Nate Reineke (00:13)
Hello, physician moms and dads. I'm Nate Renneke, Certified Financial Planner and Primary Advisor.
Chelsea Jones (00:20)
And I'm Chelsea Jones, also a certified financial planner and primary advisor here at Physician Family Financial Advisors.
Nate Reineke (00:27)
Okay, so Chelsea, I have ⁓ long wanted ⁓ to make a ⁓ kind of a fun segment on this podcast. And so we were talking about what segments we should do. And one of the ones, we're still tossing our ideas for segments. We'll see how this goes. Maybe we'll get feedback from our listeners on if they like it or not. But was all the headlines that we get, we all get right on our phones, on social media and all that.
And the big one is which headlines kind of should you pay attention to and ⁓ which headlines should you ignore? And I think ⁓ most of our clients and most of the time you and I know that a lot of headlines you should ignore. That's kind of our MO here. There's not a lot to get in the way of physicians ⁓ just saving and doing the long-term investing kind of ⁓ thing, right? But sometimes
There are headlines that you should pay attention to. So we're going to try one today. ⁓ It's quick, but we were trying to come up with a good name and you found one that I thought was funny and we'll see if the people like it. So what is the up for debate name of this new segment?
Chelsea Jones (01:46)
⁓ Temporary interim, whatever you want to call it, name for the segment is front page or birdcage.
Nate Reineke (01:55)
I made fun of it for a second until
I understood it. wasn't as fast. But Front Page or Bird Cage. If you're like, I don't know, if you're a resident listening to this podcast, you may not know about newspapers. But yeah, everyone else will. So Front Page or Bird Cage for today is interest rates on mortgages. Okay.
Chelsea Jones (02:05)
Huh?
Nate Reineke (02:21)
I should say mortgage rates have come down. Right. But when I say that, it's like, what does that mean? Since when? And I get emails, I swear, every two, three days, says rates have come down. But then I look at the rate and I'm like, it's roughly been the same rate for about the last month. So what did they come down from? Well, this is a a grabby headline. People love to save money on their mortgages.
Chelsea Jones (02:28)
Mm-hmm.
Yeah.
Nate Reineke (02:50)
a grabby headline, a grabby email or whatever, because they never send you the email when rates went up. So if rates are, you know, six percent today and then tomorrow they're six point one and then the next day they're six percent, you probably will get an email or a headline on both the first day when they went down to six percent and the third day when they went back down to six percent. Right. So just this is this is something worth looking into.
but at the same time, rates don't move as fast as headlines would like you to think. So just what you wanna do here is find a rate, yeah, or as much. It's always like rates went down, then you call your mortgage guy and you're like, hey, rates went down. He's like, no, or they went down a tiny, tiny bit. So you wanna kind of have like a target rate. If you have a good mortgage broker,
Chelsea Jones (03:26)
Yeah.
Or as much.
Not really.
Yeah.
Nate Reineke (03:46)
They'll say something to you like, hey, what's your target rate so that when we get to that point, we can consider refinancing. But the reason I came up with this topic for front page or birdcage listeners send in the name you want for the segment if you like the segment. But the reason I came up with this is I did get a question from a listener. Let find the question.
Chelsea Jones (03:53)
Mm-hmm.
Nate Reineke (04:13)
And the question was from an orthopedic surgeon here in Oregon, and they wanted to know, should I refinance my mortgage even if the balance is low? And this is good ⁓ thought that they're having. So what goes into this question, whether or not they should or shouldn't do it, is when you have a low balance, there's just less money to save.
Right? Which is a great thing. You have a really low mortgage balance. Therefore, even if you saved a whole percentage point on your mortgage, there's just less meat on the bone to save against. So you have to compare the cost of refinancing, just like any time you refinance, but this one's probably important, the cost of refinancing to the actual savings. So in this instance, this person has a $150,000 mortgage and it started, you know, it's
a million plus house, maybe close to, actually I think it's $2 million house. So they're getting close to the end ⁓ and their rate is, let's just say for easy numbers, it's really close to 7%. And so the question is if they can refinance to a 6 % mortgage, should they do it? Well, ⁓ there's one way to do this, which is to say you're going to pay the house off in five years, let's say. And if you go from 6 to 7%,
Chelsea Jones (05:27)
Mm-hmm.
