Speaker 1 (00:00.046)
this is where planning comes into play. To see in advance what you need money for and invest appropriately. So I always ask what's the money for if it's a retirement, then you invest one way. If it's to buy a house, you invest another way.
Welcome to the Physician for Retirement podcast, where physician moms and dads like you can turn today's worries about taxes and investing into all for retirement.
Family Financial Advisors.
Speaker 1 (00:26.104)
to the money you need in college.
Hello, physician moms and dads. I am Nate Renneke, Certified Financial Planner and Primary Advisor here at Physician Family Financial Advisors.
I'm Ben Otley, service team leader here at Physician Family and also a certified financial planner.
Okay, back with more questions, Ben. You ready for the first one? Okay, a family practitioner in New York, they said, I bought Tesla for $5,000 a few years ago, and it's now worth $80,000. What should I do with it?
Yeah, bring it on.
Speaker 1 (01:03.115)
Nice.
Speaker 1 (01:07.074)
That's a good question. Well, I guess I began to think like, okay, how much of your portfolio is it? Right. So if you're, there's a lot of ways you can go with this, you know, if you're, if you're a little risk averse, you could say, well, maybe it shouldn't be more than five or 10 % of my portfolio and you could print it back. Right. So that's, that's one way to go. Another way would be like, forget about the diversification thing. You know, I didn't have the money before.
Right. it was only $5,000. And so I should let it run. Okay. Another thought, which would defeat regret would be to cash out $10,000 worth of the position. So you got yourself a handy double and let the rest of it run. then, you know, I also think about, the reason that you bought it. Right. So if you bought your Tesla shares, when you bought your Tesla,
Then I would think that the reason to sell your Tesla shares would be when you stop driving a Tesla, right? So it's hard to know when to sell a stock unless you're looking at valuation, which is not what most people are looking at, especially with Tesla, given the valuations. kind of the rule that I've developed over the years is use with individual stocks, this is not mutual funds, but individual stocks, you sell the position when the opposite
Of the reason you bought it becomes true. So if you bought it because your brother-in-law told you to buy it and he doesn't recommend it anymore, maybe you sell it. If you, if it did the thing where you bought the Tesla, when you bought the Tesla and you're not driving the Tesla anymore, then maybe you sell it. Right. So, and that's before we get to tax issues. Right. So can I, can I delve into the tax issues here for a second? All right. So I took this question live.
And I just happen to know that this client bought it in what we call a taxable account. So it's not an IRA. It's not a solo 401k. It's, know, not an HSA. It's none of that stuff. It's just a regular straight up brokerage account that in this case is not even in joint title. This is one, one person's account. Okay. So then what you have is you have a $75,000 gain capital gain in that account, a long-term capital gain. And those for physicians are taxed at the 20%.
Speaker 1 (03:28.686)
tax bracket, capital gains tax rate, usually there's a 3.8 % Medicare surtax on top of that. And then in this particular case, they live in the state of New York, which is one of the most highly taxed states. So they're going to lose about 40 % of that $75,000 gain when they sell. So, uh, that'd be the first thing I would, I would consider in this particular case. Now I have another story about another stock. So I believe it was about 10 or 15 years ago.
A cardiologist came to me and he had been owning Apple since, you know, he got his first iPhone. He just loves Apple and we love Apple here too. I'm working on an iMac right now and I have an iPhone sitting right over there. So, you know, no cut on Apple. But when this guy came to me, he said, I like you. I need a plan. You know, I want some help with my investments, but if you sell my Apple stock, I will fire you. I was like, okay, fair enough. You know, it's your, it's your stock, your, company, your investments. No big deal.
So, I analyzed the portfolio and I called him back two or three days later and I said, Hey, I want to sell some of Apple stock, but, but I want to buy back the exact same amount in a different account. Is that okay? And he said, well, what do you mean? Well, so he had Apple stock in a taxable account and he had it in an IRA and he had a little bit in a Roth IRA. And I said, how about this? I said, how about we sell out of your taxable account? We sell out of your, your IRA.
