Speaker 1 (00:00.216)
You know, we're not big proponents of long-term care insurance because most of our clients have the kind of money to self-insure. But it is common that the older spouse will require care and that the younger spouse provides that. It's not required, of course, but that's something that we see in the real world in empirical data. So you need to be prepared for that. You need to make sure that you set up your surviving spouse to succeed.
If they spend, you know, their, their final golden years taking care of you and then you pass, you want to, you want to do them a solid and make sure that they're set up in your wake.
Welcome to the Physician, Family, Financial Advisors podcast, where physician moms and dads like you can turn today's worries about taxes and investing into all the money you need for retirement and college. Hello, physician moms and dads. I am Nate Renneke, Certified Financial Planner and Primary Advisor here at Physician, Family, Financial Advisor.
me.
Speaker 1 (01:00.27)
And I'm Ben Utley, Certified Financial Planner and Service Team Leader here at Physician Family.
Ben, I heard you have some big news.
I big news, big news. It's the biggest news. It's the moment that most parents have always been waiting for with some of them really happy about it, others sad, mixed emotions to be sure. But my wife and I are now officially empty nesters.
Ugh.
Yeah, yeah, right. mean, I can still remember changing the diapers, right? And the cute onesie with the little tiny toes sticking out. You just want to squeeze them, you know, and the sleepless nights. it was, I'm going to say it was all worth it because I didn't have a choice. Right? Or maybe I didn't have a choice, then my wife didn't have a choice while I had a choice. But one way or another, we made that decision.
Speaker 1 (01:54.69)
But yeah, both my kids are in college. They're both out of the house. They're both functioning, happy, doing well in school. you know, it is just, it's just a miracle. It's just a miracle. But you know, it's the best part, the best part of the whole thing. This is wild. It's the space in the fridge.
Like, I can put all my stuff in there now. I don't have to dig for stuff. There's a space in the freezer. It's like everything's where I put it. You know, it's like it's the funniest little thing. You know, it's not like being woken up in the middle of the night or wonder where there are anything like that. It's the tiny little things like, you know, the dishes stay clean.
You probably take the trash out like once a week and see
Yeah, let's let's yeah, the smaller trash can for sure you get you get the smaller trash can right? Yeah. So I mean, that's that is the funny upside. It's I miss them though. I miss I love having them here. And I'm looking forward to holidays. But the thing I'm most looking forward to is going to their house for the holidays whenever we get there. Let them cook. Let them feed me let them clean up the dishes. It is their turn to host me. I'm totally looking forward to that. And you know,
And this is sincere, because I paid really careful attention to my kids, I have a great relationship with my daughters. And I know this because they tell me this voluntarily. And to me, for my child to want to spend time with me is really about the highest praise that I could get as a parent.
Speaker 2 (03:24.302)
Agreed. Yeah, it doesn't count when there's six, right?
Yes. It doesn't count when they're six because you're their whole world, right? If you don't feed them, they'll die. Right.
Yep. All right. Well, good luck. Good luck on this new.
Yeah, new journey.
All right. Well, let's jump into some questions. You ready for it? Okay. We got a cardiologist in Maine. I can my spouse contribute to her IRA if she doesn't have an income? I haven't gotten this question for a while because we do this for everybody. So let the cat out of the bag and say, absolutely. Right. It's a spousal IRA. So allows a working spouse to contribute to an IRA for a non-working or a low earning spouse.
Speaker 1 (03:46.54)
I'm ready.
Speaker 1 (04:02.487)
Yes.
Speaker 2 (04:11.534)
Generally, there's been a change in the rules. This is the change came like six or seven years ago, but it used to be that if the working spouse did not contribute to their IRA, the non-working spouse could not contribute either. It used to be that the working spouse that they contributed, you know, half of their IRA, that was the limit for the non-working spouse. And now it's like free for all. You know, if there's earned income, you can contribute. Yeah.
Yeah, well, this is absolutely got to do this. It's important to include it in all the plans that we write.
So yeah, that's right. Because you don't do this. There's no backdoor Roth for you.
That's right. OK. So next question, emergency medicine doc in Oregon. How does my retirement plan change compared to the average physician if my spouse is eight years younger than I am? This is interesting on kind of two accounts. One, you don't see this all that often with physicians. A lot of times physicians to be in medical school, kind of similar age. But.
Speaker 2 (05:18.658)
The other reason I thought this was interesting is just the fact that they asked because who cares what other people's retirement plan is. Yeah. Your this is your retirement plan. Yeah. So it doesn't matter. Exactly. But you know, things to consider is really just comes down to one big thing, which is that in this scenario, we wrote a plan for this doc. You have.
Good question.
