Speaker 1 (00:00.044)
If you have a plan for retirement and college and all the other important goals and you're on track with that or you're ahead of track and maybe you've paid off your house and you still have extra money, guess what? You can do with it whatever you want to do.
Welcome to the Physician Family Financial Advisors podcast, where physician moms and dads like you can turn today's worries about taxes and investing to all the money you need for retirement in college. Hello, physician moms and dads. I'm Nate Renneke, Certified Financial Planner and Primary Advisor here at Physician Family Financial Adv...
and
Speaker 1 (00:38.03)
And I'm Ben Utley, also a certified financial planner and service team leader here at Physician Family. So Nate, you know, the second word in the title of our business is family. So I'm going to tell a little story. So if you're on YouTube, you're going to see all this, but I'm going to have to describe it for all the podcast listeners. So I was on a Google Meet. That's typically how we meet a lot of our clients is Google Meet. It's basically Zoom gone Google and
Mom and dad were on the phone. having their first goal-setting session. We're talking about retirement and college. It's a family of three children, and the two older children are up in Maine visiting grandma and grandpa, right? But the two-year-old is at home, and so I hear this little girl playing in the background, and she's not having this business meeting. So she calls up in mom's lap, and mom's like, okay, you ought to be quiet while we're playing. And then I could tell, I heard her giggle.
I said, what's your name? She said, Maddie, or maybe her mom said Maddie, because she was too. And I said, hey, Maddie, look at this. I put my hands up in front of my face and opened up and I said, peekaboo. And put it back down and do like this. I said, peekaboo. my God, we played peekaboo over Google Meet from like 3000 miles away. Everybody on the phone was, excuse me, everybody on the meet was totally laughing and having a great time. But there's only one thing.
Hmm.
Speaker 2 (01:59.074)
What?
I had a peekaboo accident and it landed in the ICU. First part of the story actually true did play peekaboo with Maddie, the two year olds over Google meet. So hi mom and dad. You have a cute adorable daughter. Yeah. And so, and fortunately both my kids are out of diapers. So good luck.
Yep.
Speaker 2 (02:19.726)
Yeah, I have a less cute story that just happened 20 minutes ago. My four year old is off to his first, this is his last first day of preschool. He's been in preschool for a couple years and we always take pictures and you know, mom's got to get her pictures. And I saw some cute thing where you pick up your kids and you hold them to the side and see how big they get over the years. And hopefully they'll let me do it when they're senior in high school.
okay.
Speaker 2 (02:48.718)
We had our first picture this year where he was just sobbing.
And my mom used to do this to me anytime I would cry she thought it was funny to take pictures So we have countless pictures of me crying But it was it was funny and sad all at the same time. So it's it
Sad because they had to go to school and be without mom and dad or sad because mom and dad are dopes
I think he was sad this morning. He didn't want to go to school. had a week off while his brother was in first grade where he didn't have to go to
Speaker 1 (03:20.799)
he got lavished with the mom and dad attention. Did it you cry too?
Yeah, so, but it was good. I did tear up a little bit. Nice. I was laughing too.
Here for humanity
All right. More questions today, Yes. So first question, family medicine doc in Florida. All right. They said, I have a child with special needs and I'm planning on supporting them indefinitely, including leaving enough for them to live off once I pass. How can I do that? Yeah, so there's it's kind of a two part two part answer here.
On with the show.
Speaker 1 (03:57.101)
Yeah.
Speaker 2 (04:04.766)
The first is, you know, this is really a support plan, right? You have to know how much you're going to give them or how much they need to live off of. And that just requires saving enough cash, investing enough cash, just like you would any other plan. Exactly. So how would I do that? Well, I think you turned us on, turned the firm on to this calculator. It's like an MIT living wage calculator. Right. So you could look at
Yes.
what a living wage is in your state, make that a goal, and then do some calculations for how much you need to save.
Yeah, that's right. So let me break it down a little bit. you've heard of there's a in our country, we have what's known as a poverty level. Okay. And we have what's known as living wage. They're not the same thing. Poverty level is a level below which, you know, you're have a really, really rough life, right? You can barely make it. The living wage is the amount of money that one or a family needs to earn to be able to quote unquote, make it without, without taking trips. This is no trips.
