I recently received a windfall of $1 million (net). I am in medical residency, so my income is ~$80k/yr, household income $140k. Income will be $450k in 2.5 years upon graduating. Our expenses are currently greater than our income, which was a conscious choice given the unique finances of physician training, wanting to buy a house valuing stability with two kids, and being able to have enough cash in HYSA to give ourselves plenty of runway. However given these circumstances, we haven’t been able to maximize retirement accounts, and would like to especially now.
My question is particularly with regards to this. Between work and IRA, spouse and I can put away $92k a year deducted from our paychecks (+ additional $7k into each Roth IRA). We also plan for the next two years to put the max contribution that is state income tax deductible($34k) into two 529s, totally $136k. How would you manage these retirement account contributions over the next two years? I was thinking to hold back $230k in HYSA, maximize monthly payroll deductions, and then just use this $230k for living expenses. I then have $230k slowly depleted sitting in a HYSA for 2 years, which may not be the best use, but figure is also a hedge against our upside down circumstances and ultimately worth it to maximize getting money into the retirement accounts. Is this how you would get the money into tax advantaged accounts over the next two years, or is there something else I might consider?
Otherwise we are adequately insured in all regards, have basic estate planning, adequate emergency fund (plus will beef up our runway). The other question is should we set aside additional cash for a possible move. We own a house, and intend to stay there through the end of residency training, but circumstances may change such that we want to move. We’d likely plan to rent at first given it’d be a new job / new city, but might be somewhere we know in which case we’d consider buying. I figure though even in this circumstance, will have some cash on hand, can always purchase contingent on sale of my home, or just elect for physician mortgage with 0% down.
In summary, in the next 2.5 years this would get $400k into tax advantaged accounts (401, 457, and ROTH for each of us, and $135k into 529s), I’d hold back additional $100k for runway/living expenses, and then put $500k into VTI/VXUS. Thoughts?
Emergency funds: Currently $110k in HYSA, functions as an emergency fund but primarily have this amount liquid as it serves to cover monthly expenses as our runway until completing residency.
Debt:
- Mortgage: $750k at 3.75% 30yr, currently at $715k
- Car: $15k at 5.5%
- No credit card or school loans
Tax Filing Status: Married Filing Jointly with Dependents
Age: 35
Total portfolio:: $990k with $1M windfall incoming
Current Investment Assets
Taxable $600k
VTI, VXUS, VGT
Tax Advantaged Accounts
$112k in spouse’s traditional 401k
$0 in spouses 457b
$132k in my Roth IRA
$0 in my 401k
$0 in my 457b
$7k in 529s
My question is particularly with regards to this. Between work and IRA, spouse and I can put away $92k a year deducted from our paychecks (+ additional $7k into each Roth IRA). We also plan for the next two years to put the max contribution that is state income tax deductible($34k) into two 529s, totally $136k. How would you manage these retirement account contributions over the next two years? I was thinking to hold back $230k in HYSA, maximize monthly payroll deductions, and then just use this $230k for living expenses. I then have $230k slowly depleted sitting in a HYSA for 2 years, which may not be the best use, but figure is also a hedge against our upside down circumstances and ultimately worth it to maximize getting money into the retirement accounts. Is this how you would get the money into tax advantaged accounts over the next two years, or is there something else I might consider?
Otherwise we are adequately insured in all regards, have basic estate planning, adequate emergency fund (plus will beef up our runway). The other question is should we set aside additional cash for a possible move. We own a house, and intend to stay there through the end of residency training, but circumstances may change such that we want to move. We’d likely plan to rent at first given it’d be a new job / new city, but might be somewhere we know in which case we’d consider buying. I figure though even in this circumstance, will have some cash on hand, can always purchase contingent on sale of my home, or just elect for physician mortgage with 0% down.
In summary, in the next 2.5 years this would get $400k into tax advantaged accounts (401, 457, and ROTH for each of us, and $135k into 529s), I’d hold back additional $100k for runway/living expenses, and then put $500k into VTI/VXUS. Thoughts?
Emergency funds: Currently $110k in HYSA, functions as an emergency fund but primarily have this amount liquid as it serves to cover monthly expenses as our runway until completing residency.
Debt:
- Mortgage: $750k at 3.75% 30yr, currently at $715k
- Car: $15k at 5.5%
- No credit card or school loans
Tax Filing Status: Married Filing Jointly with Dependents
Age: 35
Total portfolio:: $990k with $1M windfall incoming
Current Investment Assets
Taxable $600k
VTI, VXUS, VGT
Tax Advantaged Accounts
$112k in spouse’s traditional 401k
$0 in spouses 457b
$132k in my Roth IRA
$0 in my 401k
$0 in my 457b
$7k in 529s
Statistics: Posted by masters2010 — Tue Oct 29, 2024 11:01 pm — Replies 0 — Views 7