Nate Reineke (00:06.136)
Hello physician moms and dads. I'm Nate Renneke, Certified Financial Planner and Primary Advisor.
W. Ben (00:11.926)
And I'm Ben Utley, certified financial planner and the service team leader here at Physician Family. So today we have some special questions for you. This is what I'm dubbing internally the Trump episode. know, the new administration has brought new rules and new changes in the government. And we are getting a lot of questions from clients and prospective clients about the changes and the pending changes. you know, I am...
This is a politically neutral podcast. So what we're going to do is we're just going to cover the questions. We're going to cover the facts as we understand them and the potential ramifications of the facts, which will of course be speculative because we won't know exactly. But we have, I believe, five or six questions today. So, Nate, let's hear the first question.
Nate Reineke (00:59.308)
Yeah, one more thing is you did several hours of looking into this. So I'll just be the question asker today. So they get to hear from Ben Utley. All right, so first question is, is my federal pension at risk?
W. Ben (01:19.414)
Yeah, I think the answer to that is probably not. And so, you know, your federal pension is a promise of the government to pay you a lifetime income in retirement. So the things that have been proposed is a reduction in the pension through a cost of living adjustment. So, for example, you know, when we run calculations, we assume an inflation rate for the cost of living that goes with these things. So your pension would go up every year.
And so it has been proposed that those cost of living adjustments be eliminated or curtailed, which would essentially cost the government less and result in a lowering of your pension benefits. Another thing that we have heard is rather than calculating the pension benefit with your, average of your high three years of compensation, they're looking at the high five years of compensation. So imagine that, you know, your comp slopes up
over the course of your career, the last three would be your highest. And if you include your fourth and your fifth to last years, that's going to lower the calculation. again, it looks like it would be a reduction of the benefits. So listeners, this is a complex topic. And these questions are unheralded in my 30 years of doing this. I've never heard these questions. And so
Nate Reineke (02:30.946)
Mm-hmm.
W. Ben (02:44.105)
Admittedly, it's not top of mind. So I've got notes and Nate's kind of coax me through those notes. So Nate, what else did I put in our notes about this?
Nate Reineke (02:48.791)
Right.
Nate Reineke (02:53.039)
it's a, you, you wrote a note that said requiring federal employees to contribute more money to their thrift savings plan. Yeah.
W. Ben (02:59.732)
The first yeah, so we have another FERS question, it looks like the government would require greater contributions to the federal employees retirement system.
Nate Reineke (03:09.558)
Mm-hmm. And disallowing future employees to access the pension program.
W. Ben (03:14.963)
Yeah, correct. Just turning it off for future employees. This is, you know, here in the state of Oregon, which where our practice began, we have the public employees retirement system, and they've done things similar to that, which is rather than breaking promises to current employees, they have, they're not making promises to new employees. And over time, that liability phases out for the government and the benefits, of course, decrease to prospective employees.
Nate Reineke (03:28.366)
Mm-hmm.
W. Ben (03:43.061)
It'd be tantamount to kind of turning off Social Security for everybody born after a certain year, but keeping it in place for others, which we'll get into Social Security here as well.
Nate Reineke (03:49.036)
Mm-hmm.
Nate Reineke (03:52.886)
Yeah, so I said I wouldn't talk, I'm just, you're just gonna hear my thoughts, I guess, a little bit. Yeah, this is not answers. This is me just asking questions and talking. So when I get questions kinda like this, like you said, we don't really get these questions, let's say social security or student loans.
W. Ben (04:00.904)
This is very open mic-ish today, yes.
Nate Reineke (04:16.672)
It tends to be a theme, take the federal government out of it, but just employers, sometimes the federal government, where that's what they end up doing. They phase things out. I mean, that's not to say that that will happen this time, but usually they take a little bit of a slower approach. And I've seen my mom is in the, you know, state employee.
W. Ben (04:22.719)
Mm-hmm.
W. Ben (04:27.55)
Hehe.
