Starting my Nest Egg!

[AF Leroy]

Ok so me and my wife know next to nothing about investing. I have just taken a military scholarship (I know I know I've read through the whole dang'd Mil. Medicine forum, totally seperate discussion, let's just leave it at that). I need some advice, here's our situation.

1. 20K bonus-15K is in my account now after taxes
2. Me and my wife combined have ~23 K in student loans, with interest rates ranging from 5.75-6.5%. Only other debt is $1500 0% interest 'tll May (new living room...what can I say....)
3. She just got a good job, so we really only need about 2/3 of my ~$1800/mo. stipend.

SO here's my current line of thinking.

• 3K to bolster our minimal savings account. Put it in an MMA or some other such higher interest option.
• 10K to pay off the higher interest loans, effectively cutting our monthly payments in half.
• Wife will start maxing out 401 K contributions at work
• Pay off the furniture.
• 2K + $500 or so a month towards the Vanguard Retirement Fund.

What do you all think? Is investing in the fund a good idea? Are we going to get taxed out the WAZOO this year? The biggest thing people tell us is we should use all of the $ on investments and pay off the loans slower. I think with the market the way it is right now, it would be a good idea to pay some of it off now for our own satisfaction and there's 0 risk in it.

Thanks for your advice,
Leroy.

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[The White Coat Investor]

Ok so me and my wife know next to nothing about investing. I have just taken a military scholarship (I know I know I've read through the whole dang'd Mil. Medicine forum, totally seperate discussion, let's just leave it at that). I need some advice, here's our situation.

1. 20K bonus-15K is in my account now after taxes
2. Me and my wife combined have ~23 K in student loans, with interest rates ranging from 5.75-6.5%. Only other debt is $1500 0% interest 'tll May (new living room...what can I say....)
3. She just got a good job, so we really only need about 2/3 of my ~$1800/mo. stipend.

SO here's my current line of thinking.

• 3K to bolster our minimal savings account. Put it in an MMA or some other such higher interest option.
• 10K to pay off the higher interest loans, effectively cutting our monthly payments in half.
• Wife will start maxing out 401 K contributions at work
• Pay off the furniture.
• 2K + $500 or so a month towards the Vanguard Retirement Fund.

What do you all think? Is investing in the fund a good idea? Are we going to get taxed out the WAZOO this year? The biggest thing people tell us is we should use all of the $ on investments and pay off the loans slower. I think with the market the way it is right now, it would be a good idea to pay some of it off now for our own satisfaction and there's 0 risk in it.

Thanks for your advice,
Leroy.

1) I hope you didn't take that "scholarship" for money. I promise you'll regret it if you did. Especially with a spouse with a good job.

2) No, you won't be taxed out the wazoo. Wait until you're an attending. Unless your wife's job is really good.

3) Here's a good thread that addresses the pay-off loans vs invest question for you. My recommendation is you pay off the loans with money left over AFTER you max out your Roth IRA and her Roth IRA and get any match from her 401K. Although if you have a long military career you may be eligible for a Roth IRA for most of it, most physicians can't make Roth contributions after residency.

http://www.bogleheads.org/forum/viewtopic.php?t=4263&highlight=poll+loan+rate

4) Boost your "savings account" or emergency fund to what you need to live on at a bare minimum for three months. Put it in Vanguard Prime MMF (unless your wife makes so much you're in a higher federal bracket than 25%)

5) You did declare yourself a resident of a state that doesn't pay state income tax, didn't you?

6) A Vanguard target retirement fund (say 2030-2050) is perfect IF you hold it in a Roth IRA. If you have maxed out your Roths and her 401K and are looking to open a taxable account (for retirement purposes) I would recommend an all equity fund, such as Vanguard's Total World Stock Index Fund. Much more tax efficient for a taxable account. That is a fund you may never have to sell.

