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  • White.Beard.Doc White.Beard.Doc 
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    Splash Refinancing Bonus

    Let’s say I have 1M to invest and I invest it in taxable after paying 50% tax.  I now have 500k and I die.

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    I’m not following paying 50% tax for investing in a taxable account.

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    Living in a very high tax state, with high income, high marginal tax rates, I would pay 37% federal and then state income tax on top of that.  In my case I pay 45.8% total marginal income tax, so I am rounding it to 50%.

    Example: I earn 1M, pay almost half of that to income taxes, then invest what is left after paying the tax in my taxable account.  If I invest the 1M in tax deferred, the entire 1M goes into the investment, leaving a much larger balance but subject to income tax upon withdrawal, or more estate tax upon death.

    White.Beard.Doc White.Beard.Doc 
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    How do I build a life that allows me to take good care of myself in all realms, physical health, emotional health, enough exercise and sleep?

    How can I build healthier and stronger relationships with my spouse, family, friends and community?

    How can I position myself in a good place to allow me to give back more to others?

     

    in reply to: Success and Happiness #241607 Reply
    White.Beard.Doc White.Beard.Doc 
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    Whether the investments are in tax deferred or in taxable, the estate taxes will be the same.

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    This sounds funny to me.

    Let’s say I have 1M to invest and I invest it in taxable after paying 50% tax.  I now have 500k and I die.

    Now let’s say I have 1M to invest and I invest it in my tax-deferred cash balance plan.  I now have 1M and I die.

    Are you saying the estate tax on the 500k and the 1M is the same if I am over the estate tax exemption?  Not sure I am following you there.

    White.Beard.Doc White.Beard.Doc 
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    Please note, Cash Balance.  There is no need for DB plans anymore, and there are advantages to CB plans (which was also my experience looking at various designs provided to me by actuaries), and we now have a pre-approved plan document available which brought  the cost of these plans down.

    When you consider the cost vs. benefit for a CB plan, you have to look at the bigger picture.  Usually adding a CB plan increases % to owner, which is the primary measure for me.  However, there is also a cash flow concern and whether the timing is right for you (for example, if you have high level of high interest debt, I don’t recommend this type of plan in favor of paying your debt down, unless your income is quite high to allow for both).

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    Thank you Kon for linking your cash balance article.  Very helpful.

     

    Is it always true that a cash balance plan is better than a DB plan?  Does this depend on the circumstances, or is this always the case?

    This business is already intentionally generous to all of the NHCE and HCE employees.  The outside pension consultant who was pitching us (probably salivating at the thought of some juicy AUM fees) said that a small increase in contributions for NHCEs from 6% to 7.5% would pass all fairness testing and allow all kinds of flexibility for both HCEs and the owner.  This increase in contributions for NHCEs would only cost 0.12% of our annual revenue.

    The owner is approaching retirement age, pays large income tax bills every year, funds significant sums to taxable each year, has no outstanding debt of any kind left, and has sufficient extra income to fund a DB or Cash Balance plan.

    White.Beard.Doc White.Beard.Doc 
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    It sounds like you have thought through the many possibilities and are ready for whatever comes.  Negotiating can be challenging and everyone handles it differently.  You know yourself so you made your demands in a written form to avoid not asking for what you need, a good strategy if you are better in writing than in person.

    My daughter is typical for many young women, slow to ask for what she clearly deserves.  She likes to wait until raises and promotions are offered on a silver platter.  She has finally risen to a high level of leadership and a high level of pay, but it likely took her twice as long to get there due to her patience.  One thing I have had to work on is understanding that what works so well for me may not always work so well for others with different personalities and negotiating strengths.

    White.Beard.Doc White.Beard.Doc 
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    FWIW I haven’t ever gone in high and played the meet somewhere in the middle game but rather tell the employer my requirements up front and if they are able to accomodate we have a deal. 

