Speaker 1 (00:00.526)
Being good with your money, at investing, good at planning or whatever it is, takes, good at anything, it takes time, energy and experience.
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 in college. Hello, physician moms and dads. I am Nate Renneke, Certified Financial Planner and Primary Advisor here at Physician Family Financial Advisors.
And I'm Bennett Lee, the service team leader here at Physician Family. So, this thing happened to me that has never happened to me before. I had a real live physician reach out to me with a connection request through LinkedIn. And usually it's people that are wanting to sell us stuff or wanting to sell our clients stuff or wanting to quote unquote, making our quotes partner with us, that kind of shmarmy thing. But this is like a legit guy.
So this is Robert, a nephrologist from Texas, a very nice guy. We connected through LinkedIn and chatted a little bit. He's got a couple of kids that are going to some good colleges down there and it sounds like he's done a good job of raising them financially. But yeah, I just want to give Robert a shout out. He heard me interviewed on Doc G's Earn and Invest podcast. And so, yeah, it was fun to get another follower there. He says he's binging our show, which is, I think that's about 40 hours worth of content now.
It's not like Netflix, baby. It's a lot.
Speaker 1 (01:36.008)
Yeah, yeah, I was looking at that the other day. I think we're we're coming on three years now with the podcast So yeah, it's funny when someone says they're binging I think man we had that was a long time ago when we first got started I want to go relist to some of those episodes to make sure they're all
Alright. And I always wonder what happens if they start purging.
Yeah, we have evolved. Yeah. Okay. Well, we got some questions today. We've been gathering questions from the entire team. So we have we're a lot of angles today. Nice. You ready for the first one? yeah. Okay. This one comes from Emergency Medicine Doc in Georgia. They asked me after some analysis with a good life insurance agent.
I know they're good because we referred them to them. I know I need a couple million dollars in coverage, but is it worth shopping around for a better price?
Okay, cool.
Speaker 2 (02:34.254)
Okay. Yeah. So first a little disclaimer. We don't have a dog in this fight. So when we, when we send our clients out to a life insurance agent, we're not getting a spiff or a little feedback. We'll check none of that. None of that stuff happens. Let me say, here you go.
This is an on purpose, right? We don't have a dog on purpose and this is what I say to everybody. I refer out to live insurance agents. I check in on whether or not these recommendations are any good. And if they're not any good, this live insurance agents gets no more referrals.
Yes, heaven knows there's a line of life insurance agents out the door ready to get referrals from real financial advisors.
So the ones we choose tend to do a great job because they want referrals.
Yeah, exactly.
Speaker 1 (03:26.19)
So what do you think then? Is it worth shopping around?
Well, I mean, feel free to shop around, but here's the here's the caveat. So with life insurance, it's basically a commodity, right? So as long as you're dealing with carriers that are in like the top three rating classes, which is say that their financial like their financial wellness is good and assuming that you're getting the same rating. So if you're getting preferred best at all three, then there shouldn't be very much difference at all in the price. Maybe
you know, maybe five, 10 bucks a month on a really large policy, maybe 20, 30 bucks a month. And really you could just pick the, the best rate, you know, the lowest rate from a good carrier is, is going to be what will work. And any quote unquote good life insurance agent will be able to show you rates from at least three different companies. So, once that's done, I don't see a reason to shop around because the rates for life insurance are controlled at the state level.
So this person is in Georgia. If you're in Georgia, the Georgia insurance commissioner regulates the rates that are on all those life insurance products that you can buy in that state. And the only difference you're going to get is if you go to another agent, let's say you have a conversation with one agent and you know, maybe you, maybe you have some kind of health issue that would make it hard for you to get life insurance. If you go online and you get a quote, then they're going to quote you preferred best.
And it's going to look a lot better, but when you get down the process and you apply then come out and they take blood and urine samples and they do the questionnaire, you're going to get rated. And so a good agent will know that upfront. They'll ask you some clearing health questions and you'll likely wind up with kind of the same thing that you would have with the agent, but a good agent is going to be a little bit sharper upfront in quoting you. And also there are some life insurance companies that are better than others about people with weaker health situations.
Speaker 2 (05:26.262)
So, you know, I guess it boils down to, I wouldn't shop around if I had a good agent, I wouldn't bother to shop around. it's, you know, however, disability insurance is an entirely different thing. The pricing does depend on the agent and whether or not they have an affiliation discount.
Good. Okay.
All right, next question's a bit different, Ben. We had a big security breach as, I guess, as a country.
as a country. Yeah, not here just as a country.
