James Osborne, MBA, CFP
[Editor's Note: This is a guest post from James D. Osborne, MBA, CFP®, of Bason Asset Management, a low-cost, fee-only ($4500 per year for financial planning and asset management) advisor in Colorado and one of my advertisers. This post is full of common-sense advice for a new attending.]
So you've spent the last decade or so getting educated, specializing, doing a residency and now you're out, as an attending or in private practice. You're getting a real paycheck – now what do you do? Your first five steps:
1) Do nothing.
No new house, no new car, no big lifestyle changes. Just wait a bit. Yes, you have a nice new paycheck but you also have nice big student loan payments and you are not used to how much money is in that paycheck. Before you make big lifestyle changes, take six months to get used to your new income. If you want to get ahead financially, the first step is not parting with every dollar that comes in. So maintain your resident-like lifestyle for a while and start tackling the rest of this list.
2) Build savings.
Let's face it, your balance sheet is ugly right now. Lots of debt, not a lot of cash, probably even less invested for retirement. If you don't have one already, you need to have a cushion in a savings account. There are endless rules-of-thumb about this (3 months livings expenses, 6 months, etc) but let's pick a target: $25,000. You're gainfully employed now in what should be a stable position, so unemployment is not the risk most of you face. But cars break down, refrigerators and furnaces quit, unexpected trips to see family and attend weddings and go to graduations will come up. Start right now putting money away into savings – real money. At least $500 a month.
3) Get disability insurance.
You have now invested hundreds of thousands of dollars in your future earning potential and you need to protect it. Get competitive quotes from multiple carriers and make sure you understand the differences between policies. PLEASE work with an independent agent who can show you multiple quotes and specializes in disability insurance. If you don't know anything about disability insurance, The White Coat Investor has already done an excellent job giving you a primer – go read it here. Most surgeons and specialists will want an “Own Occupation” rider that specifically covers your ability to practice in your specialty. You also want a Non-Cancelable/ Guaranteed Renewable policy. Again, discussed by WCI here, but the short end is you do not want to give the insurance company any opportunity to raise premiums, reduce benefits or cancel your policy once it is in place.
4) Make a plan of attack for your student loans
Getting to where you are now wasn't free and the interest tab on your student loans is running up. Stafford loan rates are now at 6.8%, not cheap by today's standards. Private loans can be higher. There are varying schools of thought on debt repayment – the snowball method (attack the smallest balance first) or the highest-rate-first strategy. The snowball method is very emotionally satisfying – actually seeing a debt close and go away. A highest-rate-first strategy will result in less interest paid over time. Whichever you choose, you need a plan of attack. A 6.8% guaranteed return is tough to beat and many doctors would do themselves well in making debt repayment a top priority. [Especially with the recent threats to the Public Service Loan Forgiveness program-ed]
5) Start saving for retirement now
Whether you are an employee, an independent contractor, self-employed or a partner in a private practice, research your retirement account options. Employees may have access to a workplace retirement plan such as a 401(k) or a SIMPLE-IRA [SIMPLEs are generally used by employers that hate you and don't want you to ever retire-ed]. Self-employed individuals or business owners may have these and other options (including an individual 401(k), a SEP-IRA or plain old IRA) to evaluate. While this need must be balanced with repaying student loans, the power of compounding is on your side while you are young. Even if you are aggressively paying down debt, consider putting away 5-10% of your pre-tax income into an available retirement plan (and of course only invest in index funds).
Above all else, understand this: the single largest determining factor for your future financial success is the relationship between your income and your lifestyle. I have worked with plenty of clients and seen school teachers who retired comfortable at 60 because they lived within their means and seen business owners bringing home $200,000 and unable to retire because their spending habits grew in lockstep with their incomes for decades. Everything else is important: insurance, getting out of debt, investment policy, investment costs and taxes, but these things combined pale in comparison to the simple truth that you must spend less than you bring in if you ever want to reach financial independence. If you start this habit early, it is easy to continue. If you get behind, it can be incredibly difficult to change.
What do you think? What other advice do you have for those reaching attendinghood this summer? Comment below!