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    I think that is a better approach. In that vein, I actually sent an email earlier this morning listing what I want, gave them 10 business days to reply then said I will be exploring other opportunities and stepping down as medical director if the terms are not agreed to in the alotted time. I went all-in. I have “outs” if we are to continue with the poker analogy. I have updated my CV and am uploading to physician match and I am going to start calling my local contacts this upcoming week.

     

    Thank you to everyone on the forum who gave me the confidence and guidance to be assertive. Even if they say no I will be fine. I have plenty of options.

     

    Thanks!

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    Wait, so you just sent an ultimatum in an email?  I am not sure if that is how I would have done it.  I might bring my request in writing to a meeting, discuss it and then hand it to the administrator.  By sending an email, you lost an opportunity to read the response.

    If the hospital administrator feels screwed by you, backed into a corner, do you think that might have an effect on how that administrator treats you in the future? Even if they agree to accept all of your demands?  I have always tried to be firm but nice, and at the same time I have worked hard to be present and to understand the other side’s position so that I can get much of what I want while also giving back some of what is important to the other side.

    Please be cautious, and here is a tale of why: A few years back a colleague does something similar to administrator when they are backed into a corner.  The physician is given what they demand by the administrator, but there is tremendous bad blood left over from how things were handled.  The administrator then secretly goes to a recruiter and hires another doc with credentialing completed several months later.  The original doc then gets terminated on the spot, escorted out of the hospital by security for “failing to abide by the terms of the original written contract” and is without a job or income for over four months (time spent securing a new position and then getting credentialed).  He did get a locums gig later during that dry spell, but paying the mortgage was tough.  It was quite stressful for him and his family.

    Remember, how you conduct yourself and how you make people feel is always remembered.  Pay back can be painful.  If I was in your shoes, I would go meet the administrator at the beginning of this week.  And I would walk into the office with a smile and frame it as a listening tour.  I might apologize and say that I have a hard time asking for what I need in person, so I put it in writing.  And then just listen and explore with some targeted questions the response to what you asked for.  “I asked for what I feel is reasonable.  Is the hospital able to come through with fair compensation for everything that I do?”  Reading the body language is as important as listening to the words.  I know we all have different negotiating styles, but be careful not to create hard feelings while at the same time asking for what is fair and what you need.

    Would you be in a tough spot if they were to say no and ask you to leave?  Or do you think they would allow you to leave on your own preferred timeline?  How long would it take for you to secure a better position?  When you give an ultimatum, it is important to think through all of your plan B beforehand.

    Being willing to leave puts you in a strong negotiating position, but only if you don’t damage relationships in the process should you end up staying, and only if you have a timely transition to a high quality position available if you end up leaving.  Try to make this into a win/win if at all possible.

    White.Beard.Doc White.Beard.Doc 
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    I would recommend saving the money in a high yield online savings account.

    You might put $500 towards something fun, but only if it is worth it to you.

    And you could consider putting $1000 in a vanguard stock mutual fund to learn about how it feels to stay the course in both up and down markets.

    Most of all, cautious spending and saving is best at this point. When I was your age, I lived in a small apartment in a marginal neighborhood for $200/month when typical rents were so much higher. And those were some happy times. I didn’t need much money to find fun things to do.

    in reply to: First Post… What would you do with 5k? #241151 Reply
    Liked by bosdent
    White.Beard.Doc White.Beard.Doc 
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    Be sure to ask for more than you are willing to accept because they will likely only meet you half way.

    White.Beard.Doc White.Beard.Doc 
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    the pension consultant that spoke to us this week is AUM compensation for the defined benefit portion of the plan, and he mentioned putting life insurance inside the plan 

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    super skeptical hippo eyes toward this guy

    I’m assuming there are going to be funds of yours and additional employees in the pool. Given this I’m not sure I would direct the investments myself. You want a good flat fee fiduciary advisor. Kon Litovsky would be one person to talk to.

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    Yes, I asked directly, “How are you compensated for your services?”  When I heard AUM and when he recommended considering some life insurance inside the defined benefit plan, my spidey sense of caution!!! went way up.