7) Do you have anything else you need to save for besides retirement? New car? House downpayment? Moving expenses? Residency interviewing expenses? Be sure to plan for this stuff over the next four years and don't put too much toward retirement. Don't forget to put $1500 aside to pay off that credit card before the 0% expires.

8) Enjoy spending the next 4 years worrying about whether or not you'll be screwed in the military match. I loved med school, but I spent a lot of time worrying about that. I actually lucked out and got what I wanted, but I knew lots of people who didn't.

 

[AF Leroy]

1) I hope you didn't take that "scholarship" for money. I promise you'll regret it if you did. Especially with a spouse with a good job.

Was my preface not enough? It never ends with you people.....seriously. This is why I didn't post in the military forum. I would have been eaten alive for the first 5 or so posts.

2) No, you won't be taxed out the wazoo. Wait until you're an attending. Unless your wife's job is really good.

Good deal. I've been paranoid about tax stuff every since last year. We had some loans forgiven through a state program, and the amount forgiven counted as income, which sucked.

3) Here's a good thread that addresses the pay-off loans vs invest question for you. My recommendation is you pay off the loans with money left over AFTER you max out your Roth IRA and her Roth IRA and get any match from her 401K. Although if you have a long military career you may be eligible for a Roth IRA for most of it, most physicians can't make Roth contributions after residency.

http://www.bogleheads.org/forum/viewtopic.php?t=4263&highlight=poll+loan+rate

Thanks for the link, very good discussion there.

4) Boost your "savings account" or emergency fund to what you need to live on at a bare minimum for three months. Put it in Vanguard Prime MMF (unless your wife makes so much you're in a higher federal bracket than 25%)

Are money market accounts FICO insured?

5) You did declare yourself a resident of a state that doesn't pay state income tax, didn't you?

I am a proud resident of the Chuck Norris State.

7) Do you have anything else you need to save for besides retirement? New car? House downpayment? Moving expenses? Residency interviewing expenses? Be sure to plan for this stuff over the next four years and don't put too much toward retirement. Don't forget to put $1500 aside to pay off that credit card before the 0% expires.

I was thinking about that stuff, and also getting some better insurance policies.

8) Enjoy spending the next 4 years worrying about whether or not you'll be screwed in the military match. I loved med school, but I spent a lot of time worrying about that. I actually lucked out and got what I wanted, but I knew lots of people who didn't.

​

Ok I get it. Please keep to the topic.

 

[The White Coat Investor]

Was my preface not enough? It never ends with you people.....seriously. This is why I didn't post in the military forum. I would have been eaten alive for the first 5 or so posts.

​

Ok I get it. Please keep to the topic.

Forewarned is forearmed. I got warned on this site as an MSII and it saved my butt in navigating the potential downsides of military medicine.

 

[AF Leroy]

Forewarned is forearmed. I got warned on this site as an MSII and it saved my butt in navigating the potential downsides of military medicine.

Tell you what, I'll focus on more body shots if you can work the face for a while....

 

[The White Coat Investor]

Tell you what, I'll focus on more body shots if you can work the face for a while....

A simple thank you would suffice. You may not agree with me now, you may not even agree with me later, but (assuming you've spent at least an hour on the milmed forum) you've received info that 90% of my colleagues didn't have when they signed up, most of whom would not have signed up if they had had that information.

Good luck investing.

 

[The Sonoran]

Hello:

Here's what I think is a great "general" financial step-by-step strategy which will make life much easier.

1. Live "below" your means. Shop consignment/antique stores for future furniture purchases. If you can't pay cash for it, don't buy it.
2. Pay off all debt first.
3. Save towards an emergency fund (6-12 months living expenses) in a MMF.
4. Contribute the max of any "matching" portion of a 401k/403b/457 plan.
5. Contribute the max into a Roth IRA.
6. Contribute the max "after matching" portion of a 401k/403b/457 plan.
7. Invest any leftover funds into a low-cost, taxable index fund.

A Vanguard Group Target Retirement Fund is an excellent choice for all of your retirement and taxable funds.

Good luck!

Mike