Yeah. So we got a question from directly from a client that said that they were worried about social security numbers because they're exposed. Yeah. So there's a national public data breach and they wondered what they could do about that. And then you were talking this weekend to your your wife about this and she started to get worried about your children. Right. So like their social security numbers are exposed as well.
Speaker 2 (06:17.667)
Yeah.
Speaker 2 (06:22.039)
Exactly.
So the question is, what can we do anything about this? And if we can, what do we do?
the answer is no, there's really nothing you can do to protect your identity. this, this breach affected, they estimated 99 % of the people in the United States had their social security numbers breached and their dates of birth and their mailing addresses. And there's a little website where you can check to see if you're a breach or not. And I looked and they had all my stuff right there. when I checked it, of course it was, it was dotted out, right? So could see the last two of my social security number, that kind of thing.
But I've had my identity stolen and used not less than two or three times. I know how to fight that. But in all three of those cases, in all three of those cases, my credit was frozen. really what the bad guys want is they want the ability to go out and get a line of credit or credit card or even a home equity line of credit in your name and drain it. And of course, they're not going to make payments on it. They're not going to pay it off. So it's going to wreck your credit.
But in order for them to open that line of credit, the credit granting company, let's say the credit card company, has to tap your credit and see if you're a good risk. So if the credit card company cannot tap your credit, they can't open a line of credit for you, which defeats the fraudsters. So the moral of story here is to freeze your credit. Freeze your credit. I've been saying this for years to clients. Still, I talk to people who I've spoken with and I said, freeze your credit, and they haven't done it.
Speaker 2 (07:57.614)
So it is it is literally the only thing that you can do to protect yourself from the fraudsters It's the I mean if you if you go check my identity has been stolen. What do I do now? They'll think you freeze your credit and then you're just screwed So yeah, I mean I'll put it this way that credit people's social security numbers and identities are available for about 99 cents on the web So if hackers want your stuff, they've got it. I mean, especially physicians like you're registered everywhere
And that information is out there. So, freeze your credit. But with the kid thing, I didn't know the answer to this question, so I went looking. You know, my kids are of an age that they have credit to freeze and we've frozen their credit, but there are children that are minors that don't have credit. And so you can literally create a credit file for your one-year-old and freeze their credit. So most people would be like, well, why would I want to, why would I bother to do that? I have a one-year-old who
is never going to have a tax return to steal, or they're not going to have a tax return to steal for like 16 years, right? And no credit rating agency in their right mind is going to grant credit to a one-year-old. But there are people who will steal the social security number of that child in order to have a United States identity. And I've actually had this happen to one of my long-term clients who's been serving there for 10 or 15 years. When her son was young, his identity was stolen and used in that fashion.
And she still talks about it to this very day. was such a scare for them. It was such a pain to change it because it's a minor child and they don't have rights. And of course, nobody's going to let someone else mess with your credit file. So there is a way now for adults to actually go in and freeze and protect their minor child's credit. Yeah. And it's for kids that are under age 16. If they're 16 and older, they can actually
Yeah.
Speaker 2 (09:51.704)
quote unquote do it themselves. You probably want to walk them through it. But yeah, you as a parent, you'll have to prove, you know, you have to prove that you're their parent, you have to send in some documents. It's not easy. But I got to tell you that that undoing the fraud that happens is much worse. And this is, this is akin to not locking your front door in a not so great neighborhood. Yeah.
I was sort of thinking about it like an analogy or an example. It's like when people ask this question, they're sort of saying, I have a pile of diamonds in my bedroom and I don't want anybody to see them. But in reality, in this situation, they can already see them. There's no hiding them. you have to protect them from using them. Yeah, that's what we're talking about when you say freeze your credit. They still have it, but they can't use it.
That's exactly right.
Yeah, it's a scary thing. mean, and people assume that they're, I don't know, they're living a life in privacy, but that's just not the day.
I would say these days your social security number is about as private as your phone number is. Right. It's just, mean, anybody wants to find it can. Right.
Speaker 1 (11:02.51)
Okay, so freeze your credit. Okay, so next question, a specialist in Colorado. They said, what is an IRS Form 5500 filing and when is it required to be filed for my solo 401k?
Yeah, freeze your credit.
Speaker 2 (11:19.278)
The beautiful solo 401k. Yes
We've been seeing these a lot lately. Form 5500, it's an annual ERISA reporting requirement. So ERISA stands for Employee Retirement Income Security Act, 74. So essentially, this is something you have to deal with when you manage your own retirement plan. You have to deal with ERISA now. You have to deal with the IRS and the DOL.