Solid. This is the type of adviser I would want to hire. Alas, I don’t have $4500 a year I am willing to part with. Maybe someday…
I agree with everything except I do take issue with the label of $4,500 being “low cost”. It’s more than 2 mortgage payments for me!
It’s all about what you’re comparing it to. 1% of assets when you have $2 Million is $20K per year, just for asset management. I consider an advisor working for less than $5K a year to be low cost. If you are ultra-price sensitive (like I am) and feel like you would rather do it yourself than pay someone a few thousand a year, then by all means do so! That’s certainly a viable option.
But you’re not going to be able to hire a good financial planner or a good investment manager for $200 a year. There just aren’t any (unless you count roboadvisors, but even then, you’re probably still looking at up to $4K a year or so for a $2 Million portfolio.)
WCI, I love your site, but you are starting to talk out of both sides of your mouth.
$4500 a year to have someone invest in index funds, go to term4sale.com, and to be another middleman between you and your disability insurance company makes no sense. 1% DEFINITELY does not make any sense, but that doesn’t make $5k/year palatable (just because you say no to buying a $200k car doesn’t mean a $100k car is now cheap in absolute terms)
The fact that you think $5k/year, which over 20 years is $100k of income, is “low-cost” is crazy and frankly disappointing. You are better off just putting everything in a target-date fund, signing up for something on term4sale, reading the rest of your website.
The reason this post is particularly interesting to me, especially in response to someone talking about how this fee compares to their mortgage, is because you are saying $5k a year is “low-cost”, while on bogleheads you’re talking about how doctors are insane for living in expensive coastal areas. Id rather spend $200k (or 40 years of advising) on a house on one of the coasts than to what you know refer to as a “low cost” advisor
If you can negotiate the treacherous “Financial Adviser” *minefield* and still get to $2M in assets, you are probably a very high earner or a prodigious saver, or both. Then you certainly don’t need to hire anybody, at $5K or $20K. If you want someone for a second opinion, then hire Vanguard for $250. Or I can just buy your book at $9.99. Better still, just read this blog for free!
I agree. Absurd to consider $4500 per annul low cost. Wonder what kind of kickback was offered for this guest speaker’s post?
DrM,
Not a fair question IMHO. If WCI was to sell out, he would have done so years ago. He would not have disclosed the fact that the author was an advertiser. He could have censored your comment as well.
This raises a good point. Doctors have Stark laws regarding referrals. No such laws, at least not as stringent, in the financial world. Another mine in the minefield of picking a decent financial adviser.
Just to clarify, there absolutely are regulations in place about registered investment advisors disclosing referral fees. It is a line item in every Form ADV filed.
You can look up any RIA’s form ADV here:
http://www.adviserinfo.sec.gov/IAPD/Content/Search/iapd_Search.aspx
And mine is here (for the record, I never have and never will pay a referral fee):
http://www.adviserinfo.sec.gov/IAPD/Firm/165450
You don’t need to wonder. Financial conflicts like this are always disclosed on this site.
I never get paid for guest posts. Period. They’re all written and submitted without any promise of publication and published only if I think they’d be useful for the readers. If you don’t think they’re useful, the comments section is a great place to let me know.
If an advertiser on the blog buys a “widget banner ad” for at least 6 months, I write a post featuring their business in some way. An example is my recent interview with Jon Appino about contract reviews. As a general rule, these posts are very much appreciated by the readers and an opportunity to get an inside look at the industry and hear from an expert on a particular subject. Mr. Osborne/Bason Asset Management has not bought one of these widget banner ads.
Mr. Osborne is a paid advertiser on the blog, however. His firm is listed on this page: https://www.whitecoatinvestor.com/websites-2/. I charged him $100 for that listing.
If you think $4500 per year is absurd, see the discussion above and consider what you would charge someone per year to be their financial adviser. It might not seem so absurd after doing so.