And we load up your Roth IRA with the Apple stock. said, because if it goes up like, like you think it's going to go up, I didn't really have an opinion about it. Then all those gains will be completely tax free because your, your Roth goes tax free forever. And that's what we did about 15 years ago. So I don't have to tell you how big the guy's Roth IRA is today. Right. It's enormous because he left that Apple stock in there and he also left a little BMW in there, which is kind of basically done. a whole lot.
But the point is, if he'd left that Apple stock in his traditional IRA, then all those gains would have been converted to ordinary income. Because when you take money out of an IRA, it's ordinary income, which is like, it's just terrible, right? You take a tax favorite thing and you turn it into a terrible tax thing. When if he'd gone the other direction with the Roth, he'd turn a taxable thing and it'd never tax free, right? So where you put these expansive positions matters for taxes.
Speaker 1 (05:57.186)
And then if they're really big positions, it matters for estate planning. Like you might want to get those positions out of your estate and let them grow someplace else.
That's interesting This is this is actually funny I had a Different client you submitted this question to me We hadn't have not talked about this and I haven't told you about what I'm about to tell you Okay, same identical situation where he bought some Tesla stock. It's exploded and I'm like, alright Tell me about this Tesla stock and he's like, bought a long time ago. I don't touch it
The issue with him, and maybe we can bring this back around to, you know, rather than speculating about what Tesla's gonna do, he needs cash. But he's tied to this Tesla stock because it's done so well. And so what would you say to someone in that position? Like you see something humming along and doing great, but they actually can't afford to lose it.
Speaker 1 (07:01.978)
This is, yeah. So when you say he needs cash, like he's going to need cash in the future, he needs cash like pronto. well, I mean, so I mean, this is, I know it's, you know, horses out of the barn, right? But this is where planning comes into play. Right? To see in advance what you need money for and invest appropriately.
Like all of the above.
Speaker 1 (07:26.144)
Right? So I always ask, what's the money for if it's a retirement, you know, then you invest one way. If it's to buy a house, you invest another way. You match up the time horizon and the risk with the, with the transaction. Right? So this is a mismatch in planning, which gets us into problems like this. Okay. But now that you're in that boat, there's really nothing you can do, but just bite the bullet. Right. if you need the money soon, I would say as soon as he is, he, as soon as he knows that he needs the money, he should sell because there's nothing to say that.
you know, tomorrow, something might not come out that I don't know, Elon does something crazy. And that stock gets cut in half, because that does actually happen occasionally, right? Yeah. And if he really needs the money, it probably should have never been invested in this anyway. But argument is, hey, it is invested. He's got the money. But, you know, unfortunately, there'll be taxes to pay. That's, that's the bad news. The good news is, you know, he's got the gains. yeah, I'd sell immediately unless there's some
someplace else to get the money, right?
Yeah, yep. Okay. Well this that'll be good. Just a little teaser that this is gonna get into our last question today
Before we go I want to say that I don't personally have an opinion about Tesla stock I know that you don't because we we officially don't call stocks So these are stocks that people purchased in their own portfolio that they manage themselves and they're looking for a little bit of help But we're not stock pickers. We're we invest in mutual funds personally and we recommend mutual funds specifically index funds So, please please don't
Speaker 1 (08:58.67)
send your stock pick request don't ask me about you know should I buy Nvidia because the answer is going to be like what's the money for and it's going to be a boring conversation for you so yeah yeah we're not stock pickers these are these are I need the money situations
Exactly. Yep Okay, next question. We have an ENT in Florida who asked can I write off payments toward my practice buy-in loan and Ben you and I are not CPAs This is pretty complicated definitely deep into the the tax pool here, but Did you have an answer for this or you want me to to roll with kind of what what we found out?
You know, when you texted me the question, hazarded an answer in my head and my, well, the word write off is really broad. Usually write off is when you have a loss, you know, like you write something off. I think what they meant in those cases, can I deduct the interest, right? Because you can't deduct the principal payments, right? That's, it's less like, it'd be like trying to deduct the principal payments on your home, right? You can deduct your home mortgage interest. my, my,
old studied answer would be that they could deduct the interest against the earnings of the business that they bought using the buy in loan. right. That was been at least, but I would say let me check with the CPA, which is what you did. That's the right thing. Yeah.
