Nate Reineke (00:12)
Hello, physician moms and dads. I'm Nate Rennecke, certified financial planner and primary advisor.
Chelsea Jones (00:19)
I'm Chelsea Jones, also a certified financial planner and primary advisor here at Physician Family Financial Advisors.
Nate Reineke (00:26)
Chelsea, Valentine's Day is around the corner. I have an over under on whether or not your spouse, or I guess how long your spouse has ⁓ in between purchasing your Valentine's Day gift and actual Valentine's Day, and I think it's 12 hours.
Chelsea Jones (00:45)
We're talking about MySpouse specifically. Connor's a planner. Over. Yeah, Connor's a planner. He orders stuff ahead of time. He's got the card tucked away for like, at least a week. I know.
Nate Reineke (00:47)
It's literally. Yes. What do you think? Is it over under? Oh, really? Oh, wow.
That's a good man. That's a good man. I think the over
under for everybody though is about 12 hours. It's either on Valentine's Day or before. And if it's before Valentine's Day, you have a planner on your hands. I got some, I mean, it worked really well. I was like on my phone or something the other day and I got an advertisement. It wasn't even an advertisement. It was a video of this really like, ⁓ it was like a baker, some woman that owns a bakery. And she said, ⁓ this is,
Chelsea Jones (01:14)
Yeah.
Nate Reineke (01:31)
This is what your husband ordered like two weeks before Valentine's Day and she opened up a box and there was nothing in it. And then they just looked at the camera and they're like, order these now. They won't be available. Yeah. So what did I do? I ordered it. It worked on me. That's great. Okay. We have some questions here from physicians.
Chelsea Jones (01:44)
Here's your sign.
you ⁓
Nate Reineke (01:59)
And ⁓ none of them have to do with love. So we're going to have to sprinkle that in there some way, somehow. Right? I don't know how I'll do it. All right. Take it away.
Chelsea Jones (02:04)
I think we can do it.
All right, so the first question we got actually came from two separate physicians. Same question, two households. ⁓ Both from Oregon though. So a surgeon and an oncologist in Oregon asked me, I wouldn't set aside money for my kids. I've been hearing a lot about these Trump accounts. Should I use one of those? And.
Nate Reineke (02:16)
yeah.
Hmm.
Chelsea Jones (02:33)
It's a great question. There is a lot of buzz around the Trump accounts there. This will be the first year that you would be able to open them if you decide to. But ultimately what it comes down to when you start using the should and you start shoulding yourself is what do you want to use? Like what is the money for? Why are you wanting to set this money aside? You said it's for your kids, but like what are you trying to set your kids up for?
Nate Reineke (02:50)
Mm-hmm.
Yeah.
Chelsea Jones (03:03)
deal with this money.
Nate Reineke (03:04)
Yeah,
that's kind of, ⁓ you know, part of our job, and nobody realizes this. ⁓
inevitably, we make recommendations based on what we believe. You know, a lot of times, a lot of times, ⁓ they're saying should as if it's a financial decision, when really it's a parenting decision. So in these instances, I mean, I know where this is going. But you said, what's the money for? What did these people say?
Chelsea Jones (03:36)
⁓ so they said they get like their kids get gifts from grandparents from family during Christmas, you know, this is first of the year, they've got the Christmas money. ⁓ the parents themselves are already saving for college. They feel well, well prepared for that. ⁓ so they're like, I, I want my children to own this. and they initially had asked me about a UTMA account.
Nate Reineke (03:43)
Mm-hmm.
Chelsea Jones (04:04)
which is a taxable account for your kid. ⁓ And then we started talking about like the present concept of that. And then they were like, well, what about this Trump account? I've heard about this, would that be better? And again, it all comes down to what's the goal for this money?
Nate Reineke (04:04)
Yep.
Yeah.
So
what's the difference between, so 529s for college, UTMA is a taxable account for your children. What is the difference between a taxable account for your children and the Trump account?
Chelsea Jones (04:37)
⁓ It's really the tax treatment. So a UTMA, the taxable account, the income is taxed as you get it. So, ⁓ and not always at preferential rates. So there's the, the kitty tax is somewhat complex, but depending on how much you have in there, it could be subject to the parents.
Nate Reineke (04:47)
Mm-hmm.
