Nate Reineke (00:13)
Hello, physician moms and dads. I'm Nate Renike, Certified Financial Planner and Primary Advisor.
W. Ben Utley (00:20)
Utley, certified financial planner and service team leader here at Physician Family Financial Advisors. Nate, β seems like today we've made it past the big beautiful episode and now we're back to our standard spiel. Listener questions.
Nate Reineke (00:31)
Mm-hmm.
That's
right, yeah. We still have some questions that are β big and beautiful. So we have some.
W. Ben Utley (00:42)
do we have a big beautiful question today as well?
You know, I think I'm going to just have a big beautiful day throughout the entirety of the day. Everything I say is going to have the adjective of big beautiful. Maybe that's a, no, that's an adjective. Yes. The big, beautiful. It's my big, beautiful coffee cup. It's my big, big, beautiful toilet handle.
Nate Reineke (00:52)
You
Did you have a, this is the one. Yeah, did you have a
big, beautiful breakfast?
W. Ben Utley (01:04)
I did actually. had,
β what do you call that? It's a 20 somethings eat. was β avocado toast. Yeah. I had a big, beautiful avocado, β big, beautiful eggs. And if my doctor is listening, yes, it was yolk free and big, beautiful whole grain toast. Yeah.
Nate Reineke (01:11)
there you go.
Nice.
All right, let's get into some of these questions, because there's a lot going on β out there. People are a little nervous about Social Security. So the first question is actually, we got two questions in the same vein, so I'm going to read them at the same time. β Pain management doc in New York said, with everything happening politically, should we take Social Security early since it may go away?
And then a psychiatrist in Missouri said, I read the latest federal report that Social Security will run out in the next eight years. Should we include Social Security in our plan?
W. Ben Utley (01:57)
No, yes.
Nate Reineke (01:58)
Yeah,
that's right. Yeah, I, know, this has been a worry of people's for a long time. β And you get these big scary headlines. Something interesting, Ben, as a financial advisor, I've realized that β half the job is just reading past the headline. You know, you get in there and you start reading headlines and you're like, there's some nuance to this. here's what's important to know, at least.
In the 2024 Social Security Trustees Report, it does say that Social Security is going to be depleted. uses these scary words. If you look closely, what it says is if Congress doesn't do anything, you should be getting about, let's call it 75 % of Social Security by 2033. And that's if they don't do anything. So more than likely,
This is a belief, this isn't, I didn't read this anywhere. More than likely they will do something, because most of the country depends, or a big chunk of the country depends on social security. So how they will do that, you'll probably be taxed more as a doctor. But when you're actually getting social security, there's a decent chance that you will get your social security benefit. If you wanna be safe about this, or try to be a,
W. Ben Utley (03:05)
Yes.
Nate Reineke (03:22)
careful, just plan for a reduced social security. I think that is more than reasonable. So take 25 % off of your social security and your retirement plan. And Ben, guess what? If you're a client of Chelsea or mine, you've already done this. We've been doing this
W. Ben Utley (03:39)
That's right. That's right. was thinking
when I got this question, I was like, my financial plan already has this reduction in it and you guys handled my plan. So I knew that was already in there. So I'm not, I'm not sweating it, but I will tell you that it is tantamount to political suicide for them to β do away with or reduce social security. What, and folks, it is really not hard to fix social security.
Nate Reineke (03:55)
Mm-hmm.
W. Ben Utley (04:06)
We just lack the political will right now to do so. They could extend the social security β recipient age by a little bit. They could trim, well, they wouldn't trim the benefits, but they could increase the FICA taxes by a little bit. It is totally fixable. It's just, they haven't done it yet. And you know how Congress is, they won't do anything unless they absolutely have to, because it might make somebody frustrated or angry, you know, but yeah. So β I guess.
Nate Reineke (04:30)
Mm-hmm.
That's right.
W. Ben Utley (04:36)
If it did go away, the downside of it going away would be that it'd be really hard to retire for a lot of people. The upside is that a huge chunk of our deficit goes to serving the social security trust fund and β the country would be able to get out of debt relatively quickly. So I would say that there's probably about a one in a hundred chance of that happening. I think that accommodating this by reducing your social security expectations is the way to go. β
Nate Reineke (04:55)
Mm-hmm.