But that was that was my educated guess as well. I did found out it is slightly more complicated than that. So at the end of this answer, just know for listeners, check with your CPA. Yeah. But yeah, a bit complicated depends. You basically you can write off the interest against your K1 income and your K1 income is not as straightforward as just
Speaker 2 (10:49.356)
quote unquote, riding it against your, what you expect your income to be, I guess. So, can't write off the principle. And really the more valuable piece of this answer would be this throws the idea that you cannot deduct the entire payment throws a wrench in most people's plans. Because what I hear physicians want to do, they want to take their entire
K1 income essentially and put it toward the practice buy and loan until it's paid off because they don't want to spend the extra income until it's truly theirs and they don't have any debt against the business.
You know, that's interesting because it brings up a thought that I had. So, I have seen physicians who, they'll, basically borrow to build a practice, right? And then the practice starts making money and they take all the profits of the practice to pay down the loan. Okay. And so, right. mean, business made money, business spent money. Therefore in physicians mind, no money to be taxed. Right.
And yet at the end of the year, they get this walk-in tax bill and they wonder what happened. Yes. Well, so that's, in a situation like that, it's known as phantom income. So, you know, you're, your business made money. That was the taxable event. And then you turned around and you paid off the loan. And when you did that, you paid off interest, which is deductible and you paid our principal, which is not deductible. even though you didn't receive income, you had no cash in your hand.
You still owe taxes on the earnings. Right. Right. And I see people get huge surprise tax bills as a result of doing this. So, know, if you're if you're starting to practice and you're going to make a whole bunch of money, that's that's good for you. But just know that, you know, if you if you're digging yourself out of debt immediately, which I think is great, just remember, you're going to have a tax bill.
Speaker 2 (12:50.284)
That's exactly where I was going with that. It's, you know, let's imagine that after you made your payments or after you made interest payments, you made 100 grand and you took that 100 grand and put it toward the loan because you really want to get it knocked out. You're going to owe $32,000 at the end of the year with no cash. Yeah. And the way that a lot of these practice buying loans are structured, it's a good thing.
but they work really closely with the business, because usually they've financed all of your partner's loans, and they say, you want to just, your work will just send us all the money. If you want to apply it toward the entire amount toward the loan, we can. And they think that's a good decision, and getting out of debt is good decision here, but they're kind of missing the point that you're going to owe this big bill. that's kind of the planning aspect of this. Make sure you have money to pay your tax bill, and it's...
For this individual their their CPA told him to withhold 32 % and so get your tax bill paid and then pay the difference and I For as far as a mindset thing. I've noticed that when people get into the territory of like, oh my gosh I'm gonna owe this big tax bill. It's not withheld anymore. Nobody's holding my hand with taxes anymore You'll start to hoard money
Everyone's high I have two hundred thousand dollars, but I have to pay my taxes this year. I'll hear that all the time. I'm like, yeah
And they're like, they're like taking home 300,000. So that'd like a 65 % tax bill, right? And these are people who already having like money withheld from their regular paycheck. So it's like, they're just, they're, you would think that we're, you know, in the 70s back when we huge tax rates. right. they're
Speaker 2 (14:34.222)
Terrified so the key here is get a sharp CPA have them have them project your taxes. Yes and set aside the money. Yeah
So that in the time to get your tax protection projection is is coming up like the near the end of the third quarter Certainly the beginning of the fourth quarter. That's when you that's when I began to do you know, my my stuff with my CPA, right? So Good to know so here's the real travesty. Okay. This is the sad part of this deal You said 200,000 I spoke with a client the other day who? Skipped their annual progress check last year and was kind of in communicato and we reached out to him. They came in
They said that they they had an inheritance and that they had a couple hundred thousand dollars sitting in the bank that they didn't know what to do with and it's been sitting there since January so $200,000 sitting there since January at an erstwhile 5 % which is about what you can get on on safe FDIC insured deposits these days. I mean that's $5,000 right and that's that's
pretty much enough to cover our fee for a year. It's pretty darn close depending on what kind of physician you are.
you said it was 200,000 so it would be 10,000.