Yeah, there's
a this is there's all always context here. So just zoom out a little bit. The kitty tax is essentially if these utmost get too big, you no longer getting preferential tax treatment. In fact, it kind of gets worse. So this starts taxing at your rates. So you just have to be careful with that. And it just they lose their that must lose their luster after like, not that much money. And you start to ask your question, like, why, why do I even have this? But okay.
So it gets taxed and then the Trump account, how does that work?
Chelsea Jones (05:32)
The Trump account is tax deferred. there's limit, there's not a limit to how much you can put in an up month, but the Trump account is limited to $5,000 a year. And the money that you put in as the parent or a family member, it's after taxes. So you don't get a tax break on it, but the growth is tax deferred. And when the kid turns 18, it essentially turns into a traditional IRA. So there's...
Nate Reineke (05:41)
Okay.
Chelsea Jones (05:59)
early, there's penalties if you take it out before 59 and a half. The like regular exceptions for withdrawals to avoid the penalties to apply. So it's like, you can use it for education expenses, but why would you use that if you have a 529? You can use like, I think 10,000 for a home purchase. And there might be one other like milestone thing. yeah, so.
Nate Reineke (06:13)
Yeah.
Thousand. Yeah.
Chelsea Jones (06:25)
⁓ But it's a good account. I mean, it turns into an IRA, so it's aimed for retirement. ⁓
Nate Reineke (06:33)
And you were telling me this is interesting. As of right now, you've been talking to your CPAs that you work with a lot and you asked them about converting this essentially IRA to a Roth IRA, just like you would, ⁓ let's say with a 401k for a client. They have a bunch of pre-tax money and you're slowly starting to convert it into Roth.
when they approach retirement or in retirement. And as of right now, I think you were telling me ⁓ the way that the tax code is written, there's nothing preventing that from happening. You could convert it into a Roth and effectively have Roth money for your child. And every CPA we've spoken with, they're like, yeah, as of right now, that seems like too good to be true. Because everyone always asks us, how do I get money?
Chelsea Jones (07:13)
That's right.
Thank
Nate Reineke (07:29)
into a Roth for my child and you can't because they need earned income. So this would as of right now, it sounds like, yeah. Yeah, it's interesting.
Chelsea Jones (07:31)
Yeah.
So right now this is a way around it to get money into an
IRA without them having earned income.
Nate Reineke (07:43)
Yeah. So like you said, this is always just what is the money for? ⁓ I struggle with this one a bit ⁓ for because this is a parenting decision. ⁓ I personally won't be putting money into a Trump account for my children because I don't see a lot of value in saving money for them ⁓ for 60 years from now.
Chelsea Jones (07:57)
and
Nate Reineke (08:11)
If you are one of those ⁓ believers in generational wealth and saving as much as you can for your kids so that they can be rich before they've even started working, that's just not how I roll. I think that there is a lot of value in life to earning ⁓ your own place in society.
being a productive member of society and sometimes that requires or every time and from what I've seen that requires you to do, to work hard and ⁓ you will find a purpose, at least some level of purpose in life, earning your own way. And so I just don't go down this rabbit hole very often. If it's like a one-time thing and you're just like, wanna put $5,000 in here or you had a new baby and ⁓ you wanna get the free
money in the account, that's fine. But for physicians, every time I say what is this money for? They don't really have a great answer. It's more of just is it would it be dumb not to do this is kind of what they're asking. So, you know, you said, what's this money for? Sounds like they already had a full 529. So they want to save more. And then the question is, well, do you want this money to be theirs?
Chelsea Jones (09:08)
dollars here.
Yeah.
Yes.
Nate Reineke (09:33)
Or do you want this money? Are you saving for their retirement? Usually they like the idea of the money being theirs, but with an account, it's actually there's no you have no control over it once their age of majority.
Chelsea Jones (09:48)
Yeah, and to be fair, the Trump account would be actually theirs. It would just be expensive to get the money out.
Nate Reineke (09:54)
Yeah, which an 18 year old might not care about. So all those nice ⁓ tax benefits that you're looking for, this money is theirs. That's the whole point here. I just don't really, I just don't have a strong belief. I've never seen a situation where this is a great idea to hand over an 18 year old a whole bunch of money. I just can't see it. So, ⁓ but some people, they want to do this and.
