Speaker 1 (00:00.088)
The other thing you can do is just have an account where your bonuses go. And so you get these big boom, boom, boom, boom bonuses just hitting the bucket there. But at the bottom, you had this steady trickle that is a much smaller amount. And so imagine the bucket kind of fills up with a bonus and then it starts to drain a little bit because of the monthly flows and it fills up with the next bonus and starts to drain with the monthly flows. And so you can do that. And then you can tune that monthly flow by increasing it a little bit or decreasing it a little bit. And if you get a super big bonus, then you can just chunk it down.
to the Physician Family Financial Advisors podcast. Physician moms and dads like you can turn today's worries about taxes and investing into all the money for retirement in college. physician moms and dads. I'm Nate Renneke, Certified Financial Planner and Primary Advisor.
You need
Speaker 1 (00:51.41)
And I am Ben Utley, certified financial planner and the service team leader here at Physician Family. Nate, I understand you just got back from a vacation. You want to tell us a little bit about it?
Yeah, so we went to Hawaii first time me and my wife have been married nine years to talk about Hawaii for nine years. But we didn't get the picturesque honeymoon type why we went to the Disney Resort. Yeah, we went with a bunch of family and I was the only one who voted not to go to Disney but I think I was wrong because with the four and six year old. don't know how much hiking volcanoes we could have done you know I.
Yeah.
Speaker 2 (01:31.342)
You know, I maybe have said this on the podcast before, but on vacation, my wife, Brittany, refers to me as vacation Nate, which is like a little less tight on money and all about fun. And it's those times like laying on the beach and those, I just can't help but stress how important rest is and time away is. And, you know, I've heard you say this more than I say this, but I was literally laying on the beach thinking you only get one life.
And so I was thinking, how would I, what would I say to people about this experience? And the only thing I can come up with is, work in some bad ass vacations into your budget.
Yeah, because it's worth it. Yeah, absolutely worth it. Yeah. Combat's compassion fatigue for those who experience it, you know, get to press out a little bit of your tan if that's if that's what you're up for. I think more than anything is you make good memories with your kiddos, you know, you get she gets vacation. Nate, my kids call me vacation dad when I'm on vacation and my wife. My middle name is Ben. It's not Benjamin. It's Ben. She calls me Benjamin on vacation. And I love it because usually when she does that, she musters my hair.
Yeah. It must be a dad thing because I saw something the other day that made a similar joke and I'm like, you know, sometimes it just takes you taking a six hour plane ride to let loose and stop being so serious about everything, which I think I'm pretty good at, but maybe not with spending money. Yeah. But yeah, it's just worth every penny. And you budget ahead of time, you get there and you like I'd never have vacation hangover because the money is just there. It's saved up and
Yeah
Speaker 2 (03:12.142)
the whole time because you know my kids hear me talk about money. No no dad that we don't need to do that that's a lot of money and every time I go yeah but mom and I save for this. I say for this and yeah and then Brittany would say mom mom and dad say for this for two years. And you're just like well and I'm like I don't know if it's two years but yeah it's hitting at home and they got to get a lot of stuff.
Yeah, it was great save and okay to spend money. Those are the messages you're giving
That's right. That's right. All right. You ready for some questions? Nice. OK. So we have a urologist in Oklahoma. And they asked, or they said, retirement and college fund plan needs large monthly contributions to our taxable account and our 529s. Large enough to where I don't believe we can afford to do it every single month. But we might be able to do it if we use our quarterly distribution checks.
Not only yes, but yes.
Speaker 2 (04:08.408)
How do we make sure we have enough money to pay our tax bill while also staying on track? So I answered this in real time. And so I'm going to give a little backstory. This is a family that makes plenty of money, but with some digging, you find a lot of it is really lumpy. We call it lumpy cash flow, but quarterly, semi-annually, big bonus checks. And so the money manager of the house, sometimes they'll get their monthly paycheck with nothing else and they think,
I don't I can't make this contribution. And we talk about dollar cost averaging all the time right now and how great that is and perfect strategy all that and then but when I get together with them I find out that because they can't do a perfect they kind of don't do it at all.
that's a perfect, be the enemy of the good. Yeah. on you.
Yeah, and maybe that's an I mean, they do some but the point is, if you have lumpy cash flow contribute in a lumpy fashion. And for this family specifically, I mean, they're, they're long term members here. And my answer was show up to your annual progress check. And we'll calculate how much you need to catch up on with your lumpy cash flow.
Yeah. Yeah. Well, you know, there's another way to do it. You can let's imagine that you get a bonus check. That's I don't know. hundred and twenty thousand dollars. That's your bonus. And you're supposed to be saving, you know, ten thousand dollars a month. Or let's say you're supposed to be saving fifteen thousand dollars a month. Right. You can squeeze by with five. OK. So you still have 10 left. You get that one hundred and twenty thousand dollar bonus check. So you can program cash flows so that ten thousand dollars a month goes out. You can do that.
