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Discussion in 'Psychology [Psy.D. / Ph.D.]' started by WisNeuro, Jul 31, 2015.
Here you go, a place to discuss this separately from the other info.
" Assuming you mean specifically in reference to savings/investment/retirement/etc. - any recommendations? If general reading - had that covered for years now.
Would love to see a separate thread of ECP financial advice now that I'll finally have an income where I can start building capital. Coming from an extremely blue collar family (I'll be the first male who can't bank on my Teamster's pension for retirement?), I learned to avoid debt where possible but not much else."
I've got a good topic. Good post-retirement, tax friendly investments. Once you're over a certain salary limit, that ROTH IRA option drops off the table. What are people looking into?
Past the 401k level, I am investing in post tax accounts and relying on tax harvesting to keep the tax impact down.
I've got a rental property that has been pretty beneficial in tax write downs.
I am able to have a SEP, which makes my maximum contributions around 47k/year. Every things is autodraft, so I never see the money. I'm going to continue to max that out until I move to semi-retirement. Then I will wait a few years for the tax basis to drop down and do a back door roth conversion. Pay the taxes for that. IRA is largely comprised of blue chips that I believe in, vanguard etfs, and a few bets just to stay interested. Set up the portfolio in a combination of the "lazy portfolios", "ichan portfolio", "buffet recommendations", some fun players, some dividend payors, and a very small amount of precious metals.
Pre-retirement: After paying taxes and contributing to my IRA about 65-85% of my income gets saved. In basic, I have a sizable taxable account that is largely comprised of the dividend aristocrats (with some substitutions, some non dividend players, and a few MLPs all selected through a combination of research, p/e ratios, alpha, beta, volume, analyst estimates, news, a general familiarity with the business, and a determination if I can understand what the company is doing). All set to drip, and autodrafted out of my account on the day after I expect to normally get paid from my most reliable sources so I never notice it's missing. Bought a house from a distressed owner in a very nice area ( i spent 1-2 hours per week, for 4-5 years watching the area). Payments are accelerated to be paid off in a few years. Redid the entire interior in my spare time, which I paid for in cash as I was able. Looked into a 529, which i would use for asset protection until future kids came around, but the tax structure was not worth the risk. Looked into an HSA, but declined that. Found a corporate financial adviser who says I am super small time (which is where I want to be, smallest fish in the big pond, getting advice on how to succeed). We set up a complex, multiple LLC structure which I am still figuring out. I also invest in some artwork and physical silver for fun. Oh, and a ton of disability insurance.
Very nice PsyDr, you've got a fast track to early retirement. I'm not quite at your savings percentage level yet. I have 0 debt, but my fiancee (MD) has a little. Once we get that paid off, we'll up our retirement contributions dramatically. Goal is early retirement and enough to build a custom home in a location that we want down the road.
Well though out, psydr. I save a similar amount (though much of mine is post-tax...no sep access). I am not as well structured in terms of tax adavantages. I need to spend some more time working on that. I did fully fund a 529 investment account for my child. By fully fund, what I mean is I calculated full college costs 18 years from his birth and projected what amount invested at that point would cover it and invested that. I've read about the Ira backdoor but haven't devoted serious thought to trying to execute that yet.
Most of my stuff is managed though I have a percentage I invest myself. I may eventually take over that when I feel I have a better knowledge base for the topic. It is a dreaded percentage based service. But it's not a large percentage (< 1) and it, thus far has mostly paid for itself w tax harvesting which I would not consistently have time to execute.
I am at the start of starting an llc. Interesting process.
You need to start two simultaneously. Pm me and I can explain why. A single LLC does dick for tax or liability purposes. Other than protect your employees.
I just found out this year that after 120k household income the loss deduction is halved and that after 150k it is gone. Unless real estate is your primary business. So be careful of little details like that. No more counting trips back home as an expense.
It's working so far, I'm under cutoffs. And I decrease my taxable income quite a bit from pre-tax earnings. The plan is to use deductible depreciation and deductible repairs and such (over simplification) for tax benefits and sell in a couple years, right around the time my fiancee is no longer a medical resident and our household income makes us ineligible for several tax advantages.
And this thread has made me realize I need a financial advisor...
I recommend someone who is fee based, not someone who gets commission for selling you certain investments.
Interesting discussion. On vacation and have time to chime in. I'm set up as a S Corp. I have a SEP IRA which is tax deferred up to 25 percent or 52 k a year. One would need to make 208 k to maximize. I have a passive income model with 8 independently licensed clinicians in various mental health areas (nurse practitioner, therapists, psychologists, etc) that also generates. I have a high volume of clinical work myself. Looking to go 1/2 time in 8 years while keeping my salary the same till I'm dead. Bought a building with multiple offices on a 10 year note 7 years ago. Almost done. Pay myself a salary plus draw which according to the accountant saves me 7.5 cents on the dollar which is substantial. I pay hefty quarterly estimates to avoid april 15 panic attacks. Filter expenses legally through the company, such as a company cars and beach house investment real estate. 90 percent free of insurance finally in my early 40s. Live in a new home that is nice but below what I can afford. Should have it paid off in 38 months. Mainly doing forensic work lately and love it but love snorkeling in the Caribbean more. Vacation out of the country 4 times a year lately and am always juggling enjoying life and making money. I'm starting to chill out more as I have gotten older.