There's nothing wrong with the Trump account inherently. It's just it's just I can't see. ⁓ I normally don't get past college. It's I mean, it's hard enough to save for college.
Chelsea Jones (10:28)
I
I was going to say you're already, we're not saying don't help your kids. You're already giving them a leg up because they don't have to graduate with debt.
Nate Reineke (10:33)
Yeah.
Exactly.
And by the way, you know, for many years I was beating that drum. was just like, know, they don't really need any more money than college. ⁓ I would say my tune is changing a bit. If you have the ability to save some extra money so that your child can buy a house. ⁓ mean, housing is very difficult for young people. ⁓ Then maybe that's a reasonable gift.
because really they don't want a big, they don't need a huge inheritance. They need money when they're getting their life started outside of college. But that doesn't come with any of these accounts. That comes from you saving a whole bunch of money in a brokerage account and having the means to just give them a gift. Everyone wants to avoid these gifts. ⁓ Sometimes it's just not worth avoiding. You just give them a gift, know, give them.
in today's dollars, you know, give them 100,000 bucks to buy a house when they've started their career and they've shown you that they're a productive member of society, but the housing market is just too difficult.
Chelsea Jones (11:51)
It comes down to just talk through it with us.
Nate Reineke (11:55)
Mm-hmm.
Chelsea Jones (11:56)
help you figure out what makes sense based on what your goals actually are.
Nate Reineke (11:57)
Yeah, and worst case scenario,
you throw some money in all these accounts, it's not the end of the world, but ⁓ it's also just a whole lot of complexity for them to get a couple thousand bucks.
Chelsea Jones (12:10)
and then.
Nate Reineke (12:10)
Okay.
Chelsea Jones (12:10)
Okay.
So the next question is from an ENT in Florida. This is a one. They said, when can I buy a boat?
Nate Reineke (12:20)
Can I buy a boat? So this ENT in Florida, think, I don't remember if he listens to every episode, but he's gonna know who he is. And he didn't even ask me this directly, I changed it. ⁓ But he's always telling me about his boat. He's like, someday I'm gonna get a boat. And this has been for, it has to be at least six years. the answer is a financially ⁓ prudent person would never buy a boat.
Chelsea Jones (12:43)
and then.
Nate Reineke (12:49)
I remember one of the first things I ever saw, ⁓ some TV show, I ever saw about boats was this guy said, know, a boat stands for it stands for bust out another thousand.
Chelsea Jones (13:03)
I don't know if you know this, but my mom sells boats. Yeah, because my hometown is on a lake.
Nate Reineke (13:07)
What?
Wait a minute, wait,
wait, Did you say sale? Sales or sells?
Chelsea Jones (13:17)
It probably came out sales, she was, I think was, I think she's moved on from that job recently, but she sold boats. Yeah.
Nate Reineke (13:24)
Okay, she sells boats. Wow.
I did not know that.
Okay, tell me more. Should the NNT in Florida buy one?
Chelsea Jones (13:29)
Yeah. And I'll
tell you, she never owned a boat. And I always say, I always say you want to have fun on the water, go rent a boat. You have to buy one. But.
Nate Reineke (13:37)
Yeah.
Yeah.
But I am am joking a bit here. ⁓ That's kind of the saying, right? And the funny thing is this ENT in Florida knows this, which is why he never buys one. But really, he wants one. And I know he wants one because we've talking about it for years. And so the real question here is.
Chelsea Jones (14:06)
Yeah.
Nate Reineke (14:10)
When ⁓ can I stop making perfect financial decisions? I'm sure Chelsea, you and I deal with this all the time, I'm sure ourselves, it's just as a financial person, as a prudent person, you want some of these things sometimes, it's hard to talk yourself out of every decision that isn't a perfect financial decision. But as I always say, ⁓
Chelsea Jones (14:30)
Mm-hmm.
Yeah.
Nate Reineke (14:36)
If we all made perfect financial decisions, we'd like live in a thousand square foot house and drive a junker car. And we would never enjoy, you know, some like in that way, some fruits of our labor. And this person, ⁓ they are getting very close to buying their boat. And I want to tell you kind of like their journey. They started with, ⁓ hey, I want a boat someday. I live in Florida.