Hmm. I would guess that most new attendings would need quite a few years (if ever) before they could benefit from spending $4500/year on a financial advisor. You’d need a 75,000 investment earning 6% to break even. This website, and Bogleheads have both shown how low-cost index funds consistently beat out expensive actively managed plans, and that usually “simple” wins out. And investing $375/month (4500/year) for 30 years would make you ~$256k in compounded interest at a return of 5.9%.
Put another way, if you had $200,000 in student loans at the end of residency, and planned on paying them off over 20 years, if you took the $375/month and put it towards your loans, increasing the monthly payment from 1425 to 1800, you’d pay off your loan in 15.5 years (4.5 years early) and save yourself $50,000 in interest, if your loan had the usual 6.8% rate for students graduating now.
Maybe I’m wrong though, and I’d love for someone to show me some simple numbers/calculations to show how spending that much would be worth it.
DTSC, Dr. G. and Nate-
The math behind do it yourself investing is correct. If you are going to learn to do it right yourself, then saving advisory fees, whether they are $30K a year, $4500 per year, or $1000 per year, is going to benefit you financially. This is one of the reasons that you, and I, do not use an advisor.
However, what you, perhaps, do not realize, is that your desire to learn about personal finance and investing, and your discipline to carry out a financial plan for decades, is relatively rare among your colleagues. I have the advantage over you of interacting with thousands of doctors with varying degrees of interest and knowledge about personal finance and investing. I assure you that the vast majority would benefit from paying someone $4500 a year for their advice and assistance. The amount of benefit they would get far outweighs the cost. If you doubt me, ask the next doc you see in the hospital to describe for you the process of funding a Roth IRA through the back door. Or the value of a 529. Or how to choose a good mutual fund. Or where to go to determine if you’re paying a reasonable price for your life insurance? Or what elements of a disability policy matter most. Most docs don’t know and don’t even care about these important details. It isn’t that they’re incapable of learning them, simply that they either haven’t, or don’t want to. I can benefit them by pointing them to an advisor, who for a fair price, will take care of these details and give them good advice.
While $4500 a year doesn’t seem low price compared to $0 per year, it certainly seems low price when compared to what a typical advisor would charge, about 1% of AUM. Let’s compare the prices of some of the flat fee advisors who frequent this site, to some of the “full-service physician specific advisors” to a typical “1%” advisory firm like Larry Swedroe’s.
Portfolio of $500K
FPL: $1000-2000
Bason: $4500
Rick Ferri: $3750
Cardiff Park:$1800-3600
Sensible Portfolios: $2800
Larson Financial: $6250
OnCall Advisors: $6000
Typical 1% advisor: Won’t even take you without $1 Million
Portfolio of $1 Million
FPL: $1000-2000
Bason: $4500
Rick Ferri: $3750
Cardiff Park:$1800-3600
Sensible Portfolios: $5600
Larson Financial: $10,000
OnCall Advisors: $11,500
Typical 1% advisor: $10,000
Portfolio of $2 Million
FPL: $1000-2000
Bason: $4500
Rick Ferri: $7500
Cardiff Park:$1800-3600
Sensible Portfolios: $11,000
Larson Financial: $18,000
OnCall Advisors: $22,000
Typical 1% advisor: $20,000
Portfolio of $5 Million
FPL: $1000-2000
Bason: $4500
Rick Ferri: $18,750
Cardiff Park:$1800-3600
Sensible Portfolios: $27,000
Larson Financial: $35,000
OnCall Advisors: $55,000
Typical 1% advisor: $50,000
Are you seeing now why I describe a flat $4500 as “low cost”? If you’re charging 1/4 of what Rick Ferri is charging and 1/10th of what a typical advisor is charging, you’re pretty darn inexpensive in my book.
Put yourself in the shoes of an advisor. What would you charge and why? Would that amount allow you to stay in business? Would that income be worth it to you?
WCI,
I see where you’re coming from. The paradox is that the doctors who can’t or don’t care enough to learn that higher cost firms are fleecing them certainly won’t know what a relative bargain they are getting from Bason.
On the other hand, those of us who have educated ourselves from your site and sites like The Finance Buff and Bogleheads.org know that paying someone $4,500 per year is still too much (since we now have the knowledge to get things done for free or close to free). Why don’t we just call Mr Osborne a “lower” cost adviser and leave it at that.