Yeah.
Speaker 2 (11:48.467)
Department of Labor.
So you have to file this, like I said, once your solo 401k reaches a balance of 250,000.
So precisely, if at the end of the calendar year, that's the stroke of midnight on December 31st, if the balance of your solo 401k account is at or above $250,000, a quarter of a million, you are required to file Form 5500 in a reasonable timeframe in the next year. There's a cutoff for it, but we don't ever breach the cutoff, right? So you need be careful about that.
Ben, do you know how much it costs if you don't do this? Like how much the IRS or the DLL can charge you?
I looked it up years ago and it was so egregious. couldn't believe how much it was. So since then, I've forgotten. I assume that you know.
Speaker 1 (12:44.29)
look this up. And the reason I bring this up in the first place, one, obviously to tell you do this, you know, file the form, but but another, we're very security minded here. I think sometimes people don't really understand why when you're dealing with the IRS, the DOL, the SEC, you know, you you have to be security minded. Otherwise, in this situation, they can assess a penalty of
$2,670 per day with no maximum limit.
This is the DOL.
This is the DOL.
So like if you overshoot by a week, then you're going to be out $20,000. Wow. That's worth that's worth. So by the way, kids, when we handle these things in in house, we have a checklist process to check the balances on all these things every year just to make sure that we're not going to run afoul of this. I mean, it's it's really no big deal to file the 5500. It's I wouldn't say it's hard, but it's got to be filed. You could probably pay a CPA to do it for maybe $500 a year.
Speaker 2 (13:50.958)
or maybe your 401k provider, some of the solo 401k providers will do it. But yeah, it's just got to be done.
Yeah, you know, if you're using a TPA or CPA that they're in charge for their time, but honestly, I've seen as of recently, I've seen some pretty reasonable charges. Sometimes your CPA just they could, but they won't.
That's true. So it's just not their their main line of business. don't want to
So those are the bad things about a solo 401k. So I want to talk about the good things. Why do this in the first place and ruin your day with more forms? Solo 401k is which means you're self-employed.
not only self-employed but you but it's just you and your spouse are self-employed.
Speaker 1 (14:38.862)
Yeah, correct. So the reason these are amazing is that they allow for exceptionally high contribution limits right to these accounts. So especially if you're a high earning physician, can put away, I think last year is up to $69,000 in there.
that's current year's rate and that's before the age 50 catch up.
No. It's 50. Catch up is 7650. So there you go. I'm sorry. Seventy six thousand five hundred. Yeah. So, you know, there's an employee side, an employer side. There's a ton of money you can put in there and some of them pre tax. You can do Roth contributions. It's just.
Yeah, that's your tote.
Speaker 2 (15:22.846)
Magna Bactore Roth. You got there's a lot of options there.
Yeah, so the cost of setting one of these up and having someone file your forms for you, you save much more than that in taxes. So it's available to you. Take your tax rate.
You just have to be really careful when you, you know, if one day you're cruising along and it's really, you're busy and you need an extender or you need an assistant and you hire that person, you're no longer solo 401k, you're regular 401k and your whole world changes. The compliance regime changes and that form 5500 becomes required no matter how much you have in the plan. It's solo 401k, it's just a little carve out of the regular 401k.
With this exception for a self-employed person and their spouse, optionally. So, otherwise it's, it's a big boy 401k.
Yeah, that's good. Good point. No employees and sometimes people don't assume they will have employees and then they do. okay. Next question from an orthopedic surgeon in Arizona. Should the investments in my taxable account mirror the investments in my Roth IRA account?
Speaker 1 (16:33.816)
funny. I was reading this question to you before we started. You said kind of and I said no. So I want to hear your kind of. Well,
I think it really depends on what your asset allocation is. So there are a number of do-it-yourselfers out there who have everything in the S &P 500. I think that that has some merit. I also see some problems with it over the long term, but on a scale of 1 to 10, it's about a 9 in terms of doing it right. So if you're all in on S &P or some large cap index or something like that, your Roth and your taxable account, if they mirror each other, fine.
You know, you're it's all good. Right. The moment you introduce a bond, though, you have to be careful. So, for example, we get bonds in target date strategy and particularly in target date funds. Right. Because the I think the maximum asset allocation I've seen in a target date fund is about 90 10. You don't have to use funds to do the strategy. Right. You can get 90 percent of one stock fund and 10 percent of one bond fund.
