PFFAP-PYP-24-0321-Ben and Nate Questions 1 EP 68 re-v1
Voiceover: [00:00:00] This show is for educational purposes only and is not personalized advice. 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.
Welcome to the physician family financial advisors podcast, where physician moms and dads like you can turn today's worries about taxes and investments. Into all the money you need for retirement in college.
Nate: Hello, physician, moms and dads. I am Nate Reineke, certified financial planner and primary advisor here at Physician Family Financial Advisors.
And
Ben: I am Ben Ottley, a certified financial planner and the service team leader here at Physician. Today, we are going to change things up a little bit. In the past, when Nate and I were prepping for the show, the first question I would ask him is, what are you hearing from our clients and from the listeners?
What questions are you getting? And we would choose one lucky question out of that. Big list, and we would develop content [00:01:00] around that and help you with whatever information we could, and it just got a little bit too overwhelming to pick the very best question. And so what we decided we would do today is take all of the questions that we have and answer them one by one until we run out of time.
So that way we're able to bring more financial plenary goodness to you and, um, hopefully spark more questions for you to give you an idea about, uh, some of the kinds of things that your colleagues are asking about. Nate, can you give us the first question, please?
Nate: Yeah, it's about taxes. And I was going to ask you about this because you just prepared our tax guide.
So we have a tax guide to help people answer this question. Great. But the question I got was, how do I choose the right tax preparer? Good
Ben: question. I see physicians in two life situations, those who are focused primarily [00:02:00] on medicine. And who do not own rental incomes and are not running their practice.
And the other category is those who are maybe managing a practice, running their practice and operating other businesses on the side, such as rental real estate. So I think in the second category, it's important to have a live human being prepping your taxes. Uh, certified public accountant. So, um, they're going to help you with the upstream work that the stuff that comes before the tax return, including cleaning up your books, uh, ledger entries, journal entries, make sure that everything is squared up and that your books are ready to go.
Um, there are some nuances that go with owning several pieces of, uh, rental income property, uh, And administrative headaches that go with that, and it's nice to have a person lift that burden for you. So, for those folks, I would say to [00:03:00] go with a certified public accountant. And we have seen our clients pay somewhere between 1, 000 and 10, 000 for the preparation of those tax returns.
Now, for the lucky others, you can use TurboTax to prepare your taxes and do so fearlessly. Um, I sat down on the couch this weekend with my daughter and she booted up TurboTax and we're able to grind through her taxes in less than an hour. And I was absolutely shocked. At how good the process was and how clean the interview was and how many different circumstances and situations they were able to, to, to tackle.
And, uh, if it weren't for the corporation that I run, I would be very tempted to just dive right in there and TurboTax it myself. And I was also surprised that the cost for a federal and state tax return was less than $150. So, uh, you know, you can snap a picture of your W 2 and it fills in all the [00:04:00] blanks.
You can attach it to your financial, uh, your, uh, like your brokerage software and it sucks in schedule D information. So just, I think that most of our listeners should be using TurboTax or something like it. Yeah. I use TurboTax. There you go. There's a ringing endorsement. Yeah,
Nate: CFP using TurboTax. So, yeah, I'm with you.
Okay, cool. So, TurboTax or CPA. Um, we have a couple CPAs that we refer clients to. So, if clients are listening. Yeah, and if you want a tax guide,
Ben: which, uh, has our list of tax preparers that we like, as well as a ringing endorsement of TurboTax, for which we get no money, uh, just write podcast at physicianfamily.
com and we will ship you a copy. Next question. There you go.
Nate: Yeah. Okay. So the next question is about loan payments. So I'm kind of the loan guy, uh, cause I used to work at a bank, so I'll, I'll answer this one. But the question was, so they said, I made a large payment toward my mortgage [00:05:00] and then they asked, why didn't my automatic payment come out afterwards?
Okay. So this, this reminds me of a story. I had a doctor, we served this doctor for years, an oncologist in Chicago. She had the exact same situation happened to her. She wanted to pay down her mortgage sort of aggressively. And really the reason for that wasn't because of the interest rate or anything like that.
It was so that they could become debt free before they retire. You know, when you become debt free before you retire, you just feel a lot more secure with your retirement nest egg. Basically, your expenses go way down. And thousands of dollars a month, and so it makes it a lot more manageable to live off of.
Mm-Hmm. kind of what you've built, right? Right. The problem was when she called, I'm gonna use a term here, she calls when she called the Emotionless Empire, which is also known as the bank. She asked them to make these extra mortgage payments. [00:06:00] And it made her feel like the problem was solved because her banker made the extra mortgage payment for her.