It's not saving for retirement, it's not saving for college, it's literally just paying your bills. I was surprised at how high that level is in a lot of different places. But you can look on there and see for a house with one person in it no children, with one earner, you can look for a household with two adults where one is earner and two children, you can look at all the iterations of that.
Speaker 1 (05:37.836)
and it tells you how much money you need for each one of the things that they consider, know, food, housing, all that good stuff. And it totals it all up and then it even makes it on a pre-tax basis. So it was fascinating to look at. I've known about it for years and every now and then I peek at it to see, you know, what we might need for a client's child or a certain circumstance. So the research is really well done and it's interesting. Yeah, because, you know,
Most of the people who listen to our show are very fortunate. You and I are very fortunate, but I think it's important to keep an eye on folks that are less fortunate. They say that a society is judged by the way they treat their most marginalized citizens.
Yeah, that's good. So that can get you to a number that you can feel relatively confident in for them to be able to take care of themselves. Yeah, right. Not a whole lot more than that, but that's enough.
Sometimes you want to provide the basics for kids and let them reach for the fun stuff, you know, yeah
So, but there's another sort of angle to this, is like, so how can I do that? That's one question. What's the best way to go about it is kind of another question. So we have, don't believe we've talked about ABLE accounts on the podcast or at least not much, but they're pretty cool for this situation. the states have made special accounts for this exact situation. So ABLE account, AB.
Speaker 1 (07:07.63)
It stands for achieving a better life experience. probably the best way to think about it is think about it like Roth IRA for a quote-unquote disabled person. And as I recall right now, the rule is that the diagnosis must have been made before age 26. But there's going to be a change in the laws coming up, I believe it's next year, where it's before age 46. And so this is going to let in some...
some adults. I mean, I could see a physician who's 50 that is struggling with a disability that had onset in their 30s perhaps, and then they'll be able to contribute to an ABLE account, and it's kind of like another Roth.
Yeah, and better than a Roth in that you can contribute more. 2024, you contribute $18,000 a year.
Yeah, that's like a doubling up on your Roth. That's like the Roth plus catch-up for two people, but this is just for one. And there's some slightly restrictive things on it, but generally it looks like a really good deal.
Yeah. So this is obvious in this situation. If they have diagnosis early on and you can start saving $18,000 a year, that's going to be a large sum of money, probably get you most of the way there. let's see, the cool things about it, tax free growth. That's why you said the Roth. the important thing, I think a lot of people, so most of the time when I recommend an ABLE account, it is because
Speaker 2 (08:45.378)
they aren't sure if this child is going to college or not. So maybe it's too early to tell. And they say, well, I don't want this to go into 529. What if they don't end up going to college? Well, ABLE accounts have a lot of the same properties as 529 accounts. So we choose an ABLE account. We invest as if it's for college. And if they don't go to college, then they can just use it for something else. And so don't confuse the two. They can be used for the same purpose.
or least the ABLE account can be used for the same thing as a 529, but not vice versa.
Right. you're a member client and you're hearing this and your child is in this boat, please raise your hand and let us know because there's a great opportunity for you there. And then also, if you're listening and you know someone who has a child who's in this situation, you really should tell them about it. This is an incredible opportunity for them and it might solve a problem that they have. in the distant past, we've seen some of this problem solved with life insurance products.
specifically annuities and I think that the ABLE account is a better option for most of those folks.
All right next question a diagnostic radiologist in Kansas We're currently paying a pretty hefty private school bill for our children. We are wondering if it's worth it What are your thoughts on private school versus K through 12? Then I'm gonna let you do this one and here's why I'm gonna reveal to my listeners. I asked you this question for my own kids
Speaker 1 (10:13.844)
I think I vaguely recall that conversation. Yeah. I think you have to be careful because in some households, the money that would go to a private K-12 is money that would otherwise go to college. And so, parents would be wise to weigh when they think that their child needs that level of attention, right? So, there are admittedly some children that may not go to college.
They may not have the aptitude for it, but having that strong K-12 experience might be enough to really launch them where they need to be. So that's a consideration. If you can afford K-12 and you can afford college, it's not a consideration. You can just do both. What I have seen in my sphere of influence here with all kinds of kids going through all kinds of stuff, we have private schools in our town, and we have a...