Chelsea Jones (14:42)
and
Yeah.
and then.
Nate Reineke (15:06)
I want a boat someday, but I don't have a house yet. So they bought a house. He's like, OK, I'll buy a boat in two years. I go, hold on. Let's get on track for college. Let's get on track for retirement. OK. And I like, OK, of course, ⁓ they're prudent. This person truly is a prudent person. We do that. So they're on track. They show up every year to the annual progress check.
Chelsea Jones (15:06)
huh.
Nate Reineke (15:30)
And they're not holding back on their retirement plan. They're not saying, well, maybe I can get away with like only spending $9,000 a month in retirement. Meanwhile, they're spending more than that. Now, they're not trying to cut themselves short every step of the way just so they can have this thing that they want. So every year we make sure retirement's in good shape. College is in good shape. They're like, okay, maybe now I can get my boat. But then, you know, it's time to have a baby. And they're like, that's way more important than a boat.
Chelsea Jones (15:56)
Mm-hmm.
Nate Reineke (15:59)
so they have their child, they're on track for college. And then they have the opportunity to buy into their practice. And they're like, well, it's gonna be a big loan. And I just can't, I just don't feel right about buying a boat when I have this loan that I really wanna get rid of. And I say, hey, look, whether or you could or could not technically afford it, I think you're probably right. Because loans carry risk.
Chelsea Jones (16:15)
Mm-hmm.
Nate Reineke (16:26)
and you want to reduce risk everywhere you can, ⁓ the boat should probably take a backseat to that. You know, we're five years in. Year six, year seven, we go along like this, right? And every step of the way, they're making the right move and they're taking their plans seriously. And this person makes terrific money. You know, to the average Joe out there, they could have bought a boat seven times over, but they didn't. OK, now we're seven or eight years in. They are very, very well prepared to make this
Chelsea Jones (16:27)
Yeah.
Thank ⁓
and then.
Mm-hmm.
Yeah.
Nate Reineke (16:55)
to buy into their practice. mean, probably gonna do it with cash. They moved their mom near them. Like mom needed some help. She had moms had some money, but they needed, she needed a little bit more. Mom moved near them. Their child's college was prepared. ⁓ As soon as they buy in with cash, he's gonna make even more money. ⁓ They have a house and now he is ready to buy the dang boat. And I don't say that in like,
Chelsea Jones (17:15)
Mm-hmm.
He's been preparing for
this for six or seven years, it sounds like.
Nate Reineke (17:24)
I mean,
he dutifully preparing. And my point is this, you should prepare. You should put off purchases like this until you're truly ready. But here's the point beyond that. Once you've done that, it's really hard to like go pull the trigger. But I actually believe now boats, this is a big example, but maybe like maybe a brand new car or something and you've only ever drove, you know, five year old cars or something, you know, it's a bad decision, but you really want it.
Chelsea Jones (17:45)
Mm-hmm.
Yeah.
Nate Reineke (17:53)
and you just you've waited long enough. Once the time comes, go buy the boat. But the time needs to come and you need to be patient. this ENT in Florida, they did that. I'm hoping I'm hoping I can report back maybe in twenty twenty seven, but report back that the boat was purchased. That's my hope. Enjoy it. You only get one life.
Chelsea Jones (17:54)
Mm-hmm.
Yeah.
Yes.
You deserve it.
Nate Reineke (18:20)
That's it though. So can you buy a boat? Most can't because they can't wait as long as this person did. They just can't help themselves. But sometimes if you plan just right, you can.
Chelsea Jones (18:20)
Okay.
Yeah. Okay. Next question comes from a private practice sports medicine physician in Wisconsin. They said, can I use a five to nine account to pay for CME that I would like to attend and can deduct pre-tax? ⁓
Nate Reineke (18:48)
We got this question via email. Everyone send us your questions. So this is is private practice. Five twenty nine for themselves to pay for their own CME. But they own their own practice, so they they would also be able they're asking or saying, would I also be able to deduct it pre-tax?
Chelsea Jones (18:50)
Mm-hmm.
We love them.
So, two parts to this question. Can you use a 529 account to pay for CME? That one's a yes. OBA expanded it to where you can use it for CE. The part where, you know, can I deduct it? You can't double dip. You're getting tax-free growth in the 529. You're taking it out tax-free. You also get tax deduction in Wisconsin. The IRS doesn't like to give out, they don't like you to double dip.