Regardless, I’m always of the opinion that even if you hire a low or lower cost adviser, EVERYONE should know enough about investing to know that their adviser is doing a good job, or at least know that they’re not being screwed. NO ONE has more interest in your financial success than you; an adviser can’t read your mind. It’s just like I tell my diabetic patients to educate themselves about their disease and check their sugars and their feet, etc. They have to take ownership of their condition. Just like investors have to take ownership of their portfolio.
BTW, I just copied this off Rick Ferri’s Portfolio Solutions website: “The annual investment management fee for Portfolio Solutions® is 0.37% for the first $3 million of investment assets managed, and 0.20% for assets greater than $3 million”. So it should be $6,000. Rick Ferri does charge a $925 minimum quarterly fee in lieu of the 0.37% annual management fee for assets under $1M.
I can’t say I disagree with any of that. Are you really saying there is something significantly different about the phrase “low-cost” and the phrase “lower-cost?” Pretty subtle difference in my view. At what price would “low-cost” be appropriate in your view?
Rick charges a minimum of $3700. So it would be $3700 for $500K, $3700 for $1 Million, $6400 for $2 Million, and $10,000 for $5 Million. Interesting that it is cheaper for $3 million than for $2 million!
Well, admittedly, I’m cheap and a DYI’er, so “low” cost for me is <$1,000, maybe <$2,000 at most. $2,000 is my monthly mortgage payment, so anything more than that is not low. I would call <$5,000 "lower". Why? For someone with a $500,000 portfolio, $5,000 is still 1%. As you've mentioned yourself on more than 1 occasion, it doesn't take much more work to manage $2-3M than $0.5-1M. Greater than $5-10M one might have to worry about estate tax issues and the adviser deserves more. Most PCP's certainly won't have to worry about exceeding that amount. I agree it's just my 2 cents worth and my cut offs are completely arbitrary.
Some advisers have confessed to me that they need about $3K per client to break even. Now, obviously, some folks are able to make a profit at less than that. But I can’t imagine managing a portfolio for $500 a year is profitable for a person to do. I certainly wouldn’t go into the business planning to charge $500 a client. With 50% overhead, I’d need 400 clients just to make $100K a year.
I mow my own lawn because I’m not willing to pay $35 to get it mowed each week. But if I were mowing lawns, I sure as heck wouldn’t be doing it for less than that. Just because many people like you and I aren’t willing to pay $500 for our portfolio to be managed doesn’t mean there aren’t a heck of a lot of people out there willing to pay $4500 for it and consider it well worth the money. An advisor doesn’t have to convince everyone his fees are a good value. He only needs to convince a certain number. In the case of this advisor, assume perhaps 50% overhead, he would need about 90 clients to have an income comparable to a primary care physician. Are there 90 people in the world for whom $4500 is a great value? Of course. There are probably 90 people who will visit this site this month who see that as a great value.
Not everything is logical. I mow my own lawn too, though what I really should do is go hire someone to do it and then go see another 12 patients. I would make a lot more than $140 per month in the 4 hours needed to mow the lawn. Go figure…
“So it would be $3700 for $500K, $3700 for $1 Million, $6400 for $2 Million, and $10,000 for $5 Million. Interesting that it is cheaper for $3 million than for $2 million!”
It’s actually $7,400 for $2m (much higher than $4,500), $15,100 for $5m (0.2% only applies to next $2m above $3m).
I want to point out it doesn’t have to be $4,500 a year every year for 20 or 30 years, although advisors using DFA funds make it more difficult. As Jim mentioned before, most of the work and value is front-loaded. Pay a fee, get the value, and then stop. That’s the best way to go IMO.
Yea, I was apparently struggling with math yesterday! Thanks for the correction.
I appreciate your comprehensive reply. I don’t dispute that $4500 is significantly cheaper than the others you’ve listed. I am more commenting on the entire industry and if the end result is you are just buying index funds, doing a one-time term4sale purchase, that even $4500 is too much.