Nate Reineke (04:44.462)
Um, she's been a state employee for 30 years and I saw this with the pension. looked at her pension compared to my brother's who's also a teacher and his pension is my brother's pension is tiny. My mom's is really big. Um, and so I could see that happening. I mean, don't know if it will, but I could certainly see it. And, um, just for people who already have their pension that costs a living adjustment, will take a bite out of your retirement, but
W. Ben (04:47.624)
Mm-hmm.
W. Ben (04:55.537)
Lean. Yeah.
Nate Reineke (05:12.386)
That doesn't make the pension worthless, still worth a good amount of money. So something to plan for, but not if you're already, you know, have your pension secured, not something necessarily to, it's not going to throw you off maybe as much as you might think, but it definitely will be difficult to make a change to become, you know, let's say, I don't know how many doctors will want to work for the federal government without the pension.
W. Ben (05:14.803)
Absolutely. Yeah.
Nate Reineke (05:42.53)
they don't tend to pay as well.
W. Ben (05:42.631)
Yeah. Yeah, that's a big benefit, but, you know, not all doctors do it for the money, right? So it kind of depends. Okay.
Nate Reineke (05:49.23)
True, Okay, the next question is, is my FERS thrift savings plan at risk?
W. Ben (05:58.866)
Yeah, I think that that is the answer is more or less no. So the federal employees retirement system through savings plan is kind of like the United States government 401k kind of it's the thing that you can put money into probably more like a 403 B. So the president has proposed changing out three of the five directors on the board of directors. So those would be political appointees and they would be more likely to do.
what the president hopes to do. So that's one thing. We've also seen that the G Fund, which has the sweetheart deal where it gets the yield on the five-year treasury and there's no volatility up and down as interest rates rise and fall. So that's the sweet deal about the G Fund. the thing I did not know until I began doing this research is that the United States government in extraordinary times, like when they failed to reauthorize the budget,
in extraordinary times has the ability to borrow from the G fund. And they would still have to pay interest. The G fund value would still be there. It would still continue to accrue interest, but it is not beyond the reach of the United States government. So in terms of eliminating the federal employees retirement system, I think that that would be really slim. This is is founded under a law passed by Congress in 1987. It's been around forever. So
it would take an act of Congress to undo the federal employees retirement system. And you have to remember that judges, the judges who rule on these things are federal employees. So it would not be good for them. And I think there's like the virtuous circle there is playing in our favor.
Nate Reineke (07:31.273)
Mm-hmm.
Nate Reineke (07:37.857)
Right.
Nate Reineke (07:46.702)
Yeah, and I don't see that as a huge savings. I there's for the government, right? I mean, it's not like the pension necessarily. So probably. Yeah.
W. Ben (08:01.176)
Yeah, it's basically your money, right? And I imagine the G fund is probably just a drop in the bucket of the overall value of the United States debt. So I don't, you know, I think that's relatively small. But again, you know, if you have everything loaded up in the G fund, which some people do, due to the sweetheart deal, this might be a time to look at diversifying.
Nate Reineke (08:11.65)
Yeah. Okay.
Nate Reineke (08:22.614)
Yes. And what about, so there's this potential for disallowing investments in China?
W. Ben (08:33.549)
Yeah. Okay. So that was another thing. Thanks for hitting my notes. So the president has proposed that, like you said, that the, the I fund of the federal employees retirement system, which is basically the, the developed foreign, excuse me, developed foreign investment in stocks, that that be disallowed from investing in China. And it's interesting because yesterday, you know, you and I were both in a meeting with the guys at dimensional fund advisors talking about,
Nate Reineke (08:36.311)
Yeah.
Nate Reineke (08:59.565)
Mm-hmm.
W. Ben (09:01.89)
some of way their funds are constructed. I asked them what their take on China was, whether it should be excluded or included in an international index. And they said that they offer both flavors. They offer a ex-United States, ex-China fund, so international ex-China, and of course, a fully constituted international fund. And they said that they're offering the ex-China because of investor demand. However, when we looked at the research on this and we looked at the past performance,
Nate Reineke (09:26.04)
Yeah.
W. Ben (09:30.101)
The ex China fund performed more poorly and part of that is because China is one fourth of the emerging market economies. So, you know, it's, I think people are shooting themselves in the foot when they're excluding China.