Nate Reineke (05:43)
I'm sorry, from 7 to 6 % over the next five years, you could save like $6,000.
which the grand scheme of things in a mortgage is actually rather small. But let's say it costs you $1,500 to refinance. Well, you would think it would be worth it, right? Because you're saving $4,500. But here's the thing most people don't think about, and it's really hard to add to the analysis. I know this person, they're not going to pay it off in five years. They're going to pay it off in like two.
Chelsea Jones (05:53)
Right.
right.
Nate Reineke (06:17)
And by the time you really look at it and the effort required to refinance, it may not be worth it if it's $1,500 to refinance. Sometimes you can get a no cost refinance and it obviously would be worth it. But you want to think realistically, how long am I going to be in this house? How long or how long am I going to hold this mortgage versus the savings I'm actually going to get? And when will I get my money back and start to actually save money? Right. And if it's
Chelsea Jones (06:44)
Mm-hmm.
Nate Reineke (06:46)
If the numbers are bigger, cost more to refinance, you also can think about opportunity costs. Let's say it costs you $5,000 to refinance the mortgage and you're getting an ever so really small rate drop. Well, you might wait for a better rate drop. You also need to consider that you could put that $5,000 in a savings account or bonds or something.
and get a return on your money. So it's opportunity costs there. So you want to just make sure that it's really worth it to refinance ⁓ before you do it because it's painful to do and it costs money. So if you have a really low balance and it costs a lot to refinance, you could probably skip it unless the savings is really big.
Chelsea Jones (07:29)
Right.
Okay, very good. The next question is from an oncologist in California. They said, should I transfer my old 401k into my new one? ⁓ So this one is a question that I get a lot to every time someone changes a job. What do I do with my old plan? And usually it makes sense to transfer it over to the new plan. You're consolidating. You have fewer logins to keep track of, you know,
Nate Reineke (07:50)
Mm-hmm.
Chelsea Jones (08:06)
fewer statements to get, and ⁓ a lot of plans nowadays are kind of on par with one another, but you do want to be careful whenever you do, whenever you're considering this. ⁓ Sometimes the old plan is better, or at least better enough to warrant keeping the money there, right? And what do I mean by better? I would look at the investment options in each plan.
Nate Reineke (08:27)
Mm-hmm.
Chelsea Jones (08:35)
Cause if the old plan has really inexpensive, you know, Vanguard mutual funds, but the new plan has kind of more expensive actively managed funds, then I'd be reticent to move my 401k money over into the new 401k plan. ⁓ you also want to look at admin fees. If they're charging you a lot to keep it at the old plan, then you want to get it out of there. ⁓ if they're kind of the same, then
Nate Reineke (08:53)
Mm-hmm.
Chelsea Jones (09:04)
You know, it could go either way. ⁓ and so yeah, investment options and costs is, what I would consider when making that decision. And usually it makes sense to consolidate it. Cause like I said, all, most 401k plans or employer sponsored retirement plans are kind of, ⁓ you know, all at the same level. There's not huge differences between a lot of plans, but, ⁓ you want to do your due diligence before.
making a decision to move money like that.
Nate Reineke (09:36)
Yeah, I just looked at one of these yesterday, actually. And I didn't even know this question was going to be here. But just yesterday, someone was moving or considering moving a 401k. They had a few hundred thousand dollars in it. The cost, the funds inside of their old 401k costs 80 basis points. No, no, I'm sorry. 0.8 percent.
Chelsea Jones (09:40)
Yeah.
Yeah, that's 80. Bips. 0.08. 8 bips.
Nate Reineke (10:05)
I'm getting this wrong. so low I can't even think about it. 0.08. 0.08. was
was 8 bips. I mean, I couldn't believe it. You're like, wow. So, and then the new one, which is, this is pretty, I mean, it's not out of the question to see half a percent on the funds inside of a 401k. know, so.
Chelsea Jones (10:24)
Mm-hmm.
Right.