Speaker 1 (15:51.98)
It'd 10,000, but it's only six months. Right. Yeah. Yeah. So five grand, mean, it's like five grand in six months. It's like, Whoa. mean, that's, that's almost like a thousand dollars a month. And if I told somebody, Hey, you can, you can tap a couple of keys in your keyboard and clear an extra $750, $800, $1,000 a month. They do it. Right. But they didn't come in for their annual progress check and they didn't, they didn't mention it to us. And so I had no idea. Yeah. was like, wow, that's.
right.
Speaker 1 (16:20.654)
That's money just whizzing by. I we're talking about like 30 bucks a day or something like that.
Yeah, I had a say client a couple days ago that asked me so how is that doing as if it kind of as if it was a Stock or something. I said then they have a good amount in there. They're saving a bunch of money to remodel their house So there's hundreds of thousands. I'm like You made $25,000 It's like 500 grand. Yeah Gosh, that's I mean to accidentally have that in the wrong account. It's just
In these days, you it used to be that you didn't even get any interest, right? Right. It was was next to zero You know, I saw that the inflation rate the other day came out as like 2.6 percent and we're still getting around fives and so I mean that's like That's a spread to inflation of about two and a half percentage points Unbelievable. Unbelievable because people were losing money relative to inflation in the past because interest rates were so artificially low so I mean it's
Yeah, if you've got extra cash sitting around, you really need to rethink what's happening with that right now.
Agreed. Yeah. Okay. A pediatrician in Oregon here in Oregon said, should I roll over my old cash balance plan into my new 401k? And this this question, I think we answered this recently, but we keep getting the questions. keep answering. We'll keep answering. Yeah. So the answer is, of course, it depends. But basically, first, you check to see if you can actually roll it over. So check with the old cash balance plan. Check with the new 401k.
Speaker 1 (17:52.206)
And how do you do that? How do you check with any 401k? Nice. Chelsea, Chelsea answered this question for me the other day. It's summary plan description. Yeah. Yeah. And, you know, you asked this easily, like if you're at fidelity or someplace like that, you can log in and download your summary plan description. If you're with a smaller provider, you might have to ask your HR department for it something like that. But summary plan description tells you, uh, in enough detail that you can understand it without it being
column.
Speaker 2 (18:02.242)
okay
Speaker 1 (18:21.802)
overly legal ease how your 401k or 403b or retirement program works and it's required that they deliver this to you by law so you're not asking to go out of their way and you get that summary plan description you read it and it will tell you what kind of money you can roll into the plan. Right.
Yeah, So let's just imagine frame this question to where you can it is an option for you And then at that point you have some math to do And and this is a little bit of wonky math because you don't know exactly what your return will be in your new 401k but you do Know what your return will be in the cash balance plan if it's a guaranteed return
No, hold on a second. In this case, were they given the option to roll over their cash balance plan? Because I'm not accustomed to seeing that being optional. Usually it's like cash balance plan is shutting down. We got to send it someplace.
They were given the option in this case.
wow. Was it, was it the option to roll it over their 401k or roll it over their IRA? Or was it optional? Leave it in the cash balance plan or, like, what, what was the option set?
Speaker 2 (19:36.642)
So they switched jobs and the option was to leave it there or roll it out.
wow. Okay, I see what you're saying. Yeah, believe it there or not. Sure.
Yeah. And so, the, basically you want to determine whether or not that guaranteed rate of return is worth keeping versus your expected rate of return in a 401k. Right. And so this is, this is actually, it is somewhat complex just because you don't know what rate you're going to get in the 401k, but a good, way to look at this is if you're close to retirement, a guaranteed rate of return is, is worth more. you're taking
probably taking less risk the closer you get to retirement. So if you're within 10 years of retirement, the guaranteed rate might be worth it. But if you're 20 years away from retirement, taking, you're in mostly stocks and you could probably outpace that guaranteed rate return. Yeah. It's a, it's unique to everybody, but much like the rest of the financial planning, but. you know, the
Yeah, right.
Speaker 1 (20:39.962)
These DB plans that we see, defined benefit plans, cash balance plans, pension plans, what you're talking about here. Chelsea did some math on this one time. We had a really young physician that was highly compensated looking at going into a defined benefit pension plan, cash balance plan. And I just had an inkling that maybe it wasn't.