Um, and then the, the next month or months to come for, I think it was almost a year, she couldn't get her automatic payments to come out and she couldn't figure out why. Um, so when she called, she intended on having the banker make an interest only payment. Right. But they didn't do that and then they coded it as what they call a future payment.
And she didn't really understand this is confusing, right? But I believe what the bank does in this situation is, I mean, it's staying near theft. They take your money, they set it to the side. And then they just make future payments. And the terrible part about this is that they continue to charge you interest on the full balance.
Ben: That's just plain wrong. [00:07:00] You know, that's wrong because you know, they know what they're doing when they're doing that. You know, I, I, you know,
Nate: yeah, I feel, I feel like the bank does, but the banker may not. The banker is just indifferent. They don't correct care. Yeah. They're just getting you off. I'm
Ben: going to make one tiny correction because I know you meant this, but you, when you said it, you misspoke.
You said interest only. And I know that you meant principle only.
Nate: Oh, principal. She was trying to reduce
Ben: her. It's rolls off the tongue because interest only loans, right? We've heard about that before, uh, before COVID. So,
Nate: right. So she meant to make a principal only payment, but she was ended up, uh, coding it as future payments.
Um, she's incredibly frustrated because obviously she'd lost a lot of money and interest. The reality is, I think that she just. Another
Ben: reason she was frustrated, she trusted her banker. So the moral of the story is to stop the Stop the juice from running. You have to be explicit with a paperwork pushers and say, yeah, Hey, um, I want this to [00:08:00] be a principal payment.
I want her to go to work right now and I want to keep my other payments running. That's right. Awesome. Okay. Next question.
Nate: This is kind of a, You need question? Because it's unique to every person, but I got the question. Should we move closer to grandparents? Yes. Yeah.
Ben: Yeah, yes. That's what I said. Yes. I'm built in, built in babysitting.
Uh, occasionally you get to take a little break and go have a meal at somebody else's house and then invite them over to your house. Uh, win, win, win, win, win. Next question.
Nate: Yeah,
Ben: exactly.
Nate: Okay. So the next question is, should I count on hitting my RV use? And this is a cashflow question. So they want to know, should I plan my investments around hitting my RV use or should I take a more conservative approach?
And I have maybe once in two, in two years, In serving 200 physicians, seeing a physician not hit their RV
Ben: is. So what they want is they want to make sure they get [00:09:00] their guaranteed paycheck and they're afraid that, you know, that time or inexperience or more likely attention to care is going to keep them from hitting the productivity requirements.
Right. And so they're feeling nervous that maybe that won't happen and it will derail their investment stuff, you know? So, you know, the thing is just, um, Um, and then the other thing that strikes me as like bothersome and wrong about this is, uh, you know, there shouldn't be RV use, there shouldn't be relative value units.
It should be that everyone is able to, to get care. Uh, but with that said, you know, so what, what's been your experience with the docs hitting or not hitting their RVs? Well,
Nate: they, they, I'll just say always, it's almost always, but they pretty much always hit the RV use and the danger in, in taking a conservative approach to your plans.
When you hit your RVUs, you have a bunch of money sitting on the sideline. Right. Right. So they, they get really conservative with their income and then at the end of the year they [00:10:00] call me and they have 50, 60, 100, 000 sitting on the sidelines. Right. And they should be investing that and they should pretty much plan on hitting them.
Yeah,
Ben: or using it some way. I mean, even if they're, even if they're not investing it, they, they could be paying down debt with it. Or I think there are ways to keep that money from just sitting there and feeding more interest to the, to the grabby interest machine, right? Right.
Nate: Okay. Um, I'm going to let you answer this question cause you've seen this many, many times.
I have too, but, uh, should I buy into my surgery center?
Ben: Oh, uh, I'm going to, I'm going to give that a resounding, uh, almost always. So, yeah, almost always. So, uh, I was doing some research about, about this physician owned factors of production one time. And I, I, I called the guy and I said, um, There is this piece of equipment that physicians are putting together a leasing, a leasing outfit and, uh, you know, I want to find out more about it.
And he was the guy who was in that industry and [00:11:00] he said, the only time it doesn't work out is when the physicians don't use the equipment that they own. He said, this always works out when it's a leasing entity or a company they put together to use the equipment for their patients. And that was the magic key for me.
So, uh, what I've seen going forward is, uh, physicians who own their medical office, office building that they practice in, or they own the surgery center where they do procedures, typically do really well. And I think it just goes back to the invest in what you know kind of thing. So, um, I have not. Uh, I've not seen that work out poorly very often.