So so public school system. I find that it really matters really the child and and what's available. So for example, in our public school system we have special provisions for special needs children. You know there's federal funding that comes to these skate state schools that is designed for children with that need. But of course that federal funding doesn't come to a private school. Right?
Sometimes the class sizes are smaller in private schools, but having been on the board of directors of a private school, can tell you that politics are fierce in those schools. you know, the policies and the programs of the schools may be dragged around by one or two or three fairly wealthy parents slash donors. And depending on how much you can kick into that school, you may or may not have a voice in that process. So there is certainly you want to talk about nuance. There is no.
right answer for this, but here's the thing I encourage all parents to do. Sometimes the private schools in a town have a bad rep. Sometimes the public schools in a town have a bad rep. And many times folks won't look any further than the reputation, right? And sometimes what they find is, you know, this particular school, this particular elementary school has a bad rep, but the other elementary schools are well done, or, you know, maybe this middle school is
Speaker 1 (12:35.176)
is great, and the elementary school leading up to it is not so great. And, you know, you can kind of plug and play with some of these things. You can put them in private, you can move them into public. I've seen families with two or three kids where some of them are going to private and some of them are going public, because as anybody with two children knows, our kids are different. So the way to approach this is to double down on knowledge, to go and visit the schools, talk with the teachers, meet with the principal, tour the facilities.
and not just one school, but multiple schools in your area and do the same thing with the private schools and then talk to the parents that are there. So I think if you're a mom and dad and you're, you've got a kid who's in eighth grade or something like that, this is old hat to you. But I could see moms and dads that are looking at maybe making a decision about first grade or maybe looking at a decision about kindergarten. Just do your homework. Do your homework. This is your most important investment. Well, first is your marriage. If you're a dude.
If you're a gal, then it's your children, right? The way it works in my house, I take care of my wife, she takes care of my kids. So, these are some of your most important people and you owe it to yourself and them to do your due diligence on all the options.
Yeah, I actually did this. So your advice, I took it. I toured a couple schools. And the funny thing was that I noticed after reflecting back was the advice I was getting from people who sent their kids to private school, they're 10 minutes down the road. Totally different, especially in my area in Portland, 10 minutes into Portland versus Everton. It was just entirely different. And we had the opportunity to look at two schools. One, we were
potentially getting lotteryed in. wasn't necessarily a better school, but it just a Spanish immersion. First one we went to was not Spanish immersion. I heard mixed reviews, old sort of looking rundown school we we visited. It was terrific. Public school. was great. The principal was great. She knew she knew who was. She came, met me. It was great. And then the Spanish immersion school was just as good. So we went public. And the biggest thing, the biggest takeaway, I think, from doing that research is that
Speaker 2 (14:43.234)
throwing money at your school doesn't solve problems.
You know, I serve at least two couples that I can think of who have more than the means to send their kids to the best k-12 private school in town and they intentionally send their children to a public school because they want those children to be exposed to kind of the the mainstream experience to be among kind of average people I mean if you if you throw everybody in a pot, you're gonna get the average right? So you're gonna have
some bright kids in public school, you're going to have some special needs kids in a public school, a wide variety, and that's what they wanted for their children. That was the experience that they felt like their children would need because they're being raised in homes where there's a lot of privilege. And there's nothing wrong with that, but they specifically wanted their children to have more exposure to all walks of life, I guess.
Yeah. Okay. Next question is from a cardiologist in Ohio. I'm on track for retirement in college and I still have some extra cash since I recently had an increase in income. What should I do with the extra cash? We get this extra money question once a week. All the time and it's a problem. Like you always say, it's a good problem to have, but still a problem.
the time.
Speaker 1 (16:06.595)
Yeah.
So, you know, we've talked about this before, but I've same answer. We've taken down the extra money worksheet that we have. And, you know, we could go through it again today. What do you think?
We could. Let me give the high level on this. you know, we're planners. We believe in plans. And if you have a plan for retirement and college and all the other important goals and you're on track with that or you're ahead of track and maybe you've paid off your house and you still have extra money, guess what? You can do with it whatever you want to do. You can give it away. You can support a charity. You can maybe knock a day off work.