Right for them, right? And so she did the math and because these things are conservatively invested like you said, know The assumed crediting rate is usually around four percent. It's close to inflation I just thought this person has a long time and they have a high risk tolerance, you know, it's glide path Target date fund even you know, it's gonna be almost all stocks at that time I was like, I'm pretty sure stocks are gonna outperform inflation plus 1 % and so we did the math on it we realized that
It would be losing proposition, even giving the tax benefits of this defined benefit plan. So it was not a slam dunk, and we actually calculated the break-even age, at which point it made sense for them to go in the DB plan. And that's gonna be different for everybody, but yeah, it would have been damaging to their circumstances, despite the fact that there's this huge tax benefit.
Yeah, and the breakeven age is going to change depending on your goal. So once again invest according to your goal. Yes, we had a younger physician that normally we would expect the the guarantee or the taxable moving into a taxable account or moving into a 401k would be better, but he Saved aggressively and he's going to retire pretty early So he decided that it turned out that it was a great deal to do the defined benefit plan
Yeah, your mileage may vary. Yes.
Speaker 2 (22:21.166)
Okay Pediatric anesthesiologist in Washington so Paint the picture for you student loans kicked back in They had a baby and they bought a new house in an expensive area. I think they're in the area
That's like three slamming bills all the time. student loan payments came back, right? Because the suspension of, I don't know what you call it. You're the student loan guru. But basically the Biden thing ended and now like, wham, right? And then we got the new baby. But this person's a specialist. We know they're going to work. So you probably have a nanny bill. You definitely have a childcare bill of some sort and a new
That's right.
Large we know it's a large mortgage because it's washington everything up there is expensive. Yep. So wow. Yes, that is a huge cash flow
Yeah, they were humming along, doing great, and then $8,000 a month swing.
Speaker 1 (23:18.83)
Isn't that how it always goes? Like you're coming along doing great and then you have children. Yeah.
I have to think everyone knows this but then I have to remind them because They kind of are freaking out. They're like what wait, we're you know, we're doctors. Yeah, we can afford I'm like you can't afford children But you're also not sending them to that cheap daycare if
If you want financial independence, retire early. If you want fire, you know, just don't have kids, right? That's the way to cheat at fire.
Yeah So they said we're tied on cash. Where do I stop saving first? And you know, I think traditionally advisors or Finance, you know nerds would say buckle down and don't stop saving. Mm-hmm. But what I see very consistently is that this is a three to five year stretch in your life and then it is over and you know without
Yeah.
Speaker 2 (24:15.598)
talking to hundreds of families that went through the same thing. I would be a little nervous to tell them to stop saving, but at this point I am not. And so the reality is if you're paying attention, especially if you're a client of mine or anybody on our team, we're gonna get you back up to a good savings level as soon as you've weathered the baby storm.
Yeah, and the thing I would say is there are millions of people that are retired now who had children and went through that same lull and savings. It's not anything to be alarmed about any more than a poopy diaper is something to be alarmed about, right? It happens. In my mind, I have this, I'm waving my hand here, I have this analogy of like you're jogging along at a pretty good pace. And then,
The, the, the baby happens and you, you find yourself all of a on a treadmill and you're running as fast as you can, but you're not going anywhere. Well, when that child hits, you know, grade school age and you get your student loans paid, paid off, you're going to go rocketing off that treadmill because it's going to stop. You're going to keep running that hard. Right. And so then you'll, you'll catch up all at one time. Yeah. unless, unless you get used to a certain level of consumption and that expands and then.
And then you got a real problem, but I would I would encourage people just like Not continue saving at the required rate, but but to continue saving it is the habit Yes of saving that is most valuable and of course if you're do that then you know You contribute to the things that have the best tax breaks, right? That's right Your health savings account would be the first thing that I would not stop funding right? So in the course get your match and your 401k if that if that's you
Yes, you've seen those really, they're really valuable for kind of beginner looking at how to save money and how to invest. But it's like a filling order. You fill up the one bucket and as that fills up, it tips over, fills up the next bucket. Think of that in reverse. Right? And that's how you should, where you should stop saving first is the bottom bucket. And so really, like you said, it's HSA 401k, IRAs.