Nate Reineke (09:38.284)
Yeah.
Nate Reineke (09:45.738)
Yeah, you know, that was really interesting when, you know, we asked them their take because dimensional funds does a superb job of research and making really well thought out funds. Every little thing, it's great. But it was interesting to hear them say that it was by demand. And something popped in my head that just, I thought about all the other funds out there and I thought, just because they make a fund doesn't make it good.
W. Ben (09:59.136)
And I think through everything, yeah.
W. Ben (10:15.884)
Yeah. Yeah, just because it's the ETF does not mean it's got the wand of approval, right?
Nate Reineke (10:16.012)
You know, just because, just because people are asking for something. Yeah. Yeah. We all have to remember they're selling this and there's, they will create something for you if you ask for it, just like any profitable business would does not make it a good investment strategy. So, yeah. So, he proposed that and he's, and you know, president Trump has proposed a lot of things.
And it's some of them very nerve wracking, it's right.
W. Ben (10:48.683)
Yeah, some of them won't survive the courts, but they're all nerve wracking. I think some of these are a political faint or a head fake designed to accrue negotiating power and capital.
Nate Reineke (10:56.977)
huh.
Nate Reineke (11:00.94)
That, yeah, you know, I'm not a political expert, but that seems to be the case for many things that he talks about. So.
W. Ben (11:09.066)
Certainly jarring for those of us that are, you know, the small people here. Yeah.
Nate Reineke (11:11.406)
Yeah, that's true. Okay. Should I continue to pursue public service loan forgiveness? Yeah. Yeah. I think at this moment in time, the answer is yes. And that is because it is totally out of our control. And I don't see the benefit to making a knee jerk reaction.
W. Ben (11:20.243)
Yes, a question for Nate.
Nate Reineke (11:39.79)
You can still, you know, there is, we are on the cusp of everyone starting to pay interest again. So maybe that will change depending on how long it takes. And you need to actively, for all my PSLF people out there, give me a call because things are finally starting to change and there might be a move you finally need to make rather than sitting there waiting for payments to get turned back on. I would say at this very moment,
W. Ben (11:58.685)
Yeah.
Nate Reineke (12:08.748)
At this very moment, it seems to be pointing toward if they've promised you forgiveness, there should be at least a track to get there. Whether or not you will benefit from a, let's, well, I'll just put it in direct payment terms. they might change the payment plans you can be on that qualify for public service loan forgiveness, and therefore it may not be beneficial to you anymore. But,
W. Ben (12:19.634)
Eh.
Nate Reineke (12:38.419)
I don't at this very moment think that it will be completely wiped away.
W. Ben (12:44.986)
And then the question is like, what's the alternative to pursuing public service loan forgiveness, which is, you know, that's always been to refinance, but rates are so much higher now that I would think a refinance would not look good versus continuing to pay on PSLF. Is that right?
Nate Reineke (12:48.205)
Exactly.
Nate Reineke (12:53.966)
Thank
Nate Reineke (12:59.214)
You know, the rates have changed back and forth a little bit. I believe refinancing rate, it all depends on what loan you have. It's sort of like a mortgage. If you get a jumbo mortgage, the rate might be terrible. If you get a 15 year mortgage and you put 50 % down, maybe the rates don't look so bad. It's similar with student loans. It all depends. But at this very moment, I'd say on average, the rates are pretty close. And so there is no benefit to refinancing at the moment. And the
W. Ben (13:22.726)
Okay.
Nate Reineke (13:28.174)
But there is a reason to not refinance, which is we don't know what's going to happen with student loans.
W. Ben (13:34.929)
Well, in that, and you lose the other benefits of having borrowed from the government, is the disability, that it's discharged, the disability death and all those, there's some other perks beyond just the forgiveness that go with having federal direct loans too that are often overlooked.
Nate Reineke (13:41.549)
Yes.
Nate Reineke (13:48.142)
you
Nate Reineke (13:52.462)
Very overlooked. And for those of you out there who don't think that would be you, just last week I started the application for family physician is permanently disabled and is applying to get all of their $400,000 in student loans discharged. So.