Speaker 2 (05:47.54)
slightly younger spouse and you probably need to save enough or you absolutely need to save enough to cover them for if you die early. Like let's say you die 10 years before them. There needs to be enough money for them. So potentially need to work longer, potentially need to save a bit more, right? Because you're not just covering yourself, you're covering your spouse. And then the other big one here, I guess, would be children.
I mean, you are a little bit later to having children in this situation. which, to be honest, you might have a leg up when it comes to that. Probably going to work a little bit longer, but you're already established in your career. And so this this doctor, military doctor and no student loans already has a house like you're not chasing all your goals at the exact same time. You're sort of settled in.
Exactly.
Speaker 2 (06:44.967)
And I guess the big advice would just be get started early with college.
Okay, I got a couple for you here. Okay, these are legit. Social Security claiming strategies are different for spouses with a disparity in their ages. Pension claiming strategies, this is pivotal. One of my friends has a, well, he's a friend who's a physician, not a client, never has been, never will be, but we go out to breakfast every, my gosh, once every week. So if you're listening, hi,
But you know, he has three annuities that he had to buy as a workout for an overfunded cash balance plan. anyway, you know, we're talking in fact, it was we had coffee just the other day. And I said, how did you set up your annuity? And he said, it's a joint and survivor payout. And I said, good. And what that means is that when he passes, she'll continue to get
the same amount of money that he was getting before and vice versa. You know, she passes, he'll continue to get the same amount before. It's a reduced amount versus if it was just based on his life, but you know, it continues. And so that's a crucial strategy if your spouse is younger than you are because they're likely to live a long time. That's right. Yeah, absolutely. So those are at the minimum, those are the things that we begin to consider. But by the same token, these are for physicians of an advanced age or docs that are really approaching retirement.
which is a time when you just need to sit down and carefully think through everything.
Speaker 2 (08:17.41)
That's right. Yeah, because a lot of doctors and people in general will choose the higher payout on those annuity type products when they're entering retirement and they just assume it's going to pay the most. you know, got to do some calculation on life expectancy, is not fun, but necessary.
Yeah, and I think the last piece here is that, you know, we're not big proponents of long-term care insurance because most of our clients have the kind of money to self-insure. But it is common that the older spouse will require care and that the younger spouse provides that. It's not required, of course, but that's something that we see in the real world in empirical data. So you need to be prepared for that. You need to make sure that you set up your surviving spouse
to succeed if they spend their final golden years taking care of you, and then you pass, you want to do them a solid and make sure that they're set up in your wake.
Yeah, yeah. OK, next question here. Pediatrician in California. My mom is sick. need to take off work so I can go see her for several weeks. How should I handle my finances if I need to take some unpaid time off for work? It's a sad situation, but a fairly straightforward answer. This is why we have emergency funds.
Mm.
Speaker 2 (09:45.4)
Yes, I mean, that's all this comes down to. But I wanted to I included this question because I wanted to point something out. I see constantly people try to get around spending their emergency fund, which I think is fine. I mean, it's a good thought to have. You want to not tap into that if you don't need it. But for some reason, there's this hesitancy to use it. You should hear the things people tell me that they don't want to spend their emergency funds. They're clearly emergency.
Yeah.
right and so maybe this doesn't feel like one because it's not you but you know someone's car breaks down and they need to buy a car they're like I don't have money to buy a car and they have fifty thousand dollars in an emergency fund I'm like well that's why you
Nate, don't you know that not having money to buy a car is not an excuse not to buy a car?
That's right. Yeah, well.
Speaker 1 (10:34.67)
i could resist it did i had to take it
Yeah. So, you know, use your emergency fund. I know it sets you back, but that's why you have it. Yeah.
and by the way, build a car fund. course. you could do that. You don't have to borrow to buy a car. That's right. Yeah, you can have a car fund that pays you while you wait instead of you paying it.
I like that. you said it, so I'll keep going on cars, but I cannot help but point out that every time someone buys a car in cash, they tend to spend less. That's really where they get you.
That's true. Hold on, gotta look at my shoe. I think I just stepped in gum with a whole car comment.
Speaker 2 (11:12.11)
Yep, I know I I hold back on that quite a bit. It's not a fight
Please don't don't me for advice about cars every I gotta say there's only been like I can only remember a couple times in my career when I've given advice about buying cars like people ask for the advice that they actually paid attention Usually they're just gonna go out by whatever kind of car they want. know and I mean, I'm no mechanic. So yeah, just like right
Yeah, I gave up on that a long time ago
You pay for the right to ignore me. That's just how it is being an advisor.
That's right. Yeah. So, OK. Another question here. have double doctor family in New Jersey. My wife and I just got out of residency. We'll be making a combined six hundred thousand dollars over the next 12 months. One child, three hundred thousand dollars in student loans. And we're about to buy a house. We really want to pay off all of our student loans.