W. Ben Utley (05:06)
Social Security trustees report basically says that Social Security will be insolvent in 2033. This never kept our government from spending. But I've been reading those reports for like practically my whole career for the last 20 plus years. I've been reading those reports. I mean, this is a known quantity. It's not new. I don't think having a new regime and power is going to change that. This is
Nate Reineke (05:24)
Mm-hmm.
W. Ben Utley (05:34)
as Nate said on the last podcast, this is a big fat nothing burger.
Nate Reineke (05:37)
We're gonna get to that big fat nothing burger later.
W. Ben Utley (05:41)
Yes.
β wait, big beautiful nothing burger.
Nate Reineke (05:44)
Yeah.
All right. β Next question is from a spouse of a hospitalist in Tennessee. We have seven children, so a lot of college to pay for. We also don't have an emergency fund. What should we put off while building the emergency fund?
W. Ben Utley (05:58)
Yeah.
Hmm. Well, I know you're a big emergency fund proponent, so I'll hear your answer and then I'll tell you what I actually did.
Nate Reineke (06:09)
Yeah.
I mean just about everything. You have seven kids. I was out in my deck last night and I built one of those Costco play structures and I was telling the horror stories to a friend that I was sitting so about how long it took me to build it. Everyone told me it wasn't that bad. It took me like four weekends. And then I look back and both of my children are standing on the top of the thing and I'm like, what is going on? No shoes on. They're going to fall off and break an arm any second.
W. Ben Utley (06:41)
Yes.
Nate Reineke (06:41)
And you
got seven of those things running around. Let's build that emergency fund before we do just about anything else. Yeah. β there you go.
W. Ben Utley (06:46)
What you need, what you need, Nate, is you need five more kids so that they can do a trust ball.
Do you trust your siblings to catch you? β
Nate Reineke (06:57)
Yeah.
Yeah. You know, this is an interesting one. Not because of the theory of why you should have an emergency fund. Every doctor should have an emergency fund. But I do hear it all the time. People come in and they just aren't all that excited about it. It seems hard. And yes, it is hard. The the thing you get out of this is peace of mind. And that is like a sales trick that insurance people use. This is actual peace of mind. Like you.
W. Ben Utley (07:07)
Yes.
Yeah.
Nate Reineke (07:26)
Do not have to worry about something happening to your child. You get to invest more money because you have cash. It is a true benefit and you need to sprint toward this one goal and then the rest can be steady Eddie for the rest of your life.
W. Ben Utley (07:42)
Let me tell you something. This is my real life experience with clients and emergency funds. Yes, they all exude a high pitched whine when you tell them that you need to set aside some money earning basically nothing after inflation. Always happens. Okay. But we had this little thing that happened about 25 years ago, a tiny, tiny microscopic, almost atomic size thing called a virus, AKA COVID.
Nate Reineke (07:48)
Mm-hmm.
Mm-hmm.
W. Ben Utley (08:11)
And I had not less than three physicians thank me for recommending that they have an emergency fund because it made all the difference at that time. And you don't know when another COVID is coming or a cut to CMS or, you know, reduction of the staff at your local rural hospital. You don't know when that stuff is going to happen. And my God, seven kids, you need an emergency fund. But, so there is a way to kind of
Nate Reineke (08:38)
Yeah.
W. Ben Utley (08:40)
cheat a little bit. so this is not the best way to do it, but it is a way that I did it long ago when I didn't have an emergency fund. I used my Roth IRA as my emergency fund.
Nate Reineke (08:54)
Mm-hmm. Yeah, you can
W. Ben Utley (08:55)
Cause I wanted
to start saving for retirement. So I put it on the Roth IRA so you can get it back out with some provisions. So that is a kind of a synthetic temporary emergency fund. β the other, β the other thing you might consider is if you have a health savings account, then you could consider that being your emergency fund because I would expect that if you have an emergency with seven kids, a real emergency, it's probably going to be something medical. Right. β but.
Nate Reineke (09:07)
That's right.
Mm-hmm.