W. Ben (14:09.616)
Hmm
W. Ben (14:16.366)
Wow. That's a game changer. Yeah.
Nate Reineke (14:19.118)
It's a game changer. It's like buying life insurance, but the only difference is you just get it and you're giving up your life insurance or your disability insurance if you refinance sometimes.
W. Ben (14:29.222)
And you know, we serve about 230 or 240 physicians today, like doctors, MDs, DOs, and you know, one out of 240, it's not a bad chance. Yeah.
Nate Reineke (14:34.819)
Mm.
Nate Reineke (14:41.074)
No. It's big deal. And so you have to ask yourself, what's the cost? And if the rates half as much and you can save 100 grand on your student loans, well, then that's probably worth it. At the moment, it's not the case. I would continue pursuing PSLF and sit in the uncomfort of not knowing what's going to happen. And if you feel that uncomfort in your client, just call me. I have asked all clients that have asked me about student loans, I say,
W. Ben (14:52.293)
you
Nate Reineke (15:09.294)
please forward me all emails, even if it seems totally like I wouldn't care about it, just forward them to me. I'm getting the, I'm crowdfunding my knowledge. So everybody's sending me their emails and I get to see what the government's telling them. So that's right.
W. Ben (15:21.175)
Nice
W. Ben (15:25.878)
That's part of specialization experience, right? So, all right, on to the next question.
Nate Reineke (15:30.86)
So next question is what happens if Trump dissolves the FDIC?
W. Ben (15:36.298)
this one's for me. This is my question. Yes. So I think it's first, I think it's unlikely to happen. Right. So this is something that was put in place to stabilize United States banking system and make it so that when you put your money in a bank, that it's guaranteed to be there when you come back for it. Or at least a certain amount is guaranteed. All right. So let's imagine that we all hear the news that the FDIC has been dissolved and that our bank deposits are no longer protected.
Nate Reineke (15:37.41)
Yes.
Nate Reineke (15:42.702)
Mm-hmm.
W. Ben (16:05.985)
I don't know about all the hundreds or thousands of listeners out there, but I'm going to go to the bank and make a withdrawal in cash. Okay. And when everybody does that, they all stand in line to get their cash. Well, there's not that much cash in the bank. This is known as a bank run, a run on the bank. And it is catastrophic for that bank. Now, if this is happening all the way across the economy, that's catastrophic for the economy. So that's the first thing that would happen, would be a bank run.
Nate Reineke (16:13.07)
Mm-hmm.
Nate Reineke (16:30.84)
Yeah.
W. Ben (16:33.985)
And that would be a crisis of epic proportion. And imagine that that decision to get rid of the FDIC would be reversed immediately. It's hard to imagine the level of craze that would go with that. So let's say we get past that hump. Well, the next thing that happened is some of the little banks might go out of business and the big banks would not have to pay as much in FDIC insurance as they do.
So this would favor the big banks, the Chases, the Wells Fargos, those are the big banks out there. It would disfavor the small banks. And a lot of the small banks are the ones where you get your practice buy-in loan, right? Or they're the ones who help you purchase your building or get a loan for your ambulatory surgery center, that kind of thing. They're also the banks where a lot of physicians bank because community banks and physicians tend to have a tight connection. So it would be directly impactful to physicians in their businesses, right?
Nate Reineke (17:11.736)
Mm-hmm.
W. Ben (17:30.017)
So that's one thing. And then the next question is, all right, so now I've got my cash, what do I do with it? All right, so I'm thinking, okay, the safest place to invest, at least to this moment, has been in US Treasury debt. So that's T-bills, bonds, and notes backed by the full faith and credit of the United States government, such as it is now. So I would think, okay, rather than loading up on FDIC, I would put money in a brokerage account and I'd either buy Treasuries or I'd buy an exchange traded fund that buys Treasuries.
But if the government is going to revoke the FDIC, what is to stop them from welching on the federal debt the next time that we hit a debt ceiling? Which by the way, is coming March 14th, right? So, you know, it begins to get into the doomsday scenarios. And ultimately, you know, the place that you wind up putting quote unquote safe money would probably be in the debt of large corporations, companies like Apple, they're borrowers.