Speaker 1 (05:55.374)
The other thing you can do is just have an account where your bonuses go. And so you get these big boom, boom, boom, boom bonuses just hitting the bucket there. But at the bottom, you had this, this steady trickle that is a much smaller amount. And so imagine the bucket kind of fills up with a bonus and then it starts to drain a little bit because of the monthly flows and it fills up with the next bonus and starts to drain with the monthly flows. And so you can do that. And then you can tune that monthly flow by increasing it a little bit or decreasing it a little bit. And if you get a super big bonus, then you could just chunk it down.
Yeah that that's definitely what they should do and I think part of this and the question is just nerves about taxes yeah and so I mean do an amount that's comfortable those are the exact words that I use to do an amount that is comfortable where you know you'll have plenty for taxes and then when you have leftover money do it do a bigger contribution then.
Yeah, well, when you get these bonuses, cut them in half, take half and put it in your that's right. Invest account in the other half, put it in a tax account because it's it's going to come pretty darn close to half if you're making that kind of money. You know, set it aside. That way you got to you got the means to pay it. But, know, the contrary here is somebody gets that hundred and twenty thousand dollar bonus, maybe three or four times a year. And if you don't put that money away, it's going to wander off. I have a saying cash makes you stupid.
And that kind of cash makes you real stupid because it's like, I could afford that. I could afford that. I'm going to buy that. And then boom, bonus gone. You know, if you get in the habit, if you get in the culture of savings, then you, then you save and you don't have to make that big, huge decision three or four times a year when, the market drops and stares you in the face and makes you feel sad about it. Just try to get it to be, take that lumpy cashflow, put it in a little bucket and smooth that out over time so that you can stay on track.
Agreed. Okay, next question is from a radiologist in Florida. asked, can you sell- Hello, Florida. Yeah, he said, can you sell VT and buy AVGE, these are ticker symbols, and avoid the wash sale rule? So let's start with Ben, what is the wash sale rule?
Speaker 1 (08:05.358)
Well, Nate, the wash sale rule says that if you have a used jacket and it's dirty, you can't sell that jacket until you wash it. a minute. Oh, no, sorry. That's a whole different podcast. That wash sale rule has to do with tax loss harvesting or taking a capital loss. And essentially, if you sell something for a loss and you buy that same thing either, what is it? 60 days?
It is.
Yeah, 60 days before or 60 days after Kyle. I apologize if you're hearing this, I don't have that. does all this stuff, so he's got it down. But basically, if you buy that same security either 60 days before or within 60 days after, then that loss is going to be disallowed. So it goes to waste. so what this listener is basically asking is, if I sell the Vanguard Global Equity Index Fund, basically it's a world fund, and I buy this other world fund that's a different fund,
Am I going to run afoul of the Watchtel rules? And the answer is no, because Watchtel says you can't buy the same thing or something that's really, really, really, really similar. But you can buy something that's kind of the same, that's not the same. Right. you know, if you sold Tesla and bought Rivian, more likely you sold Rivian and bought Tesla, then
Yeah, that'd be okay. Or if you sold the S &P 500 index and you bought the total stock market index, you could do that. Or if you sold Vanguard total stock market index and you bought the XYZ total market index, you could do that. But I think you run the risk, like if they're very similar. For example, if you bought the Vanguard Tax-Exempt Municipal Bond Index Fund, VTEAX, if you sold that for a loss, because bonds have lost money recently,
Speaker 1 (09:53.576)
and you turn around and you bought, I believe it's VTEB, which is the ETF version of it, I would say that is super close to the same thing, to the point that I might be a little bit worried that if it came under scrutiny, the IRS would be like, no, you can't really have these losses.
Right. Yeah. And, you know, we admittedly didn't really know what AVGE is. Yeah. So before this, we're like, well, let's look. And you just have to look if they kind of pass that rule of being substantially the same. While you were talking, I actually looked this up so we didn't have to make a correction on the next podcast. This is what it says. You can't sell shares of stocks or other securities for a loss and then buy substantially identical shares within
within 30 days before or after. So kind of 30, kind of 60.
Yeah. It's actually identical and it's 30 days, not 60. Kyle's got that all over me. 30 days end to end, 30 before and after.
That's right. Yeah, so for this case, yes, but the bigger picture here is be careful with your tax loss first.
Speaker 1 (10:54.52)
Yes, as we, we air quotes, I mean, Kyle. Yeah. Thanks, Kyle.
Okay, next question is from a retired surgeon's adult son in Oregon.