W. Ben Utley (09:25)
You know, I love to see six figure emergency funds, but by the same token, I love to see emergency funds period. So, you know, your starter emergency fund could be a grand, right? Um, then you build up to five and then you build up to 25, and then you kind of relax a little bit, go back to what you're doing. There's 25 grand covers pretty much any short-term emergency. It's not going to cover your, uh, you know, your, your four month waiting period.
Nate Reineke (09:33)
Right.
W. Ben Utley (09:54)
while you're waiting for your disability check to come or while you're fighting the insurance company over your disability claim. But, you know, that's ultimately where you want to be is at least four months worth of hardcore living expenses, X savings, right? That's where you want to be. But a month, a month gets you in the green zone, right? Because if your car dies, you can get a used car for 25 or $30,000. Most families to have, you know, real bills.
Nate Reineke (10:12)
Yeah.
W. Ben Utley (10:23)
of around $15,000 a month. So 25, 30 grand gets you a couple months worth, right? The more kids you have, the more emergency fund you need. Yeah.
Nate Reineke (10:29)
Mm-hmm.
Mm-hmm.
Yeah, I mean, you and I many, many times over the years have seen people really use and need these emergency funds and the rush of excitement I get when it happens is kind of strange because they're usually in the midst of an emergency. So they're not really, β you know, happy. But I just spoke with someone yesterday, a tree fell in the middle of their house. They're living out of a hotel and they had a
W. Ben Utley (10:59)
β
Nate Reineke (11:03)
six figure emergency fund and they're still saving. They're still saving money and they're like, hey, do you think we can take money out of the emergency fund? I think it qualifies. A tree is in the middle of your house, right? And then, you know, there's the cautionary tales. We've talked about this before. We had a family that didn't really want to build it. They wanted to take all their cash and build a house and it literally caught on fire.
W. Ben Utley (11:07)
Cool.
Yeah.
Yes, I was going to say you've you just talked about the smartest. That is the dumbest emergency fund story I've ever heard. The folks that wanted to have one to buy a house, they bought the house and then they use the emergency fund to fix it up. And before they could talk to the insurance company about the increase in value, it burned to the ground.
Nate Reineke (11:34)
That's right. Yeah. β
No, and a lot of people listening to this and me 10 years ago, I would probably been with them is like, what are the chances my house is going to burn down? That's not the way to think about this. The way to think about this is that the 1 % chance something does happen. You don't want to literally like go bankrupt. Right. mean,
W. Ben Utley (11:56)
Yes.
Yeah. Hey, guess
what? Guess what? If it's an emergency that you know about, it's not an emergency. It's only an emergency. If you can't see it, you won't know what the emergency is going to be. I've seen skied into a tree. You've seen trees falling in houses. We've seen forest fires or consume houses. However, a tree can get screwed up. That's what's going to happen. That's going to cause your emergency fund. So beware of trees if you don't have an emergency fund. Yeah.
Nate Reineke (12:11)
Yeah.
Yeah.
Yeah, that's right.
Okay. Bear with me here, Ben. A spouse of, I practice this, okay. A spouse of a dermatopathologist. Did I get that? Dermatopathologist. Okay. That was tough. In Pennsylvania. All right. This is β the big, beautiful bill again. So given the recent 529 rule changes that are coming,
W. Ben Utley (12:44)
pathologist. Yeah.
Nate Reineke (12:58)
the big beautiful bill. Should I be putting more money in my 529 to pay for private K through 12 school? So this is the nothing burger I talked about. And then right after that podcast, I spoke with a client and they asked me, hey, hadn't heard that episode because it's actually hadn't been released yet. β Hey, should I be putting more money in my 529s and then just pay my private school directly? I thought, β I guess this isn't a nothing burger.
So it is a little bit, but there are a few people that live in these states where the 529 deductions, know, state tax deductions are really high. And they're so high that you may not be getting the full deduction because you don't need to contribute that much money to pay for college. OK, so in this particular example, they can deduct up to $30,000 a year in Pennsylvania.
W. Ben Utley (13:28)
Yeah.
Thank
Nate Reineke (13:57)
for saving for college. β But they only contribute maybe $1,100 a month. So that's enough to get them through college. β They're going to state school. And β I realized that they could contribute the rest of the $30,000, take it right back out, and pay for their private school and get more of a deduction. So.