Speaker 2 (12:06.126)
quickly and we believe if all goes well we can pay them off by the end of 2025. Okay so just real quick there after taxes that's most of their money. Right so they have 600k not a lot to live on.
600K you probably lose about a third of that to taxes and self-employment, excuse me, FICA taxes. So yeah, 200, 250 goes away, you're left with about 350. Yeah, that's... Yeah, I could see that, it's pretty tight.
Yeah, so the question is should we put all our resources toward our student loans after we buy this house? Okay, so You just heard us talk about our We just talked about staying out of right car debt. Yeah, we don't like that Right. So we're not the advisor. That's like, you know leverage up and invest the rest to invest in all you can but there is something important here, which is that
You don't have to sprint that hard at your student loans. It's it's it wouldn't be a terrible idea to put most of your resources toward your student loans. And I would say it would be a much better idea if you did it after you built an emergency fund. Yes. Fund your IRAs. You fund your retirement plans at work. Get that match. Get that tax. You fund your HSA.
That's true.
Speaker 1 (13:29.676)
Yes.
Speaker 1 (13:33.454)
deferral. HSA for sure.
Yeah, you know, it's really tempting to do this right out of the gate. It's it's just right in your face. The student loan payments are coming. You want to get rid of them as fast as you can. Yep. But you have to grab these tax breaks while you can.
And there's a New Jersey, I'm pretty sure that there is a, you're the college guru here, but I'm pretty sure there's a tax break for contributing those five to that.
I believe so. you know, stretch it out another 6 to 12 months. It's not the end of the world to pay your, I mean, you paid your student loans off in two years, it's no big deal.
could be a
Speaker 1 (14:09.134)
Okay, I got a sleeper for you. Okay, here's a sleeper. Okay, so let's say that you aggressively pay off these student loans in your first year of these new practices, but you find that the places you work are not all that you thought they'd be. And so rather than working in at a, you know, for profit place, you wind up working for a not for profit hospital where you have PSLF as an option, in which case you've just wasted or burned your PSLF card.
And I can just hear people saying, yeah, it's not going to happen to me. know, it happens to other people, it's not me. But about 50 % of physicians leave their first job in a very brief period. And I've seen this over and over and over again. So it may not be you, but it's going to be your spouse, right? Because there's a 50-50 chance. So be very careful about how aggressively pay off these student loans. So my take on this would be get all the tax breaks you can get.
certainly have a full emergency fund because you can bet you know if you put all your money in your house the next thing you have is an emergency we've seen that we've seen people who put all their money in their house in the house literally burned down to the ground and they didn't have an emergency fund to make it through so you know that that emergency fund is real it's there for a purpose so fund it and then you know scrape up a decent down payment so i would say that there's really not a big hurry on a house either you i'd say you
jobs.
Yeah, exactly. You need that house when your kid is five. Right, because that's going to set up where they're going to go to school and you want to have everything established before that starts. So I guess in all things, you this is one of the things I like to say, there's never been a fiduciary decision that was made in a hurry. There's always time. And the essence of planning is balance and perspective and doing things intentionally. So, yeah, I think the sprint to pay off the student loans.
Speaker 1 (16:05.292)
I'm pretty sure that's like a Dave Ramsey thing, or maybe it's coming from, you know, some loudmouth on the internet. But, you know, you and I have both seen physicians who took nine, 10 years to pay off their student loans, and they're still on track for retirement. Yeah. So, I mean, your goals are still possible, even without this, I'll use the word radical. Yeah, radical approach to your student loan.
And you know, I you know this, Ben. mean, I I wouldn't say fell victim, but I had a very strong mindset about student loans before I even started working here. This is what me and my spouse did. we gave up tax breaks. And yes, I did that intentionally. But we also gave up a lot of life. It was our first three years of marriage. We really do much. You know, and I'm not saying you have to do expensive things. We found ways to, you know,
continued to pursue each other while we were paying off debt, but it was like, here's $5. Go find me a treat at WynnCo and we'll take it back home. So we bought each other treats at WynnCo and took them, which is a, a discount grocery store.
I would say, like, I'm throwing this in like a medical analogy for a second. Imagine that you're, you know, you're an internist and you have your patient come to you they're like, well, I'm starting my, you know, I just, you know, I have a young child and I'm thinking about just feeding them kale all day long, every day for the first year of their life. What do you think? And the doctor would probably say, yeah, you kale's pretty good. You could certainly eat a little bit of it every day, but it wouldn't want to be
like everything you eat, you have a whole lifetime to eat kale. Right?