I know that's going to be hard for some folks, but you could see about doing that. You could move to a different part of the country. You could take another vacation. mean, gosh, know, give me an extra $50,000 a year and I can tell you a whole bunch of stuff that you could do with it. That's really cool. Like not buying an extra car, but really cool stuff to do that would be meaningful and material and impactful in a life. You have options. And sometimes the plan says what to do with it.
Even folks who have a really low rate mortgage, if you have a whole bunch of extra cash, there's no need to be carrying around that mortgage. Right? So a lot of things can be done within the sense of planning, but at the end of the day, you know, even with the plan in place, you might still have extra money. And we covered this in the annual progress check for clients who have extra money. go down this list. So Nate, roll out the extra money checklist.
Speaker 2 (17:39.318)
I mean, I think you covered it, to be honest. Yeah, because I'm assuming like just the nature of this question. And they were their clients. So, you know, they got their emergency fund. They're planning for taxes. There's only fun stuff left at this point. I mean, unless you want to be more aggressive with your goals. But I don't always I mean, some people do. They kind of start with a middling goal. Let's say they want to retire at 65 and they're on track for that. Like, well, maybe let's switch out to 62.
and see what happens. So planning can help you make this decision. But if you're perfectly happy with your retirement and you just are saving, you just decide, well, let's try 55. That's not a good thing. I don't think that's a great thing because if you can't even take a day off work at that point when you have so much extra money that you're just going to pull your retirement forward a little bit, I promise you, you're not going to be able to just full stop at 55.
That's true.
You can't you can't slow down now what's to say you can full stop in 10 years from now.
And more to the point, when you're 55, your kids are typically grown and gone, or if they're not, they're in college, and the time to spend with them, or I should say invest with them, is when they're young. mean, most children, their values are formed by the time they're six years old, and that's one of the best things we give our children, is solid values. And then they're really fun from the time they're six until they're maybe 12, and then after that, they're kind of intolerable for a couple years, then they're great again, right?
Speaker 1 (19:10.764)
That's all happening now. It's all happening today. It's all happening right in your home, in your backyard, in your neighborhood. It's all happening now. So this concept of early retirement is so flawed. It's so flawed because there's so much joy and bounty and incredible experiences to be had, particularly with children at this moment in life that I think one of the best things to do is trade some of that money for time. I know it might be difficult.
Difficult if you're in private practice, you maybe you work five days a week and on that fourth day you break even on the fifth day you have profits. But guess what? There's all kinds of other practices out there where you can make money and lead a good life and get some balance. So would it take some change? Hell yeah, it takes some change. But is it worth it? Absolutely. Absolutely worth it. We've guided a few clients through this transition and it's paid off for them in non-financial ways, ways that
Typically money cannot buy.
Yeah, you can have your life now. You can have those experiences now. Everyone who writes about this online, it's all this early retirement. I'm like, well, you know, Halloween's coming up. It's some of my it's like one of my kids favorite holidays. I don't know why I didn't put that into them. I'm like, you know, I'm going to go spend some time with them. I'm not going to be working the whole time because I get to work for longer. I get to, know, I'm not planning to retire when I'm 50. So.
Yeah, well, and I'm 55, so that ship has sailed for me.
Speaker 2 (20:43.534)
Know I just think about all the time. I'm giving up by trying to make it big. Yeah, you know now's the time
Sometimes you just need to make it. So speaking of which, you could tell we're financial advisors. You could tell we love what we do. We have smiles on our faces. We laugh about things. The best thing for me is when I'm talking with a prospective client on the phone and whether or not they choose us, we're laughing. I mean, that for me is probably four out of five calls are joyful. And I feel lucky to serve the people that we serve. So if you're looking for a financial advisor who gets it, who understands life,
who knows that children are precious resource, who understands that work is meaningful and has purpose, give us a call. Give us a call. You can reach out to us at physicianfamily.com forward slash start. You can send your buddies to us. If you're not ready for that, shoot us a question to podcast at physicianfamily.com. And as I always say, but I really mean this, I really mean it. You are not just earning a living, you are making a life.
Thank 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.
Is there.
Speaker 1 (22:00.536)
This show is for educational purposes only and is not personalized. All investments.
consult your tax advisor before taking action. Involve risk of loss, past performances, no guarantee of future results, read show notes for full disclosure.