But if you have a target date fund, they always contain taxable bonds. So if you own this in your taxable account and those bonds are going to pay interest, you're going to owe taxes on that interest, which is not great. If you deploy this, that kind of strategy where you own stocks and bonds, you're to want to own municipal bonds in a taxable account for almost all of our listers. And then inside your Roth IRA, your traditional IRA, you're going to want to own traditional bonds in there.
you know, government securities, US treasuries, you know, high grade corporate bonds, it could even be high yield corporate bonds, foreign bonds, but those kinds of bonds should not be held in a taxable account for people that pay a lot of taxes.
Speaker 1 (18:22.592)
Right. Okay. So, let me take a step back. Everything you said is true. But back to basics, these accounts have entirely different tax properties. So Roth, the reason what you said is true is a Roth grows tax free. And if you get dividends or bond payments, you don't owe taxes inside the Roth. That's why you can own whatever bond you want in there. Yep.
That's true.
Speaker 2 (18:49.39)
It's deferred forever.
you know, unlike the Roth taxable or brokerage account, you would pay taxes on those things. So they're just taxed differently, which means you should invest slightly differently in there. But as you said, for young physicians, a lot of times they'll be mostly stocks. And if you don't have any stocks in there, in your Roth or in your tax, I'm sorry, if you don't have any bonds in your Roth or your taxable account, you really won't see any pitfalls with mirroring the accounts.
Yeah, that's right.
Okay. Last question of the day. All right. got a kind of a curve ball for you. I was interviewed on a podcast yesterday. I'm going to shout him out. Okay. This is the art of medicine podcast with Dr. Andrew Willner, who is a practicing physician. He's a neurologist in Tennessee. And he was asking about us. Right. And he said, what type of physician needs a financial advisor?
It was an interesting... Yeah. Yeah. And I think he was expecting me coming from, you know, my line of work to say everyone should use a financial advisor, but that's actually not what I said. Yeah. So I sort of, you know, I've answered this question in a few different ways and over the years, I guess it evolves. But right now, I believe there's sort of two areas of hiring a good financial planner.
Speaker 2 (19:51.882)
the podcast listeners my eyebrows just went up like this
Speaker 1 (20:19.182)
financial planner, financial advisor, you know, and I would say that there's there's kind of a two prong question. Do you need investing help? And do you need a plan? And there's two things there. Most most typical advisors are just going to help you with investing. Yeah. And I sometimes I wonder if that's why a physician may think they don't need an advisor because they think they got it when it comes to investing.
you
Speaker 2 (20:43.278)
Yeah, mean, the best thing is, I mean, it's not hard.
Yeah. Right. Right. We've talked, we've said this before, being good with your money, good at investing, good at planning or whatever it is, takes good at anything. It takes time, energy and experience. Yeah. And so if you have the time and energy, and usually if you have the energy, it's because you have an interest in it. you have, you're interested in it. You like keeping up with the tax code. You like reading about investing. This is just your thing. And you don't have the experience.
I would say if you spent an hour a week on this topic, you could eventually get enough knowledge and experience, maybe with some hiccups along the way.
But if you start small, they're small hiccups, right? Right.
Exactly. If you do this early on, there's not a whole lot to screw up because you don't have very much money in the first place. Yeah. So if you're willing to do that, you can do your own investing. Reality.
Speaker 2 (21:42.318)
Yeah. But I want to make a distinction here. Okay. So when you and I talk about investing, we have a specific thought in mind. I think that when physicians talk about investing, is the broad corpus of this body of knowledge. Right. So when I hear physicians say investing, that means everything from, you know, retirement planning. It could be like
Which kind of account do I use? How much do I save? When can I retire? Goal setting, all that stuff. All the way down to picking an individual stock or picking a fund. In our world, quote unquote investing means a buy, sell or hold recommendation plus execution, which is say to know which security to buy, which security to sell, which security to hold. If you're an index investor, that is really simple.
But there's so much more to it than that. There's knowing what kind of account structure, as you mentioned previously, where to put your stuff, how to get the maximum tax breaks, how to work the tax code, how to make all that stuff work with your other benefits and how to integrate all that stuff with what your family has in mind. And then ultimately the outcomes that you want, which may or may not involve a spouse who may or may not be interested in personal finances. So there are layers of complexity on top of this. So for a physician say I can do investing myself.
I believe that using my definition of investing, broader, think that you can do that. I think you could save a lot of money and have decent investment results, but I always wonder, are they going to get the kind of life outcomes that a person really could have with real advice from somebody who's been there, done that?