Speaker 2 (17:46.7)
Right. So, yeah. So, but I, that to say is I get this. I would have done it different if I could go back. I really would have, I would have stretched out to a four years instead of three and like not been so, just overwhelmed by it. Yeah. But sometimes that takes someone.
This is Wise Nate versus New Nate.
Yeah, exactly. OK, we got time for one more question, double doctor family in Colorado. We sold our house and are taking some time off before we buy another one. And I know this family, they they moved to Spain for a year. Cool. Yeah, it was really cool. We are going to end up with a million dollars in long term capital gains. How much taxes will we owe on the gain of our home again on our home?
Where should we park the cash while we wait to buy our next home in about a year?
Hmm.
Speaker 2 (18:42.548)
So yeah, this family bought in an area of Colorado that just exploded.
It sounds like it rhymes with a rasp in.
Not exactly, but yeah, but they but it you know it did it exploded and they bought in a great area and all that and they owned it for several years so now they have this big gain and So they you know they took their deduction that there's a five hundred thousand dollar deduction for married couples right so if you have gain on your personal residence You can write off five hundred thousand before you pay any taxes
and they also did something where they collected their receipts for any upgrades they had done to the house or
that's that is so prescient. That's unbelievable. Nobody does that
Speaker 2 (19:26.126)
I know they're on top of it. So at the end of the day, though, just for easy numbers, say you have 100 or $500,000 in gain, you will owe taxes on that. you know, it's long term capital gains, 20 % in taxes and state taxes. Yes. So you have some state taxes in there, but the federal tax will be a hundred grand. So be prepared. And for someone else who is selling and buying right away in this situation.
Yeah.
Speaker 2 (19:56.15)
Don't use all that money on the next house. You got to pay your tax bill. Right. This family is going to have the cash. So the question is, we got this big nine hundred thousand dollars in cash. What do we do with it? What do you think?
Yeah, that's right.
Speaker 1 (20:09.71)
It's probably more than that because the gain was a mill, right? Yeah, so that means that the basis was probably Could have been a mill could have been a half mill could have been a mill and a half. I mean that we're talking about seven figures here What do you do with it? Well, I think you figure out how much you can eat for your next house, right? And if you're moving to a low-cost a living place, you just kind of estimate what the home is gonna cost Set that aside and something that's you know
safe liquid, easy to get, perhaps FDIC insured and the rest of it, know, work your plan. your plan says you're underfunded for, you know, the private colleges that you want to pay for, put it there. You know, if your retirement says that you can retire when you're 60, see if you can retire when you're 59 or 58. You know, just work your plan or, you know, if you have extra money, work down the extra money checklist. that I had a client that was owned a home in Seattle.
a double surgeon family owned a home in Seattle. They lived there for a long time. They home appreciated and then they moved to Kentucky, Louisville, low cost of living area for them. And the difference in the price of the homes, like what they sold one home for and they bought the other home for was enough that they could fully fund college for two young children, like college done. You want to talk about freeing? Whoa.
That was huge. And the house they bought in Louisville, mean, yeah, it's nice place on the river. Beautiful. So.
Okay, yeah, that that's a so work your plan after you set aside the money for the next house this family I believe they're gonna It's gonna be 20 minutes away from where they used to live. So it's the same You know pretty much the same area and so what I had told them is you know, a year is not enough time to invest this money in the market It's not an investable time horizon. Yeah, so they're gonna park it an FDIC insured account at betterment and they're gonna get five percent interest
Speaker 1 (22:02.54)
later.
Speaker 2 (22:11.032)
Assuming that interest rate doesn't change. Yes. Right. And that's I mean, with six figures, I'm sorry, seven figures, big money, six figures of interest.
Yeah. And the interesting thing about the so Betterment has the cash reserve product that's available to everybody who's listening. It's not just our clients. There's some details, but basically the amount of FDIC insurance you can get on their cash reserves product is multiples of what you can get in just a regular old banking arrangement. So read the fine print. But you know, that's what we do for our clients read the fine print.
But that's something to look into. It's a high market-based rate to consider. guess maybe also short-term bond fund would work, provided that the credit quality is high and the duration is low.
certainly. Okay, that's it for today.
wow, that went really fast. I'm like, we got to have seven more questions, right? Okay, good. Well, you've been listening to the Physician Family Financial Advisors podcast. If you're interested in talking with us, visit physicianfamily.com, click the BigFactGetStarted button. And if you're not ready for that, we do answer questions on this podcast, believe it or not, and you can send your question to podcast at physicianfamily.com. So until next time, remember, you're not just making a living, you're making a life.
Speaker 2 (23:37.784)
Thank you for listening to the Physician Family Financial Advisors podcast. Are you getting all the tax breaks you really deserve? To find out, get your copy of the Overtax Doctors Retirement Investing Checklist available at physicianfamily.com forward slash go.
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