I have started using a health savings account too so that I am using untaxed dollars to spend on anything medical with dental actually being the bigger expense for me and my spouse at this time. It is confusing as we have two different types of accounts. Fortunately my wife is good at keeping track of that stuff. We do need to get set up with a financial adviser in the area though.
I haven't gotten the HSA just yet. The VA's isn't that great, it's pretty much use or lose for all but like $500. After we have kids it will be worth it, but my health costs are minimal at the moment.
That use it or lose it thing baffles me. Ours rolls over so that helps. We get a debit card attached to the account so it makes it easy to separate out costs too.
As another VA employee, the use it or lose it aspect, along with my *knock on wood* minimal healthcare expenses, are main what's stopped me from contributing to it thus far.
I do have to say that the other benefits are pretty solid, though.
Reading up a bit more on health savings accounts, I see that it is only an option for high deductible health insurance plans so that is why VA doesn't have it. I recall now that when I had low deductible health insurance, I had the same type of non-rollover type of option. The good thing about this health savings account is that if I don't use it for healthcare, then I can also use it as a tax deferred retirement account. The bad is that I have a high deductible insurance plan.
No, we have the option for HSA's, just not an attractive option unless you can count on a certain healthcare expenditure. We also have a fairly wide array of options for healthcare, high and low deductible plans. I chose a high deductible one at the moment because I am in excellent health and it's much cheaper in terms of my premiums. I'll probably change that around after I get married for higher security.
Then the HSA should rollover and be pre-tax. It seems like that might be a good option or is it that there is no investment income in that type of account? We might have to adjust our 401k vs HSA balance if that's the case. We really do need to sit down with a planner soon.
It does allow rollover, but the rollover maximum is fairly low, 500. Or at least it used to be, I haven't checked to see if they've changed in in over a year.
Bump, I'm bored. Anyone got any new news, tips, or updates on investing/finance?
Favorite broad US index fund?
I'll start. For the generic investor, especially the set it and forget it folks. Vanguards VTSMX/VTSAX funds. ERs of 0.15 and 0.04 respectively. VTSAX is the admiral share, needs 10k minimum investment. If you can't afford that right away, just sock 3k into the VTSMX investment and build up til you get 10k into the investment and then just transfer them into the admiral shares.
Start the Roth IRA as soon as you can. Invest in broad mutual or index funds and have both domestic and foreign holdings. I'm presently returning 18% on my IRA :-D I drop the same amount into all my funds every month regardless of their performance. Many banks let you start off with just 1k in many funds.
I do cringe a little every time I make a payment, since as an academic I'm probably going to retire at like age 95. Oh, well.
Do any of you do short term investing? Most of my investments are long term and that's what I've read on, but the insanely low interest rate is murder. e.g., I want to buy a house in about a year, and the currently accumulating down is just sitting in savings doing nothing.
I guess it depends on how short term you're talking? If you need it in the next year or two, savings/short term CDs are probably the way to go. You don't want to be saving up for a down payment on a house or something and then get hit with a 10%+ market downturn. If anything, you can always throw it into a money market fund, still a low rate, but most are definitely better than savings accounts.
Timely bump. Was reading about Roth income limits this morning!
Yeah, I wish they'd make the ROTH income limits much higher. Too easy to hit the income limit, especially on a two professional household income. Without having to go through the needless steps to do a backdoor conversion.
The "lazy/couch potato/idiot/boggle" portfolio using vangaurd's instruments is the pretty standard advice.
Like investing in real estate, the real money is in leveraged investing. Buying a house in cash is probably a bad idea. Buying a house using someone else's money at a rate less than market returns in an appreciating market is probably a good idea. Option trading is a way to do this. So is venture capitalism if you are an SEC qualified investor. Note: some people will tell you about investing in businesses, but do not know the laws about this. Private equity is even more lucrative, but you're gonna need around $10 mil to start.
Making tons of money comes from neither of those things. If you look at the income from most rich people, it comes from taking a percentage of an action preferably one that does not require individual action.
Short term, sell puts on fangs with extra emphasis on the A using fibronacci retracements. Use proceeds to buy 110 shares of the top 50 dividend aristocrats and drip for a decade.
If you're buying CDs instead of shares of O, you're doing it wrong.
Somebody's been watching CNBC while on the treadmill
I don't think when you retire matters regarding tax advantaged retirement accounts. I.e., when you hit 65 or whatever the rule is when you are around that age, the withdrawal penalties and such won't occur. . . . regardless of whether or not you actually retire.