Nate Reineke (18:25.057)
Mm-hmm.
W. Ben (18:28.165)
And their credit rating is actually stronger than the credit rating the United States government. So it would force a huge dislocation. I think the likes of this are just are just unconscionable, not to mention the fact that Congress would probably stand in the way. Yeah, so I would say that it's the the doomsday that would come from it is so nasty that I think the likelihood of it happening is just about zero.
Nate Reineke (18:45.034)
Mm-hmm. Yeah. You know...
Nate Reineke (18:56.032)
Agreed. Okay. Next question is, will Social Security still be there when I retire?
W. Ben (19:04.96)
Yeah, I think the answer to that question is yes. Okay. So, um, I'm going to kind of back into this. So Donald Trump has hinted at a third term in office, which is unprecedented since, uh, Congress passed the 20, we passed the 22nd amendment has term limits. We did that after Roosevelt was in office for four terms. Right. So, um, you know, he's hinted at that. If he were to.
Nate Reineke (19:07.48)
Mm-hmm.
W. Ben (19:34.303)
basically got Social Security and Medicare, I think that that would be a tantamount to political suicide and it would virtually guarantee no third term. Or at least I would say it would virtually guarantee that he would not be elected for a third term. Yeah, so I'm thinking Social Security is still good. I don't know about raising taxes to make Social Security whole.
I could see that they might curtail social security benefits for people over a certain age or that they might be reduced. You know, interestingly, the Department of Government Efficiency has promised they're going to cut three trillion out of our seven trillion dollar annual expenses. But in order to do so, they would either have to cut defense or they'd have to cut the entitlements programs, which is social security and Medicare, just because they are the vast proportion most
of our national debt. And that's both of those are unconscionable in a time when we you know, we're threatening to put tariffs on our closest allies. And, you know, we're we're threatening China. It seems unconscionable that they would cut the defense budget. And at the same token, you know, we have a lot of people here that are old and depend on those entitlements. So I think that's not going to fly. And ultimately, they will probably have to back down on their their cost cutting measures. But I doubt that Social Security is going to go away.
Nate Reineke (20:31.906)
Yeah.
Nate Reineke (20:46.838)
Mm-hmm.
Nate Reineke (21:02.734)
Once again, can see there's been some history in social security and changes based on how old you are. So seems like something that's more likely is that they will slowly reduce it. But if you get a plan from Physician Family, we use this social security as a measure of conservatism. If you have a plan from Chelsea or Nate, it's not calculated with your full social security benefit.
W. Ben (21:28.508)
you
Yeah, yeah, we look at the report of the Social Security trustees. At least we used to have report. I'm not sure if that's still being published anymore, because there are some reports that have been curtailed. But in past reports, I believe they said like 70 % of benefits are funded. So, you know, we rely on that as a way to kind of hedge against Social Security not being there. And if it is there, then, you know, for physicians that 30 % is that's pretty close to beer and pizza money.
Nate Reineke (21:32.78)
Right, so.
Nate Reineke (21:37.474)
That's right.
Nate Reineke (22:00.974)
Yeah, that's right. All right, last question. Should I update my asset allocation?
W. Ben (22:01.979)
Right? So.
W. Ben (22:09.979)
Again, on this one, I just have a resounding no. So there's no correlation between which party is in power and market returns. I can remember when Barack Obama came to power, I had several conservative clients say, know, the stock market is going to tank, and it went up. By the same token, I've had very liberal clients when
When President Trump originally came to power, stock market is going to tank. It didn't. These predictions are perennially wrong. And I think it is a serious mistake to predicate your asset allocation, which is your balance of stocks and bonds on the current political office that is, the current political party that's in power. I just think that's a terrible mistake. mean, if you're 70, 30 now because you're 10 years away from retirement, I think that's how you ought to stay.
Nate Reineke (23:04.716)
Mm-hmm.