And in the times when it's worked out poorly, it's because the organization was so large that nobody really knew what was going on. So, um, Yeah, it's, it's tends to, tends to work out if it's, if it gets torpedoed, it's usually politics, it's not finances. So in most cases I say that, that, that, that's a pretty decent deal for most folks.
Nate: Yeah, I agreed. I generally see it work out. It's hard to give the [00:12:00] stamp of approval on everything because at the end of the day it's a business, but, but right. I mean, I see it work out and, uh, it's kind of a big, scary loan. Sometimes I have to take out to buy in
Ben: and usually it works. And I would say another thing.
So if you're thinking about doing this. Don't send us your financials. Don't send us their, their backward history showing how great this is going to be because all that can change in the heartbeat. So, uh, you know, these are very small businesses. It is a higher risk way. It's way higher risk than what you're going to get in publicly traded securities.
Um, you know, the, the, the past is not prologue. So you can't look at the back. backward looking financials and estimate what things are going to do. Just, uh, if you're going to do it, hold your nose, uh, limit your exposure and, and dive in. Right?
Nate: Okay. I'm 10 years out from retirement. Should I cancel my life and disability insurance?
Ben: Good question. So we're, we're both, uh, Credentialed in this area. Do you wanna take it or do you want me to?
Nate: Yeah. Well, uh, this [00:13:00] question was actually asked to me. Okay. Some of these questions I got from other team members too. Okay, cool. So this one was asked directly to me. Okay. So, um, in their situation, and pretty much in any situation, the answer is no.
Uh, should not cancel, definitely not cancel your disability coverage. Yeah. Um, I think physicians feel like disability insurance costs a lot, and so, and it does. Yeah. But the reality is the closer and closer you get. The less and less you're paying in, you know, in future years towards your disability.
Right. And you still need it. I mean, you still need to be covered until the day that you're retired just to replace your income. Exactly. Yeah. So disability is sort of a slam dunk life insurance. It's still a no, you should not cancel it. Uh, but with With a little asterisk, which is assuming that your life insurance was set up correctly.
Like you bought some term insurance that as you go through your career, some of it drops off. Maybe you bought a 10 year and a 20 year term life insurance. This should [00:14:00] be done for you already. It should automatically drop off. But
Ben: that's what I've seen is with clients where I did their life insurance planning 10 or 20 years ago, those policies have come to term and expired and we just let them go.
Nate: Right. And in this situation, which I'm sure is very similar for a lot of the listeners, um, is a few million dollars in, in term life insurance, which is not very expensive. And they were a few million dollars short of, of finishing up retirement at 10 years left. So their money is going to double probably in that 10 years.
Yeah. And if for some reason, uh, the physician in this family were to pass, they would need to fill up retirement because there's no more income. Yeah, exactly. Exactly.
Ben: So that's, it's still, it's still necessary and yeah, absolutely right answer.
Nate: Okay, here's the last question. Um, I just got married. My spouse has children and pays child support based on tax returns.
How do we combine finances? Okay. And I, and I'm going to answer this one as well [00:15:00] then. Okay. We're the deep end of the pool. I'm going to let you swim out there. Yeah. Yeah. Well, I, I, this, I thought this was a good question because it brings sort of, taxes and money into a question that the root of the question or why they're actually answering this, asking this question really doesn't have much to do with taxes
Ben: or investment.
It's not about the money. It's a financial question. That's not actually about the money.
Nate: Exactly. Yeah. And so the reality is, you know, listen to your CPA. If you need to file separately because of this. Um, that's fine, but you should combine finances in most cases in your own unique way. So, uh, we've talked about this before, but there's in cashflow planning or with, with, I guess, combining finances planning, there's sort of two ways you can go about this.
There's the hour. Our bank account, bank accounts. And then there's [00:16:00] the, what you might call his hers and our bank account. Right. But one way or another, you need to combine forces and combine your goals. So goal, uh, creating goals, going at the goal together, combining incomes and kind of having a, A common, um, trying to think of a different word for goal, a common vision for success vision.
Yeah. Yes. Vision is, is super important because going at a retirement alone is a lot more difficult than if you're going at it sort of with your team member. That's
Ben: a perfect last question to take us out. Um, so, uh, we'll come back with, with more questions next time. So until then, remember, you're not just making a living, you're making a life.
Voiceover: 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 Overtaxed Doctor's Retirement [00:17:00] Investing Checklist, available at physicianfamily. com forward slash go.