Short term investing? Bitcoin, ethereum? I kid, I kid. China is killing that currently.
People know about Roth's, backdoor roth's (though I don't bother), and IRAs and 401Ks, and 453Bs, etc...
Here's some others people may not know about:
Health Savings Account (HSA) - HealthCare.gov Glossary
Dependent Care FSA - FSAFEDS
Or somebody consults for two financial firms...
1. Do what the ultra rich do.
I know much less about this than I need to, but I really liked the book "The White Coat Investor" as a starting point.
My plan is to max out my Roth each year, and pay off the rest of my loans.
That's a great one, and John Bogle has a few that are very easy to read even if you don't know much about investing. Honestly, most people don't even need to know the esoteric nuance of finance. If most people just knew the basics, we'd be in a much different place as a country.
Paging @The White Coat Investor
Wanna give some advice?
I imagine we have some widely ranging groups of people here, depending on prior debt levels and where people are in their careers. We have some with zero debt, low debt, high debt relying on PSLF or the like. And probably a wide range of existing savings/retirement investments. If you have a butt load of debt, probably worth meeting with a fee based advisor to discuss the best plan for getting that paid off and socking away for retirement what you can, while maintaining a certain standard of living (but you'll still need to budget). If you don't have any or very low debt (or low interest), options are a lot wider.
I keep meaning to pick up a copy of The White Coat Investory. I'm woefully under-informed in the area, so I figured I'd start with The Intelligent Investor, which I'm currently working through, and go from there.
It sounds like we are in similar spots. I've been meaning to grab WCI for the last few months; this thread was a good reminder.
Grab it, it's cheap and has great info. I made my MD wife read it. She hates finances, but actually liked reading it.
Thanks, that was the nudge I needed to look into a low-cost index fund versus the target date fund I'm in now. I didn't realize the Vanguard fund had such a low ER. Just looked it up on Morningstar and the admiral shares fund looks great.
Any other recommendations to consider for someone investing over 100K?
For the average investor, Vanguard is pretty hard to beat. It's super easy to set up, and the ERs are pretty much the lowest in the business, especially for funds with essentially the same long-term returns.
As for other investments, depends on a lot of things, really. Age, risk aversion level, retirement goals. A general allocation mix for a middle aged investor would be something like 45% ish in a total stock market fund, 10%ish in international funds (VGTSX, ER 0.18, admiral fund VTIAX ER 0.11), maybe 20% ish in a total bond market fund (VBMFX ER 0.15; admiral VBTLX, ER 0.05), maybe 20%ish in inflation protected securities. If you're comfortable, a small percentage in REITs. If you can handle more risk, you could lower your percentage in bonds and put it elsewhere for probable higher growth. If you really don't want to think about things, you could always stash money in one of the Target date funds, which will re-allocate itself as time goes on to become more stable and less risky as you get closer to retirement.
Also, if you have the desire/knowledge/ability, you could look into other investments such as owning and renting property. It's not for everyone, but it can be a nice passive (mostly) income stream and can be a decent tax write off at times.
@MamaPhD money is only a tool. What you want to use it for informs how to invest. Things like kids, social support, etc all male various ideas better or worse. For example, I thought about investing in real estate and farm land. My realtor laughed in my face and he wasn't wrong. No time to respond to renters and no ability in handy type of work.
@WisNeuro youre not wrong about wanguard. They were investigated by the sec for having such low fees. If you are more active in your management, I would stay out of the bond fund until the market dips. Or sub municipal bonds.
I'll confirm about the real estate stuff. It can be time intensive if you want to manage things yourself to some extent. It worked for me when I was close because I could respond to minor/moderate incidents and could fix most things myself. If you don't have those things, probably not worth it. Having a rental management company takes about 10% off the top when you're working on tight margins. Only really makes sense if you have a lot of properties. Also, passive vs active management changes your possible tax deductions.
Well, reading this thread definitely makes me feel like an idiot. I can barely follow most of what you guys are saying! I suppose that's a good reason to do more reading/understanding of investing and finances, but it's just so boring. I mean, money isn't boring, but understanding it is not fun for me, and I only have so much brain power with an academic job and two kids under 4. Sock this one away in the "to look into later" category....
Time is money. For example, if you've just had your money in savings and checkings accounts in the past years with sub 1% rates, you missed out on a 5 year average return of 14.2% That's huge. Granted, it's a higher than average return, over the long term you'd be closer to 7%, but you've missed a huge bull market. Even with a modest bear market, those returns will have you far out ahead.
I have a financial advisor because...brain power.
I mean, I am maxxing out my contributions to my retirement plan, and my university matches up to 10%, so I've been doing that, but that's about it! I have been pretty excited to see how much is in my account after 6 years, I must say. Seeing those TIAA-CREF quarterly statements in my mailbox does kinda make my day.
10%? That's pretty great.