And somebody with a different outside perspective, like a third party involved in your in your family. I know some people don't even don't even think they want that. But they have I've seen so many families benefit from me or Chelsea or Kyle come in and say, so tell me why you do it like that. And you realize that maybe one person is running the show in the household and they're creating all the goals and they're the ones who say we need to save half our money. Maybe they got
Speaker 1 (23:54.67)
their ideas about how much to save from their dad or their mom or something.
Sometimes we're saying the same thing that one of the spouses is saying to the other. Typically, it's a woman speaking to a man. A woman says, we need to do this. Man's like, oh no, whatever. They come in, they become clients. We say the same thing she was saying and he hears this for the first time, which kind of drives me crazy. But man, over the last 30 years, I've seen that more than my fair share. It's just...
I'm sorry, ladies, I'm just gonna apologize on behalf of my species. You know, we're a little dim when it comes to that. Nate, I'm sure you've seen this. I've probably done it myself too.
Yeah, and I yeah, I've seen it both ways but mostly the way you said Exactly. Yeah, and and I think that just comes from you know Skepticism that like so someone in this house has this all figured out I don't know Yeah, but at the end of the day a third party perspective can help it can help you bring bring you together Let's say you have two strong opinions and you need to meet somewhere in the middle but really the planning part of this is much more than just
Yeah, yeah.
Speaker 1 (25:01.624)
how much do I save for retirement? It's everything you just said there. mean, it's account structure, it's taxes, it's everything. And that is the part that is hard to wrap your head around. And honestly, it's very difficult to find that information all at one place.
It takes me a long time to teach a new advisor with a CFP designation how to put all these puzzle pieces together. you know, I'm probably not as smart as our average listener, but I figured it out. It took me a long time, right? With my CFP designation took me a long time and I'm still learning things every day about this. So I think if a person loves to learn and they're not afraid of making mistakes, then yeah, they can do it themselves.
I mean they don't need an advisor.
Yeah. It seems to me that most physicians, for whatever reason, know they can do it, so they feel like they should.
Yeah, I think there's a lot of that in the physician community, like, why would you hire somebody to do this when you can do it yourself? You you should do it yourself. And do it yourself is a very middle-class mindset. So that makes a lot of sense. But you know, there's kind of a spectrum I see. So one end of the spectrum you have the DIYers. These are people that we never ever see.
Speaker 2 (26:27.916)
And then as you progress down the spectrum, you get to validators. These are people who are not quite confident about what they're doing. They want to show it to someone who is authoritative and ask, I doing it right? Okay. I also call these the reluctant DIYers. Some of them are really doing it right and need to keep going. Some of them are messing it up. We go further down the spectrum and we get collaborators. So these are people who value input from another authoritative party.
And they don't expect us to have all the answers. They know that they don't have all the answers, but they believe that the combination of our input and their input working together in collaboration is going to get better results than if either one of us did it. And then there are the delegators who by and large see us as, you know, investment pushers, stock jobbers, and they just want their investments handled. And I think that's okay, too.
But I will say that the ones who get the best results are the ones that are collaborators. We work best with folks who want to collaborate. They don't really want to do it themselves, but they want to know enough to understand that what we're recommending is the right thing.
Agreed and in a simplest example that that comes to mind is I can't create your own goals for you true But if you make me I guess I could take an average and we can do all that but it won't give you that feeling of this is my goal, you know, I Believe in it. I I'm following this plan. Yeah, it just it just won't happen. But so You know, this is I Do believe most physicians could
Benefit from an advisor.
Speaker 2 (28:06.626)
Yeah, yeah, it is some kind of advisor. Right? Maybe hourly, maybe subscription, maybe, you know, project. Maybe somebody who handles all their investments, preferably for a flat fee, not a percentage, right? Because that gets expensive after a while. Yeah, yeah, I think I think everybody could benefit from a little help, you know, agree. So yeah.
Yeah. Hey, I call you about my personal finance sometimes.
Yeah, well, when Jim worked here, he functioned as my idea bouncer guy. You know, so, yeah, everybody needs a friend. And with that said, friends and listeners and those of you that are new, thanks for joining us. So, I'd like to invite you to send us your questions at podcast at physicianfamily.com. You can also connect with us on LinkedIn because we are there, and as you can tell, we're responsive now. Again, thanks, Robert.
And until next time, remember you're not just making a living, you're making a life.
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' Investment Checklist available at physicianfamily.com forward slash go.
Speaker 2 (29:09.09)
Copy of retired.
Speaker 1 (29:20.366)
occasional purpose. Consult your tax advisor before taking action. All investments involve risk of loss. Past performance is no guarantee of future results. Read show notes for full disclosure.