When you and other bogleheads talk about the difference between an expense ratio of 0.1% vs. 1% for active management, the argument is fees have a compounding negative effect on your investments. This is why low-cost index funds work. Having an advisor at the level of $5k a year, or even higher, is a massive increase in the expense ratio of your funds. And to date, no one has shown me a benefit compared to just telling someone to put it all in a Vanguard Target Retirement Fund.
I agree that much of the benefit of a financial advisor is in the financial planning, and not in the asset management side since that is relatively easy to automate in an inexpensive, broadly diversified manner after reading a book or two. But lots of people struggle with figuring out how much they need to save, when they can retire, how much they can spend in retirement, whether they should pay down student loans or max out retirement accounts, what kind of retirement account to use, whether to go for loan forgiveness programs, how much disability insurance to buy, what kind of disability insurance to buy, how a backdoor Roth IRA works, where to open an HSA etc etc. There can be a lot of value added there that is far more useful than “buy a target retirement fund.” Plus, even with that advice, there needs to be an understanding of why that is good advice. Without that understanding, the necessary “stay the coursing” won’t occur.
I see financial planning/investment management a bit like climbing. When someone doesn’t know anything about it, it looks really, really dangerous. Once a beginning climber realizes there is a lot of safety/back-up/overkill engineered into the system he starts thinking it is supersafe. Then, as he gains experience (and loses friends in “freak” accidents) he eventually develops a healthy respect for the uncontrollable and the danger inherent in being far off the ground. Likewise, with financial planning and investing. At first, it looks really complicated and hard. Then he reads a few good “Bogleheadish books” and realizes, “Hey, this isn’t that hard. I can just save 20% of my income each year, buy a handful of low cost index funds, and rebalance them once a year.” However, as he continues to learn he realizes there is a lot more subtlety involved in a lot of financial stuff. Which index is better than others? Should I tilt to value? Small? When do I start toning down the risk? How does real estate fit in? At what age should I take Social Security? What about my spouse? What if we get divorced? Should I buy that index fund in the 529 in my state, or in Nevada’s? Add in some behavioral issues and all of a sudden paying an advisor a reasonable price doesn’t seem so stupid any more. Lots of people really benefit from the coaching aspect (save more, you can do it) and also from helping get two spouses to agree on what to do with their money. Most advisors I talk to do a lot of marital counseling disguised as financial planning.
WCI,
First TFB goes out and spends $250 to get a financial plan from Vanguard. Now it’s interesting to hear you tout the benefits of having a FA!
Yes, there are subtle things that FA’s know that most of us don’t. However, Jack Bogle’s 1st Pillar of wisdom is that “Investing Is Not Nearly as Difficult as It Looks”. He stresses “doing a few things right”. So most of us don’t need to know all the details, but rather just get the big broad concepts right – spend less than you make and keep investing costs low. We won’t save every dime in taxes by doing backdoor Roths or pick a 529 plan with ER’s lower by 15 basis points.
It’s a delicate balance, I’m afraid. If more doctors used FA’s, more doctors can benefit from their knowledge. However, more doctors now run the risk of hiring one of the many *bad* FA’s who’ll run their investment ship aground. I myself had 2 bad ones before finding the Bogleheads. I got sold 5.75% front load American Funds. Fortunately, I found out he wasn’t so bright when he told me to pay off the student loan with the lowest balance first, rather than the one with the highest interest rate. My second FA quit when the market tanked in 2008. His parting advice was for me to buy actively rather than passively managed funds. Good thing I didn’t heed that. So it really can cut both ways. By the time one educates himself to know who is a good versus bad RA, he might well have enough knowledge to be a DIYer.
Finally, if you need marital counseling disguised as financial planning, you’re most likely *screwed* as you and your spouse have such divergent views on money.
Wow, great discussion this turned in to. I’ll just make a few points and be on my way.
– My experience agrees with WCI: most advisory firms run a breakeven around $3K in revenue. And I would say that is for full service financial planning and investment management. For just asset managers (like FPL or Evanson) the breakeven is much lower, as they are serving a much larger base on an automated basis rather than working closely with clients in a more comprehensive relationship.