Nate Reineke (19:32)
Mm-hmm.
Yeah.
Chelsea Jones (19:37)
So you
can't get the tax benefit of the 529 and also deduct it as a business expense. It's one or the other.
And if we're comparing state tax benefit and tax-free growth of like less than a year since you're just passing the money through versus deducting it as an expense, the better tax break is deducting it as an expense.
Nate Reineke (20:01)
Yeah, that's right. You know, it would be very unique for a physician to ⁓ enjoy the benefits that the, you know, the big, beautiful bill, the one big, beautiful bill ⁓ kind of added here. Because if you're a W-2 employee, most of time your work is paying for your CME. If you're private practice, it's going to be a lot more beneficial to, I mean, you're going to basically get 50 % off by spending, you know, money or
Chelsea Jones (20:21)
Okay.
Nate Reineke (20:30)
paying for it pre-tax. And then even if for some reason, like let's say you're a W-2 employee and you wanted to pay for some CME that your work wasn't going to cover, most of the time you're already saving for your children's 529 and you're getting the tax break already for contributing to your child's 529. So putting in an additional $10,000 or whatever it is for
Chelsea Jones (20:32)
Yeah.
and
Nate Reineke (21:00)
your own 529 doesn't make sense. The funny thing is in Wisconsin that is not the case. That's why this person's asking this question is like you can actually get a per beneficiary but most 529s there's a limit per tax filer. So it'd be very unique to be able to what we would say wash this money through a 529 to pay for CME. But.
Chelsea Jones (21:08)
Yeah.
Yeah.
Nate Reineke (21:22)
Still a good idea.
Chelsea Jones (21:24)
Yep, question worth asking. ⁓ And our last question that we have today is from a primary care doctor at an undisclosed location. We don't know where they're at.
Nate Reineke (21:34)
in undisclosed area. I got this question.
They did not tell me where. I was surprised and delighted. I don't think I've told this on the podcast, but ⁓ I had a couple of questions be asked ⁓ over email and it was signed off, not even their name. It's signed off as, you know, like a primary care doctor in, you know, in Washington. And I was like, my gosh, I didn't even know that, you know, that was going to catch on, but
Chelsea Jones (21:58)
Yeah.
Hahaha
Nate Reineke (22:04)
So I put undisclosed because they said they were primary care doctor but not where they were. All right.
Chelsea Jones (22:08)
Mm-hmm.
so their question is they have two job offers. One offers a pension plan and the other has a higher comp, but they offer a 401k plan, not a pension plan. How do I decide which one to take?
Nate Reineke (22:22)
Yeah.
Yeah. So you and I deal with this kind of comparison all the time, Chelsea. First of all, I'm going to correct something here. We don't know if the other job actually has higher comp. OK. because
Chelsea Jones (22:43)
Okay.
Nate Reineke (22:45)
your pension, your benefits is part of your comp. OK, people miss this. They see the big dollars, you know, they go some private practice and they're like, we're going to pay you five hundred thousand. Or you could go work over here for three hundred and ninety thousand dollars a year, but you get a whole bunch of benefits that your private practice didn't offer you. Maybe your private practice is going to offer something, obviously. Maybe they're maxing out your 401 K or they're giving you a match.
Chelsea Jones (22:49)
Mm-hmm.
Yeah.
and
Nate Reineke (23:14)
or they're paying for your health insurance. the point is, you should be, you're gonna use every last benefit these people give you. So you should be comparing the overall benefits to each other, and that is your comp. So what this is actually saying is, what is my pension worth in terms of comp? That's this real question here. And... ⁓
Chelsea Jones (23:22)
Mm-hmm.
Mm hmm. Yeah, so it's like
another way to maybe rephrase that that's easy to understand is this the the higher comp. Do I like how much do I have to save out of that higher comp to match what the pension would be like what I have to save more than I don't know $120,000 a year if we're talking about that different. Yeah.
Nate Reineke (23:47)
Yes.
Yes.
the benefit of the pension. Yeah, right.