Speaker 2 (11:14.818)
That's right. So they said how would I move money from my UTMA to my Roth IRA? I wish there was a creative way to do this but you got to sell the money in the UTMA and move it to an IRA, a Roth IRA and in order to do that all the same rules apply, right? You have to have earned income in order to contribute to a Roth IRA. Very good idea though if you have earned income. It's great place to put it.
Absolutely. Well, since he's he's an Oregon kid, we're talking about here. I would say just do it because that's what Nike would say. Let's do it. Get that out of your UTMA, which is basically a taxable account once it once that quote unquote child reaches the age of majority. It's just regular old taxable account and pop that into Roth IRA where it can grow tax free forever. That's a good move. OK.
Nice.
Speaker 2 (12:03.95)
Last question here. Pediatrician in Pennsylvania. We have an Iowa 529 for our child but currently live in Pennsylvania. Should we move the 529 balance to the Pennsylvania 529? So before I get into the weeds on this, basically what this is referring to is, you know, when you move, usually the way you would choose a 529 is really based on investments,
And fees but the number one thing that most people do is do I get a tax break in my state so when you move states a lot of times you will switch 529 so you get that tax break and so when people doctors move states a lot and when they move to this new state they start looking in the new 529s and you can just open one right up but then they want to clean up their accounts they don't want 529 spread out all over the country yeah so they say hey should I move it and Pennsylvania 529 is really great so it'd be nice to be able to move the Iowa money there.
But the thing you need to check, and this is really unique to some 529s, which is when you take money out of 529 for anything other than college, you will pay a penalty. And you would think that every single 529 would not count this as a unqualified event, I guess, to transfer money from 529 to 529. But there are a handful of states where that will trigger a penalty.
Just so happens that Iowa is one of them. So it's called the recapture tax. And so let's see.
Yeah.
Speaker 1 (13:44.46)
is another one of those things where it just like, it seems really simple and yet there's a little gotchas around every corner and so much of what we do. I mean, you hear these guys talking about it on the internet and they got their little blogs and stuff like that. They blog about it as if, as if everybody can do it. And in fact, everybody can do it. know, it's these little catches that give you pause about things.
You know, that's I was just sitting here thinking like, do I remember any other states and I don't. And it's strange as an advisor, you think you're going to know all this stuff that other people don't know. And a lot of times people come in, they know a lot. They do. I mean, they've done their research and at a high level, doctors, many doctors are well informed. Some not so much. That's okay too. But it's these red flags that go off in your head, you know.
the people who are doing it every day. You know, like you and I know there's a wash sale rule, but Kyle knows it's 30 days right off the bat. And it's those things that trigger in your head. You can look this stuff up, but you just got to be really careful. I would hate to see people pay penalties when they've worked so hard to save for college just because they're trying to clean, do something as simple or as, I don't know, what seems to be so easy. Yeah.
Trying to clean things up, right? I just want everything in a nice neat pile. But sometimes that's not the right thing to do. And a lot of times, quote unquote, financial advisors out there will help you consolidate things. But in the process, they make a bunch of money in a commission or a way to get fees or whatever. Sometimes they mess up backdoor broth I raise when they do rollovers. in a lot of cases, it's best just leave things where they're at.
Yeah, it's funny because I'll talk to physicians all the time and since we don't charge an assets under management fee, they'll ask me where I should move their 401k and when the answer is, when Kyle's answer is leave it there, they're very surprised. Yeah. You don't want me to do something fancy with this? It's like, no, you can't move it to an IRA and your other 401k doesn't accept incoming rollovers or your other 401k is not as good as your old one.
Speaker 2 (15:57.996)
the average advisor would say roll it into an IRA and they may have never done a backdoor Roth conversion. So yeah.
Yes. Folks last year, the year before last, we did 141 backdoor Roth conversions as part of the backdoor strategy. This year we did 215 backdoor Roth. And so I can remember the first year that I did a backdoor Roth, it was two offices ago and it was before Kyle came on board. So this is over a decade ago. It took me like three, six months to figure it out. And now it takes Kyle, you know, like three to six days to get it done. Right. Right.
So a little experience goes a long way in this area, particularly if you have a messy form 8606, which is probably a matter for another show. And I think we're running out of time. can I take a- Okay. Ladies and gentlemen, home. You're under drive time work. You are on your Peloton. You're running down the street from a bear if you're here in Oregon or perhaps Alaska. At any rate, you're listening to us. If you're not a client, you have a chance to be a client.
out. Yes you can.
Speaker 1 (17:01.784)
could be a much better deal than what you're experiencing right now. You'll get to hear our voices live, answering your actual questions on your telephone. check us out. Go to physicianfamily.com and you can see all of our pricing fully disclosed there, who we take, who we don't take. And if you're not ready for that, you should go to physicianfamily.com forward slash quiz and take our retirement well check just to see kind of how you're doing. Take your pulse. So.
Thanks for listening until next time. You're not just making a living. You are making a life. Thank you for listening.
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