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I’m a bit late to join in for 2018, but I figure I might as well get started in preparation for next year. I posted a bit in the retirement planning and student loan threads some time ago asking for advice, and since then I’ve fired my financial planner, taken charge of our retirement, student loans, and general financial management myself. We’re 37 and 38, to give a context to the retirement saving situation. My wife is a physician in a field with high burnout risk, and she’s been depressed for a while. As a result my overarching goals are to reduce our liabilities as much as possible while also trying to plan retirement. We’ve got a fair amount of student loan debt from medical school as well as two homes we’re paying on, the old one we’re renting at a slight loss to relatives. I’m a scientist and make a good income as well, with good benefits. Overall Goals: 1. Pay off Wife’s student loans Status: In the last twelve months, since I started actively targeting this we’ve paid down the balance from 122k to 84k. We presently owe 54k in 3.25% interest loans and 30k at 6.55%. My goal is to eliminate the 6.55% loans in 6 months, paying 5k extra each month to achieve that. Once this is done we’ll have a fixed 1200/month payment for the remaining 50k, which should pay off in four or five years. Whether we pay it off faster depends on the burnout situation. 2. Maximize 401k and IRA contributions. Almost done. The 401ks have been maximized (at 18500) for years for both of us, but I just started the IRAs two months ago. Because we’re over the limit I’m using a backdoor Roth for each of us. One of the good things our financial planner did was encourage my wife to convert her 30k residency IRA to a Roth. However, he neglected to tell her about the tax implications, which led to a fun April tax bill a few years ago, since it happened immediately after we bought our house. We currently have 130k and 70k in our 401Ks and 34000/4000 in our IRAs. 3. Emergency Fund: Because of the large liabilities we have from two homes + loans, I’m targeting an emergency fund balance of 50k. Our fixed monthly liabilities should drop to 6-7000 in six months, so I feel comfortable with that amount in a low risk (VMMXX) account. We’re at 34000 now and I’m adding 1500/month. 4. Investment Fund: I put 10k into VTSAX as a starting taxable brokerage fund a few months ago. It doesn’t really make sense to do this while also paying off loans, but I viewed it as another ancillary source of emergency money. I’m not adding more to it until the loans and emergency fund are satisfied, but after that I want this to be the primary spot for additional income to go, since I have concerns about the sustainability of our income long term. 5. Mortgages: Our first house was bought shortly after we had our first child, and it was near my Wife’s family. Unfortunately, it’s in a bad school district and the house is now worth less than we paid for it. We’re renting it, but it’s losing a few hundred/month. Long term we’ll sell it at a loss, but we have another year of renting for it to potentially be tax-advantageous to do so. Our primary home has PMI, so my last real goal is paying down enough extra to remove the PMI and save a few hundred/month. I’ll switch to a biweekly payment scheme for both houses at some point too, since my wife and I are both paid biweekly and it will be advantageous long term. Velius fucked around with this message at 17:05 on Nov 9, 2018 |
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Nov 9, 2018 17:03
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BEHOLD: MY CAPE posted:It sounds like your priorities are reasonable and you are taking the correct steps to take control of your situation. Good luck with your wife's work situation, I hope she's able to strike a balance and find something that is sustainable long-term. I totally understand how bad it must suck to grind through medical school and residency and worry about burning out after all of that. You’re not wrong about the student loan interest. It doesn’t seem likely to be worthwhile at present, though, since I would need to consolidate the 3.25s up and the higher rate stuff will be gone soon. Regarding the mortgages, the PMI is on my primary residence, not the rental. The rental is $1400/month for the mortgage including tax and interest, and we’re getting $800 from a cousin who is renting it. The cousin is finishing nursing school soon at which point we will be raising the rent to cover the mortgage in full. I’d still like to ditch the property medium term because I’m not sure they’ll stay indefinitely. They’re on my wife’s side or I’d be more comfortable checking in on their long term plans. Maybe during the holidays I can catch up. For our primary residence PMI is 142.50/month. We’d need to pay 43k to get to 80% principal balance relative to the closing price/appraised value, so that’s looking like a ~4% interest rate, or slightly worse than the mortgage alone. Am I correct in considering this as additional interest to the 3.625% I’m paying for that 43k already, so really it should be treated as a 7.625% rate? If so then clearly that should be prioritized once the student loan debt is gone, probably above a taxable brokerage account. Velius fucked around with this message at 20:19 on Nov 9, 2018 |
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Nov 9, 2018 19:46
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