W. Ben Utley (14:18)
Yep.
Nate Reineke (14:23)
The new rule for the big beautiful bills, you can take out $20,000 a year. Before when it was 10,000, was kind of, I guess this was still an option, but it just, there wasn't a lot of meat on the bone. So, you know, they're.
W. Ben Utley (14:35)
Yeah, it doesn't
doesn't that go up? it? Does it rise to 40 soon?
Nate Reineke (14:40)
It goes from 10 to 20. I didn't see anything of it going up to 40. Maybe that.
W. Ben Utley (14:42)
that's it, huh?
Okay. Well, I must've been mistaken. So
this is not a nothing burger, but it's more like a slider. β So, you know, when you and I talked about this, β like I've actually used this strategy because I saved everything I needed for college. And then, β I had some money that was in a taxable account and still had bills to pay. β and so what I do is I put the money in from the taxable account. I contributed it to the five to nine, got my state tax break and turn right around and wrote a check to pay for college. It's just that.
Nate Reineke (14:53)
There you go.
W. Ben Utley (15:17)
That one extra step, you know, save me some taxes now here in Oregon. It's not a lot, but if you live in a state that has an unlimited income tax break, which there are some that have that, then this is a viable tax break for you. So here's, here's what you got to have. You got to live in a state. Cause this is United States, right? You got to live in a state that, offers a tax break for contributing to section five to nine plans that has a large or unlimited, β
Nate Reineke (15:36)
You
W. Ben Utley (15:47)
tax deduction for contributions and You're already saving everything that you need to be saving for college. and by the way, you have to have kids And I have to go to and they have to go to private school So this is that is a very complex Venn diagram of overlap that has a a tiny little slider burger at the middle of it Yeah, so it is it is a great big beautiful slider for an ant
Nate Reineke (15:56)
Yeah, and they have to go to private school.
Yeah.
That's right. Yeah, and
so sometimes you have to run across that situation to see it, for this person, they're going to save a thousand bucks. It's worth it.
W. Ben Utley (16:23)
Yeah, it's worth it. It's worth
it. It's just, it's, uh, you know, these are, these are the nichey little things that we get into that are very specific for individuals. Sometimes it's a thousand, sometimes it's 50,000. You know, uh, this is, this is the benefit of doing this for a couple hundred people in a boat like this all over the country.
Nate Reineke (16:34)
Yeah.
Yeah,
that's right. Yeah. Okay. So β last question here, Double Doctor Family, β Family Medicine in Alaska. We are close to retiring and have money in Roths. As a count stand right now, we can't use a backdoor Roth. Is it worth it to move things around to open a backdoor Roth?
W. Ben Utley (16:53)
Okay.
they're right on the customer retirement? Yeah, I'm going to say no. for most of our listeners. So worth it. Like, yeah, it depends on how much you got to move stuff around. And I would be surprised. mean, usually people have moved things around by now. β the thing that would keep them from doing this successfully would be having a, β a traditional IRA with basis in it, which is to say that it came from.
Nate Reineke (17:07)
Yes.
Mm.
W. Ben Utley (17:35)
pre-tax contributions or was a rollover from a 401k. What they're going to have to do is they're going have to take the balance of that account and roll it into an active 401k or 403b or FERS account if that's possible. And if that's possible, it's not that big a deal. It just depends on how you value your time because it does take time to do this. You're to have a little time out of the market with your account. So it kind of depends on how big the account is.
That's kind of what I think of it.
Nate Reineke (18:07)
Yeah, let me try to, this is a, whoever asked this question is actually more astute than I would expect, right? They're like, should we move things around? They're making some assumptions that maybe our audience doesn't know. So, right, what they're saying is they can't do a backdoor Roth because, like you said, there's money in an IRA. So there's money in a traditional IRA. And if they were to do a backdoor Roth, it would violate the pro rata rules.
W. Ben Utley (18:29)
Okay, got it.
