most intelligent investors on the planet that make money with arbitrage schemes and what not don't day trade their retirement savings.

Day trading has possibly been profitable for some people the last 4 years under market conditions that have mostly been shooting skyward. That's a pretty rare market, though, and certainly not what will prevail long term. And day trading leads to massive losses when it goes bad. Hell, even the profits are problematic and lower than you'd guess because of tax rates and transaction fees.

Again, this is only in one account -- a Roth IRA. The $5500 I put into that annually amounts to around only 5-6% of total sum I put away each year for retirement. That's the only account I take such risks in, because I can afford to do so. My 401(k) and taxable investment accounts, where the bulk of my savings sit, aren't nearly as aggressive and more passively managed.

 

[deleted126335]

In my opinion. Unless you got so much money or near retirement. (Or both). CD rates are paying so low it's not worth it.

Better off with preferred shares ETFs that pay 5-6% like PFF.

But that's just my opinion.

Now if CDs were paying 5-6% like in 2007 I'd do it.

fixed income is for safety. Preferred stocks have risk. check out the performance of Preferred stock mutual funds and ETFs during the financial crisis. They behaved just like ...stocks.
Risk is best rewarded on the equity side. Corporate bonds, preferred stocks, reits, mlps, and other income generators carry risk that tends to show up exactly when you don't want it to. In a crisis there are two assets and two assets only. Nominal US Treasuries and everything else.

 

[deleted126335]

Your smart reply deserves kudos. Nobody makes 25% annually without taking a lot of risk unless they were scooping up value stocks at the bottom of downturn when you probably did very well the last 5 years without a ton of risk. Average return the last 15 years is right around 5% for equities.

It's all about balance. If you want returns above 10% long term, you need riskier investments. Nobody gets 25% annually long term.

Value stocks carry plenty of risk. If they didn't the market would bid up their prices so their higher expected return would disappear. Take a look at the volatility value stocks in a crisis. They are more volatile than the overall market.

 

[deleted126335]

Any suggestions on Fixed rate income? I'm looking at putting $500K into CDs. My Ally Bank and Barclays accounts are savings at 1.00%.
FYI, FDIC insurance is $500K for a married couple per bank/institution. Or, $250K per person per bank. This makes it difficult to keep CDs, savings, etc at the same bank (for me anyway).

My Brokerage accounts pay crap on CASH/MM and my local bank pays 0.12% per year.

Fixed income still s*cks. My most recent purchases : CDs for IRA brokerage account, a small amount of the 10 year TIPs at the January auction, Also tax deferrred account. , and Vanguard Limited term tax exempt for taxable account.

 

[Mman]

Value stocks carry plenty of risk. If they didn't the market would bid up their prices so their higher expected return would disappear. Take a look at the volatility value stocks in a crisis. They are more volatile than the overall market.

If you are measuring risk on a time line less than 20-30 years, it isn't worth measuring when planning retirement. As for market prices of individual securities, it is interesting over time how the market price can at times have very little to do with the value of the business. In the short term the stock market is a voting machine (popular stocks go up, unpopular go down). In the long term, it is a weighing machine (doesn't matter if it's popular or not, successful business get valued more). As for value, it isn't a stock. No such thing. It's a business and a price. The right business at the right price makes it a value purchase. The right business at way too much money makes it very risky.

 

[Mman]

Again, this is only in one account -- a Roth IRA. The $5500 I put into that annually amounts to around only 5-6% of total sum I put away each year for retirement. That's the only account I take such risks in, because I can afford to do so. My 401(k) and taxable investment accounts, where the bulk of my savings sit, aren't nearly as aggressive and more passively managed.

If 5-6% of your annual savings are going into a Roth, it's more likely that 10%+ of your retirement savings should come from that account since it can grow tax free. So it's probably wiser to think of it as a larger share of your retirement. So I'd agree being more aggressive with it can be a good thing, but not being reckless.

Day trading is an enjoyable hobby for some people. I, however, personally know 3 physicians that had 7 figures wiped out from their retirement savings in under a year by doing it, despite having several years of success previously. It impacted them so much it delayed their retirement plans by several years.

 

[aneftp]

Slow And steady wins the race for most physicians.

Most anesthesiologists I know have been able to retire in their late 50s and early 60s with slow and steady.

Don't get divorce
Don't risk ur retirement for ur kids graduate education (okay to help with in state college). But kids are on their own for professional or graduate school. Don't send kids to fancy liberal arts college unless they get close to same cost as in state college. Public schools folks. Never understood why my former colleagues up in Potomac Maryland and McLean, VA (both very wealthy suburbs of Washington DC) send their kids to Sidwell and Georgetown Day School in DC. Just idiotic to spend that type of money in K-12 grades when they have very good public schools in their school zone.

Ur house should be paid off by the time you are in late 50s early 60s even in high cost areas.

I'm 10.5 years out of residency. So seen the peak and bottom of the stock market (and will see it again 2-3 more times in my life). Plus lost a ton of real money in the housing bust (like 250K cash).

But just keep chugging away. Slow and steady. I'd had hope to hit 2 million in retirement by the time I was 40. But probably won't hit that number till age 46-48 right now. Well past 1 million now. Put away 50K plus a year if you can. I've been doing it every single year I've been out of residency. (been putting 70K plus the past 5 years).
I've still enjoyed my life. Fancy vacations 2 x a year plus various weekend trips. Fancy cars etc. all paid in cash (Range Rovers, BMW convertibles, Audis V8s etc). Now we got kids, "downgraded" to Honda Minivan. I actually enjoy driving the Honda Minivan these days cause I don't feel like someone will car jack at night.

And it's not like I've made like 500-600K a year like some of my buddies have. I've probably averaged around 375k-400K a year total compensation the past 10 years. That's total compensation. So like an academic job paying 300-325K W2 with benefits is like 375K total compensation.

 

[dmk5n]

aneftp, do Academic jobs pay 300-325K? with benefits?
They were much lower in 2000...around the 200K range...

 

[aneftp]

aneftp, do Academic jobs pay 300-325K? with benefits?
They were much lower in 2000...around the 200K range...

Mid Atlantic Academics places were paying in high 200s already in mid 2000s plus generous benefits (Many increased their salaries circa 2003-2005 to compete private practice)

Salaries are very misleading in many academic places. "Base" salary can be advertised even in 2015 around $230-240k. But depending how contracts are structure. If you do base calls (q10-15/20 days are most places plus one weekend call Q 5-7 weeks). You can easily hit 300k plus benefits.

My cousin out 6 years assistant professor at mid Atlantic academic makes $300k with 4 day work schedule plus calls (almost every Friday off unless she's on call that particular Friday). Her base is $230k. Plus very generous benefits (10% match up to $260k or whatever the limits for 401A plans) health insurance. Usual cme sick leave etc.

If she wanted to work the full 5 days she'd probably be making around $350k in academics.