Speaker 2 (26:30.668)
And then, you know, you have a kid, now you have to save for college and you have a taxable account. This is for the, you know, garden variety W2 earner. the real question at the, when you get to the end is, do I stop saving in this taxable account or do I stop saving in my 529? And really it's pro for tax reasons. It's probably the taxable account. And you can catch up with taxable accounts. There's
There's no going back and funding your, you know, 2023 or 2022 401k that you missed, right? Contribution that you missed. So you keep doing that. It's not all that much. And after taxes, it wouldn't mean that much to your paycheck anyways. But with a tax bill account, you can fill that up. When that treadmill stops, you can catapult forward and contribute to the tax bill account. But something that I run into often, okay, so
I'll share this so that you don't feel bad when this when you feel when this happens to you and if you want to go down this road is that when when you're on that treadmill or not the treadmill when you're off the treadmill before kids and you're Moving really fast toward everything you have your first baby day one Usually college goals are set really high Like almost unattainably high in my mind once you have to start paying a nanny.
Mm-hmm.
Speaker 1 (27:55.5)
Yeah, I want my kid to go to Harvard for four years and then I want them to go to Harvard Med for five years. Right. Huge goals.
And so and then once you get you know, hit over this side of the head with eight thousand dollars in extra bills You feel like I don't want to steal from their future. But my goodness, this is a lot of money. Yeah, and So I think it's totally reasonable to reassess your goals constantly. This is a moving target, right and So it would be reasonable. Let's say to slow down on taxable, but then to also slow down on college
And it's not, you may not catch up with college. You may just need to adjust your goal. Right. Because college is hard to catch up on.
Yeah, the whole financial thing, not locked up. I mean, I guess if you're formulaic about it or you've downloaded some kind of financial planning kit or something like that, it's going to be relatively rigid. But life doesn't work that way. Budgets don't work that way. Marriages don't work that way. There's give and take and there's times when things are supposed to be quiet and there's times when you're supposed to save like crazy.
Agreed. totally agree. All right. So I think this is our last question. Okay. So a physician asked, I want to invest more aggressively than my target date fund for retirement is set for. Do you see anything wrong with that? Okay. So Ben, I don't necessarily see anything wrong with that. Like
Speaker 2 (29:37.63)
Morally wrong right we talked about target date funds and everybody wants to know like what's what's wrong with being all stocks or you know, but
Your chakras will be misaligned.
Yeah, right. But but I also don't a lot of the times people asking this question, they're they're asking it without a full understanding of what it means. Right. So that if you understand the risk involved with quote unquote, being more aggressive, which we can go down that rabbit hole in a second. But if you understand that in our in the stock market history, that
There has been several times that it has gone down 50 % and you're okay with that. You're okay with that happening to you. Then maybe it is okay for you. But a lot of times, um, since 2008 to now, we have seen one of the biggest bull markets in history. Right. And so if you're under 50 years old, you have never really weathered one of those storms. Right. And everyone
Most people do believe that they can and that they would. But I would just sit and meditate and ask yourself, could you really? mean, if you had a million dollars and went down to 500,000, would you stay strong?
Speaker 1 (31:01.174)
Nate, that would be the crappiest meditation I've ever heard of. Yeah, all these attachments you'd never reach, Trivana.
you
Speaker 2 (31:09.546)
So, you know, I just, it's, there's nothing inherently necessarily wrong with it, but there's also not much right about it.
All right, so hold on. Let me break it down. Okay, so so I hear you. So more aggressive, I want to be more aggressive. All right. And more aggressive than my target date fund. So this question is something I get from investors that are earlier in their career. Right. The first first five or 10 years of their career, as a physician and as an investor. I don't have this conversation with people that are in their 50s approaching 60.
Here's the difference. All right. When you're 50 approaching 60, if you've, if you've done your homework, you're talking about a couple million bucks, right? Couple, at least a couple million bucks, maybe $3 million. And if you're a younger investor, you might be talking about $50,000, a hundred thousand dollars, maybe one 50. You know, if you just really maxed out things for your first three to five years, you know,
doesn't really make a difference. It does when you're younger. But here's the funny thing about it. I think most people are like, I want to be more aggressive than my target date fund. At that age, your target date fund is already aggressive. If you crack that thing open and you look inside, it's 90 % stocks and 10 % bonds in most cases. you want to root out that last 10 % of bonds? I mean, that's part of what makes you have a little bit smoother ride.