W. Ben (23:06.212)
I would leave that stuff alone. can tell you I have not changed my asset allocation and I'm not recommended that anyone do so. The reason to change your asset allocation has to do with a change in your life, not a change in the stock market. Let's say you get an inheritance and you double your net worth. Hey, you don't have to be as risky anymore. You can be more conservative. You can shift more towards bonds, right? Or if you decide that you're going to work longer, then maybe that's the time for you to load up on stocks, right?
Nate Reineke (23:19.67)
Mm-hmm.
W. Ben (23:33.913)
Or let's say you have some money that's left over in your 529 plan, you're building yourself a dynasty college fund for your grandkids. Then you shift your asset allocation towards something that's more aggressive, but you don't shift it for who's going to be in power for four years. And with that said, it's important to remember that we don't know what's going to happen in the next four years with the presidency. We don't know who the next president will be, but we know, we know for certain that most people who are listening to this show are going to live to their mid eighties.
And a lot of them are in their 40s. We know that you're going to need your money for 40 more years. That's long term. Four years, that's short term. So keep your eye on the long term when you're thinking about your investment.
Nate Reineke (24:15.2)
Yeah, 40 more years means 10 more of these presidents, right? And to make a decision every four years, I mean, it could literally be catastrophic.
W. Ben (24:19.586)
Yes. Yes.
W. Ben (24:26.262)
Yeah, absolutely. That would be terrible for the outcome of someone who's investing.
Nate Reineke (24:30.54)
Yeah. Yeah. And then I've heard you say this many times about a variety of things. And I don't think you just mentioned it. But talk about how prices, it's already reflected in the market. Did you hit that?
W. Ben (24:45.705)
Yes, and that's the one thing that I forgot to say here is that the market is a voting machine. People vote with their dollars when they either buy into the market or they take money out of the market. And so as a result, you get the collective thinking of everyone who's a market participant. Some people think it's going to go up, other people think it's going to go down. They put their money in, they take it out. They're all voting. And as a result, all of the information
Nate Reineke (24:52.578)
Mm-hmm.
W. Ben (25:13.035)
that is knowable at the market at this time is already reflected in market prices. So maybe you're thinking that these tariffs will push up inflation. You're wondering why the price of eggs has not gone down yet. Well, you know, all that is reflected in the price of securities. Somebody out there has figured out the probability that the price of eggs will go up versus go down because they can look at, you know, feed inputs, they can look at probability of bird flu. They look at all those things in a way that just would boggle your mind, you know.
And so they've, they've already thought about these things and they place their bets. And so in the moment, when you think, you know, something's going to happen, guess what? You're just a doctor. I'm just a financial advisor sitting here in Eugene, Oregon, right? There's no way we can know these things like the market can know them. And the fact of the matter is there's a really good chance that we're going to be wrong because the market knows everything. And when you're wrong, you're out of the money.
Nate Reineke (26:12.003)
Yep.
W. Ben (26:12.256)
So yeah, it would be a mistake to tamper with your investments based on what you perceive to be the future.
Nate Reineke (26:19.182)
That's right. Okay. That's it for today, Ben. You wanna take us out?
W. Ben (26:24.083)
Yeah, so I'll take us out. I hope you've enjoyed the show. We tried to be political neutral today. I know this is a hot topic, but we are certainly getting a lot of questions about it. One person I spoke with the other day said, you know, after speaking with you, I know I'm not going to change anything, but it just felt good to hear your voice. That's a shout out to you, George. So if you're in that boat and your client, feel free to pick up the phone and call us.
We'd be happy to chat with you about this and see if there's any opportunity in here for you. There will undoubtedly be opportunities as we go forward. Change always brings opportunities. That's the first thing. Second thing is, if you have a financial plan and your plan is on the ragged edge of funded, it is time to get real. It's time for you to save more. It's time for you to spend less. It's time for you to dip in and dial up your attention to your personal finances and really get a plan together. And if you don't have a plan, my God.
It is time, absolutely time. Your family is counting on you. If you're not ready for a plan, go to physicianfamily.com forward slash quiz and take your retirement wellness quiz. This would be a good time to check in. And until next time, remember you're not just making a living, you're making a life.