Nate Reineke (18:35)
and they would pay taxes, which that's not the point of doing the Roth. The point is you already paid taxes. So it's hard to say yes or no without seeing the account structure because if there's a little bit of money in there, if there's a few dollars in there, pay the taxes and roll it over. It's not a big deal. But I've seen traditional IRAs with a hundred, $200,000 in there for whatever reason, maybe an old financial advisor rolled their 401k in there and
to get it out if you don't have an active 401k or you can't move it, you'd be taxed on that for a long time. β So here's the reason, you know, so they're missing out on it, right? So they can't roll it over to the Roth without paying a bunch of taxes. they just, it feels like you can't do anything. But what they can do is just wait a year or two instead of paying taxes. And they can start rolling this over to a Roth when they're retired and pay a lot less in taxes because you're tax,
W. Ben Utley (19:10)
Yeah, that makes sense.
β
Nate Reineke (19:33)
your tax bracket is so low. exactly, that's right. So β if you're a year away and you can't get the money out without paying taxes, just wait a year and start doing it then. And then you can get some tax-free growth in retirement because you're still going to be invested in retirement.
W. Ben Utley (19:35)
like proactive Roth convergence is what we, you know, we usually do that for retirees. Yeah.
Yeah, that's right.
Yeah. I mean, what are we talking about here? Like if you're two years away from retirement, you can get another 15 grand total, maybe. Yeah. And then you would otherwise and tax free growth of $15,000 for the next 10 years is another 15 grand tax free. I mean, and if you're ready to retire, you've easily got mid seven figures and $15,000 is a rounding area in daily volatility. So I don't know. mean,
Nate Reineke (20:00)
Yeah.
Yeah.
W. Ben Utley (20:21)
Again, it's, is it worth doing? It really depends on how you value your time. In fact, Chelsea and I had a conversation about this not too long ago where she was recommending something and I wasn't recommending something and it came down to paperwork. And I told her, said, I think we need to start asking clients. Um, if I could save you, uh, $10,000 in taxes, how many hours would you be willing to put in to save that?
$10,000. So like over a hundred, less than a hundred, over 50, less than 50, so that you can figure out how that client values their time. Right. They might be willing to put in a thousand hours to save $10,000, which would be ridiculous. Right. But you know, some, some clients who are really, they're kind of set up. It just, that's literally not how they want to use their time at all. Right. They say, ah, I might put in four hours. Right. So that's finding their time at $2,500 an hour.
Nate Reineke (21:03)
β Yeah.
W. Ben Utley (21:18)
And if it's that person who's looking at this Roth is like, I don't think so. My personal rule of thumb is, β if I can save, you know, two, $300, for β putting in hours work, I'll do it, especially if it's something I'm going to save every year. So maybe reshopping my car insurance or something that would make sense.
Nate Reineke (21:22)
Yeah.
Mm-hmm.
Well, going back to that earlier question, it's like, it's going to take you about the 529. It's going to take you 10 minutes to transfer it in. You're have to wait a couple of days, and then it'll take you another 20 minutes to transfer it out, and you save thousand bucks. That might be worth it. And some people, literally, they won't do it.
W. Ben Utley (21:47)
Yeah.
Yeah, accounts are already linked. You know, it's all built. I've already got the cash flows in place. It's like beep, beep, done. Right. Saves me 500 bucks. But yeah, I mean, it's got to tell you that cleaning out a traditional IRA to get the backdoor Roth setup going. I won't say it's hard, but tedious. Absolutely. Absolutely tedious. And we do it all the time. That's how I know. And that's if it goes well, it's tedious. If it doesn't go well, then your money's kind of stuck in cyberspace. I don't know. Probably the best thing to do is just not roll it over in the first place.
Nate Reineke (21:55)
Yeah.
Yeah, right.
Yeah.
Hahaha.
That's right. All right. That's it for today. Bye. Anyone take us out?
W. Ben Utley (22:29)
Golly, was that it? was having so much big, beautiful fun that I just time slipped by. So ladies and gentlemen, thank you so much for listening to us today. We love your questions. We love it when you schedule an interview with us. You can go to PhysicianFamily.com, click Get Started, and you can apply for an interview there. Or if you're not ready for that step, just send us a question, podcast at PhysicianFamily.com. And until next time, remember, you're not just making a living, you are making a life.
Nate Reineke (22:31)
Yeah.