    We have a very good TPA, and they have always directed us well.  We also have a good CPA to ask for advice and direction.  Basically, what I got out of the meeting is that the opportunity to save over 1M with income tax deferral got my attention.  At the same time, the distributions will eventually be taxed (although they can potentially be stretched out for a long time by heirs), and depending on the state of our union and the estate taxes, the savings on front end income taxes could also be eaten up by estate taxes on the back end.

    White.Beard.Doc White.Beard.Doc 
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    Earnest refinancing bonus

    5500 seems quite simple, and relatively brief.  I would not fear filling out the 5500 return.

    in reply to: Should I fear form 5500 #241090 Reply
    Liked by Tim
    White.Beard.Doc White.Beard.Doc 
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    Would you go to a physician in their 70s?  I have an appointment for next week.

    I have known this physician for many years and I am feeling quite comfortable, but hopefully this is a brief consultation involving one or two visits and all is well.  If it turns out to be something needing longer follow up, maybe I will decide to then see someone younger.  I kind of like the idea of the wisdom gained through all those years of experience.

    White.Beard.Doc White.Beard.Doc 
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    Sorry to hear of your financial struggles.  At the same time it is great that you are on the forum and seeking advice.  And next year sounds like your situation is going to improve 100%.

    Don’t despair, hunker down and know that things will be better in the future if you make a few small, good decisions to get things going in the right direction.

    in reply to: refinance vs forbearance #241088 Reply
    Liked by Lordosis, Peds
    White.Beard.Doc White.Beard.Doc 
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    Thanks Tim, the basic resources regarding defined benefit plans on this forum and on the bogleheads forum are fairly basic.  The rules for these plans get complex with funding requirements and non-discrimination rules.  So clearly we would need sophisticated advice.  At the same time, I like to learn as much as possible, to be an educated layperson to make reasonable decisions.

    For example, the pension consultant that spoke to us this week is AUM compensation for the defined benefit portion of the plan, and he mentioned putting life insurance inside the plan.  From this thread I learned that all types of compensation models and asset allocations including self directed are allowed.  I also learned that life insurance inside the plan is fully optional.  Finally from some of the other threads on the various forums I learned that a conservative asset allocation with lower risk during the funding phase is recommended by many experts.

    Any other thoughts or advice are appreciated.  I am generating a list of questions for next week’s meeting.  We are also going to talk with our CPA, our TPA and other pension consultants to get a variety of opinions.

    White.Beard.Doc White.Beard.Doc 
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    Does anyone know of any reliable resource to learn a bit more about defined benefit plans?

    White.Beard.Doc White.Beard.Doc 
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    Either I’m misunderstanding, or you’re misunderstanding.

    Highly compensated employees are already maxing their elective salary deferral to the 401(k) plan you have stated. Additional contributions to the 401(k) plan have to come either from employer match/profit sharing, or if from the employee they would only be voluntary after-tax contributions which I don’t believe is what anyone here is talking about.

    Therefore, when you say the highly compensated employees would have additional deferral space, those funds must be going into the cash balance plan, which would make sense. I don’t believe a cash balance plan only for the owner, with 100% exclusion of employees is possible. You should clarify with the consultant.

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    The pension consultant said that in addition to the employer contribution, the employee could request an additional contribution from their own pay.

    Example:

    Base pay 300k

    Elective employee deferral 19k

    Employer contribution 30k

    Employee wants to shelter an extra 100k on top of the other contributions, so the employer reduces base pay to 200k, then makes an extra 100k contribution to the profit sharing plan.  What seemed funny is the consultant said that a 300k employee married to a 700k spouse working for another entity could elect to contribute the majority of their salary in this way by lowering their base pay and taking all that extra compensation in a profit sharing contribution.  Even though the pension consultant said that is possible based on the contributions for all of the non-HCE employees getting generous contributions and passing all fairness testing hoops, I have never heard of something that allows that level of contribution above the limit of 56k for younger employees and 62k for older employees.  What the pension consultant said is not making sense to me.  I have a follow up call with them next week to ask for further clarification.

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