So ⁓ I'm going to tell you kind of how this works or tell our listeners how this works. I've done this math before on the podcast, but it's important. really, here's the important part. ⁓ Sometimes there isn't a huge benefit either way. Which gives you more freedom. You get to decide, like, which one do I want to go work at?
Chelsea Jones (24:07)
Okay.
Mm-hmm.
Nate Reineke (24:21)
I did this math for somebody ⁓ and they realized that the numbers were roughly the same. So they got to live in San Diego instead of like middle of the country. And that's what they wanted to do because the numbers ended up being the same, but they didn't realize that they were the same because one had much better comp or I show, sorry, I just screwed up much better salary, not comp. Okay, so ⁓ let's say,
Chelsea Jones (24:33)
Yeah.
And then.
Yeah.
Nate Reineke (24:48)
that you do the math on what the pension is worth and you find out that after 25 years, it's gonna pay you $8,000 a month. Okay? So the way to do this, and this is gonna get a little mathy, but Chelsea and I can do this for you and with you. But essentially, the question you need to ask yourself is, what is that $8,000 a month worth? And the way to do this is to say,
Chelsea Jones (25:13)
and
Nate Reineke (25:15)
how much money would I need invested to spin off $8,000 a month of income? And I did all the math before. And I wanted to be generous. I didn't even use the 4 % rule. I used the 4.5 % rule, which everybody knows the 4 % rule, is, you know, that's a safe withdrawal rate. So I said, well, what if I could withdraw a little bit more and just make this easy? Long story short, you would need about 2 million bucks.
Chelsea Jones (25:23)
and then.
Nate Reineke (25:44)
at least $2 million to spin off $8,000 a month of income.
So how much money would you need to invest every month for the next 25 years to get $8,000 a month? It's like $2,500 a month or $30,000 a year. Okay. And you would have to put that in a taxable account because you can't put, you you're already going to be filling up a 401k and all that. So it's an addition to that, which you could essentially say that's 40 or $50,000 a year. So you do all this math.
Chelsea Jones (26:01)
and
Nate Reineke (26:18)
You find out the pension's worth 50 grand a year. One job pays 500, the next job pays 450, but has a pension. It's the same. It's the same comp, and it's never the same. But I'm just just just to say, like, just to give an example. Now, the real to go one step further, you now have investment risk versus sort of the risk of your job.
because if you leave after four years and you don't get any pension, you would have wished you took the higher salary. But it's also worth it to note that if you have a 401k, you're investing your own money in there or you're investing your money in a brokerage account, that's risk you're taking in the stock market. you're risking your own money. ⁓ So there's pros and cons to a pension versus investing your cash. ⁓
But when you're trying to make a job choice, you just need to say, what is that pension worth? And then consider in your overall comp when making your choice.
Chelsea Jones (27:20)
Yeah. And if it's a temporary job, like if you know you're not going to be there for more than five years, because even some pensions vest after five years, but if you leave after five years, you might get 100 bucks a month. So, yeah. And that's what we see most of the time with pensions not working out is people switch jobs.
Nate Reineke (27:35)
Yeah, it's just really small. Yeah.
Yeah, they do switch jobs a whole lot. ⁓ But, you know, I've seen a lot of people stay at the VA, especially when it's not their first job, you know, and they're like, you know, I kind of know what I'm looking for. And then they find the VA and I'm a big advocate for the VA. Some places in the VA aren't fun to work for. Others, people really love it. But I'm an advocate for it because ⁓ it seems to be a better pace.
Chelsea Jones (27:53)
Mm-hmm.
Nate Reineke (28:12)
and of work and also their pension is really rich. mean, you can get you can essentially it's probably similar to these numbers. It's the pensions worth tens of thousands of dollars a year.
Chelsea Jones (28:25)
Yeah, not to mention the tri care, the health insurance.
Nate Reineke (28:27)
Yeah. Man,
yeah, they got a lot of benefits.
Okay, I think that's it for today. Thank you everybody for listening. If you liked this episode, please be sure to subscribe so you don't miss when we release one new episode every week. You can leave us a rating wherever you're listening. If you'd like to work with us, you can visit us at PhysicianFamily.com to schedule an interview. And if you aren't ready for that, send us a question, podcast at PhysicianFamily.com. We'll answer it even if it doesn't make it on the show. ⁓ Until next time.
Remember, you're not just making a living, you're making a life.