– I’ve never really intended to be a “low cost” provider. It has worked out that way for many clients compared to what they may pay elsewhere, but that was never my intent. My intent was to have a more honest conversation about how investors pay for financial advice and that it should not be tied to portfolio value. My fee structure reflects my costs, what I consider to be reasonable compensation as a professional and how many clients I know that I can have productive relationships with (this number is under 100, FWIW).
– My experience has been that some people will never see the value of financial advice, which is fine. But there is a significant portion of the population that does value an ongoing financial relationship. Perhaps we should leave it at that? I could change my own oil in my car but I choose to pay someone else to do it. Waste of money? Your call.
– Lastly I agree with WCI that most of the value a financial professional offers is 1) behavioral maintenance and 2) real financial planning. It’s not stock picking or investment performance related. It’s about income planning, tax planning, retirement planning, charitable giving, wealth transfer, etc, etc, etc. The real things we can control in our financial lives.
Thanks for an engaging conversation!
This is good, basic, actionable advice for a new attending in my opinion.
I do take some exception to the editorial comment regarding SIMPLE IRAs. They are indeed an imperfect retirement plan vehicle, but there is a reason they exist and that is because they are indeed simple. As an employee starting at my first job after residency, I participated in the plan offered by the small private practice that I joined. I did not like the low limit on contributions and the expensive choices that my employer at the time offered. It certainly wasn’t ideal.
A couple years later, I started my own practice with two other doctors, and we started with a SIMPLE IRA through Vanguard because the whole process was very easy and manageable. It was all we could do at the time with so many other things to worry about. Then, we began to offer a 401(k) a couple years later, but for those who have not been through the process of setting these up and administering them, I can tell you that it is a real challenge fulfilling all the obligations of the plan, taking the fiduciary duty seriously, choosing investments, etc. And it can be expensive for the participants and/or expensive for the practice administering the plan. Typically, there is a push of the expenses from the plan sponsor on to the participants in order to save the business money.
That and it seems like the only people in the whole financial services world who are at all liable for the outcome of their investment choices are the poor fiduciaries (like me) of these small business 401(k) plans that take this on. It took a few years and two different plan providers, but I am now very pleased with what we are able to offer our small group. Still, the whole process stinks, and there is so much potential to go wrong on so many level that I can see why people choose SIMPLE IRAs to avoid the hassle.
Sorry to go on so long of a tangent given the focus of the article.
I found the process of changing our 401k plan provider from one that was setup by our advisor (with costs and fees) to a low-cost plan that’s offered by Ascensus to be daunting at first but turned out to be smooth. You do have to invest some time to understand how these plans work but it’s worth the effort.
I agree. I certainly invested an awful lot of time educating myself about these plans, and we have tried both the low budget do-it-yourself route as well as working through an advisor. Pros and cons to each, and I very much value the advice component that an advisor adds to help work with employees. In the end, I think we offer the best plan that a business our size can, but it certainly takes dedication and a strong interest in financial matters for a small practice to pull this off well.
It’s hard to disagree that a SIMPLE is simpler than a 401(k). But it is pretty easy for a small practice to hire this work out that it seems like a weak excuse not to use the 401(k) instead (as you eventually did.)
Fair enough. Perhaps I took too much issue with the hate you comment that I suspect you made somewhat in jest. I would argue that an employer who offers a high cost, poor investment choice 401(k) plan may indeed “hate you” more than one who offers a more limited but fair Vanguard SIMPLE IRA. After all, a full participant in such a high cost plan may transfer a far greater amount of wealth to the financial services industry than the participant in the SIMPLE plan.
It is all too easy for a practice to hire this work out so to speak. That doesn’t always lead to the best outcome. I get unsolicited calls all the time wanting to sell us a better 401(k) plan, but they are only ever better for the person doing the selling.
The problem with writing in a style that is 100% factual all the time in any and every situation without any flamboyant language is that no one reads it. It reads like a legal contract.