Right? So you might, you might eke out an extra half a percentage point for as long as you are, are in that position. the only thing I can think of that would be more aggressive than all stocks is focusing on a sector or focusing, foolishly on, a single country. You know, we have a huge home side bias here in the United States. So I would, again, it's, it's the amount of money is so small that I don't think it makes a big difference.
Speaker 1 (33:10.646)
So, you know, I guess the question is, no, there's nothing wrong with it. It's not going to, it's not going to kill somebody, you know, unless there's just a whole lot of money in there. In which case, if you've got that much money and you're this age, you don't need to take on that kind of risk. Right. Right. I mean, you, got to, you got a headstart in the race to the finish line for retirement. You don't need to take on that kind of risk. And there's a very big difference between the theoretical risks that someone's taking and the lived risk that they're taking.
I've been through four or five drubbings in the market and I can tell you that people's story changes dramatically When they when they've been through it when you actually live with it. So You know, I don't think that there's really a right answer here. There's a lot to consider Yeah
Agreed I think I think the only thing you can hang your hat on or anchor the only thing you should anchor yourself to is your goals Yeah, and you're not going to get your goal Materially faster by picking an extra ten ten percent more in your portfolio of stock
Yeah, that's not going to that's not going to move the needle. It's really not. then, I, when people talk about, should I invest more aggressively than my target date fund? Sometimes I wonder if a target date fund is really a good fit for a person like that, because it tells me that, they haven't, they haven't been shown how a target date fund works. Some people assume that these are, they're for babies. They're for whips. They're for people that don't know anything about investing.
If you understand how a target date fund works though, you see that it's in most cases, it's very elegant. It's low cost, not tax efficient. You'd only want to own this in an IRA or 401k, but it takes an astute investor to appreciate a target date fund. But some people are not astute. They want to just see the, they want to see how the watch works. Right? So in a case like that, I'd probably set a static asset allocation, maybe a 90 10 asset allocation, unbundled the target date fund.
Speaker 1 (35:12.47)
show the individual components invest 10 % in this bond fund and 50 % in this US stock fund and some small cap value in there and you have some international and a smidge of emerging markets so that it's like, I hate to say it but it's there's some entertainment value in having something other than a target date fund and that seems to be what does the trick for some investors.
Hmm. It does. Well, you do have more control. Not that you would use it, but you do have more control when it's, when it's, you know, split out and, um, yeah, because if you, if you go beyond that, I cause these target date funds are, I mean, beautifully created. A lot of them are. And, um, if you go beyond that, then where does it end? Like if you're not investing for your goals specifically,
US why not all US stocks why not start picking individual stocks and then you just you're kind of out in no man's land
And so this is the flip side of control. You're talking about you have more control. You do have more control, but we all know that the best way to invest is to keep your hands off the damn money. It's just like set aside, leave it alone. A target date fund makes that infinitely easy for you. If you break out the positions, then you're be tempted to play with the money. And then you're gonna look at the performance, you're gonna chase performance, and ultimately you're gonna get worse results.
then you get a target date fund. This is for most people. It requires incredible discipline to beat a target date fund in your 401k. if you have that kind of discipline, you probably understand that a target date fund already works, right? So it's kind of a circular argument that just begs for education.
Speaker 2 (36:53.302)
right alright that's it for today you'll take us out
Yeah. Yeah. So, want to let everybody know that we are open for business. We're accepting clients. so, you know, if you know someone, you know, one refer to, them to us, we'd love to have that maybe send them to listen to the podcast first. another thing you can do is you can, call our answer line at 503-308-8733, or you can send your questions into podcast at physicianfamily.com. So that's a wrap until next time, folks. 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 deserve? To find out, get your copy of the Overtax Doctors Investing Checklist available at physicianfamily.com forward slash go.
really dis-
Speaker 1 (37:39.862)
Retirement is
Speaker 1 (37:48.546)
This show is for educational purposes only and is not personalized. Taking action. All investments involve. To result. Disclosure.