But if you write something like “Employers who offer you a SIMPLE IRA instead of a high-quality 401(k) hate you” then people remember that SIMPLEs are generally inferior to 401(k)s. They might even remember the reasons why. They might even go the extra mile to offer their employees a high quality 401(k) like you have.
Well said, and I actually chuckled when I read the comment.
Well said, and despite my comments I rather enjoy your writing style. He hate you comment gave me a good chuckle when I read it.
This is great advice. I’ve been out of fellowship for exactly 1.5 years and the most important thing we did was start saving from day one. We lived in our old house during the first 6 months of being out of training and eventually did buy a house(less than 1.5 times my yearly salary but still nice) and were able to put away a 6 month emergency fund plus some. That has slowed since buying the new house but we still save 18% for retirement, max out my hsa and put a couple k in our savings account each month. I still drive the same car I bought 11 years ago and we don’t have real bedroom furniture but that will come. I think the biggest surprise for me was even though we are fairly conservative with out money it’s amazing how much more expensive the lifestyle of an attending is….when you add up mortgage, disability/life insurance and student loans it’s more than we lived on per month during training.
Great article. I think too often people forget that there’s really two ways to get ahead-make more or spend less! I wouldn’t count on the making more. Also, I think the pressure of family and friends can get to people. I met with a couple making the transition this summer and they were feeling pressure from the people who thought they were the “rich doctors” and should get the fancy house/cars right away. Build in flexibility so if life changes your in a good position to handle whatever comes your way. Don’t forget to take advantage of the programs like the DRB student loan refinance that can help your position even more. Keep it simple!
Nice article. Provided there isn’t a number six espousing all the joys and wonders of Universal Life Insurance, then I’d say this is exactly the kind of advisor I would want to have. I’m still at a point where I enjoy the DIY approach, but if and when the day comes, it’s good to know that this type of help is available.
Great post and suggestions. I agree that the advisor cost of $4500 could be lower but I also agree with WCI that this is something that many/most physicians need. WCI, for your post comparing advisor fees I think Evanson Asset Managers deserve a mention. They follow an indexing philosophy, allow access to customizable portfolio of DFA funds, and do so for a flat annual rate of approx $2000 regardless of the size of your portfolio. That’s tremendous value!
I agree that Evanson is a firm giving great advice at a great price.
[Especially with the recent threats to the Public Service Loan Forgiveness program-ed]
What do you mean by this? I haven’t heard anything.
The Obama Administration’s proposed budget for 2015 caps the total forgiveness at $57,500.
Not that it affects me, but with the Obama cap of $57,500 does that affect people who have been doing IBR for the past few years or are they grandfathered into the system. I just knew that deal was too good for the government to let medical school graduates continue to use. On the other hand, I believe that the amount of student loan debt that is forgiven will include a tax bill, so if someone is in the 39.6% tax bracket, they would owe that federally on the forgiven debt. Is there also a tax bill on the forgiven debt at the state level?
PSLF forgiveness is tax-free at the federal level. IBR forgiveness is taxable. I don’t know about the states, but they generally follow suit. The cap isn’t law yet, but some are talking about grandfathering those currently in IBR. Stay tuned!
Can someone bullet point why SIMPLEs are bad (at least as oppose to 401ks)?
https://www.whitecoatinvestor.com/simple-iras/
Main problem for docs is the low contribution level ($12K).
Why as a small business owner you should consider a Pension:
A comfortable retirement isn’t just something that happens. It takes much planning and years of preparation to get there. For many people, their retirement plan will be the bulk of their savings and optimizing this savings can yield significant rewards. One of the many advantages of smaller companies are the flexibility they have when it comes to deciding which types of retirement plans to implement.
Most companies have shifted away from pension plans and have implemented 401(k)s because of the increasing costs of pensions that have come with lower interest rates and increasing life expectancies. And yes, because of their actuarial needs, pensions can be costlier. In the right circumstances though, a pension plan might be the best answer for many profitable businesses. Additionally, since you may be able to save more pre-tax dollars, the tax savings may significantly out-weigh the additional costs of implementing and maintaining a pension.