Nate Reineke (10:31)
a few hundred thousand dollars in there, if they just let you keep it in there for 10 years, I mean, you're saving tens of thousands of dollars just by not transferring it, by doing nothing. So that was an extreme example. Nowadays, ⁓ 401k people who put the funds inside 401ks are getting pretty smart to this and they give you low cost options, but we see it all the time. So usually you're right, they're on par, but. ⁓
Chelsea Jones (10:54)
Mm-hmm.
Nate Reineke (10:59)
Once in a while, you can literally save a few thousand dollars a year by just leaving the money there.
Chelsea Jones (11:05)
Yeah. And fun fact too, really quick before we move to the next question. ⁓ Thrift savings plans, TSPs are kind of hard to beat and you can roll money into your TSP even if you're no longer like active in the plan, you're no longer employed by the federal, whatever branch you worked at. And so that's another way of consolidating. you have a TSP, you can move your old money into your old quote unquote old TSP.
Nate Reineke (11:15)
Mm-hmm.
Mm-hmm.
Chelsea Jones (11:35)
because the options in there are really appealing.
Nate Reineke (11:35)
Yeah.
Yes, they are. I love talking about the G fund with people, your bond options. So yeah, that's cool.
Chelsea Jones (11:42)
Yeah.
Okay. The next question comes from a child psychiatrist in Nevada. They said, should I shop around for better disability insurance or, you know, shop around for different disability quotes?
Nate Reineke (11:59)
Yeah. So this is the answer is pretty straightforward. How you get there sometimes can be confusing. This is the thing everyone needs to hear. This is all under the assumption that you're comparing identical policies to each other. So apples to apples. Right. ⁓ But each I am ⁓ I wrote this out so I could be really clear. So I'm actually going to read the answer here. So
Chelsea Jones (12:19)
Mm-hmm.
Nate Reineke (12:28)
Each state's insurance commissioner regulates rates on insurance. Meaning you can't get rate gouged. Okay, so they regulate rates. ⁓ So the rates for ⁓ if you have the same amount of coverage ⁓ and the same amount ⁓ risk or the same risk classification. So
when you go do your health tests for disability insurance, they're going to classify you as like, how healthy are you? And the same benefits, the same riders, if everything is exactly the same, the rate will be exactly the same, same company, right? Because sometimes you'll go to an agent and for whatever reason, not good or bad, I don't know the reason. Sometimes agents have a good reason, like they don't like a specific company maybe because
Chelsea Jones (12:55)
Mm-hmm.
Nate Reineke (13:25)
that company. don't know that I was just talking to an agent the other day, they, they got caught wind that a company might not be around for a whole lot longer. And then sure enough, they sold. And so he didn't want to sell a slightly cheaper policy to somebody, even though it made no difference to him. In fact, I think he would have made more. Because he just didn't, he had some reason to not like the company. So as long as the same company, same rate, same writer, same risk classification,
Chelsea Jones (13:48)
Right.
Nate Reineke (13:53)
their rates will be the same. And so if you know for certain, this is the actual hard part, if you know for certain you're buying the policy that you should be buying and you like it, like this is the one I want, and you got a good ⁓ health classification, you do not need to shop around. Which is a good thing because shopping around for disability insurance is burdensome.
Chelsea Jones (14:02)
Mm-hmm.
Nate Reineke (14:15)
Yeah, so it's pretty straightforward. Get a really good agent. We have some you can call and ⁓ you can trust that you're going to get the best rates because it is the rate.
Chelsea Jones (14:29)
Yeah. And fun, another little anecdote on disability insurance. I recently bought my own policy and having a good agent made the experience really great. But also he, talked through, you know, the process, what do you expect or what should I expect in terms of what the insurance company is going to rate me? But he was like, I'm just going to ask them to give you the best rating. I'm going to say that like in the initial application and they're going to be, have to be the one that like
Nate Reineke (14:35)
Mm-hmm.
Mm-hmm.
Chelsea Jones (14:57)
knocks you down a peg to a different rating. I ended up getting the best rating. So get, be optimistic and then have the insurance company be the, you know, the jerk that knocks you down instead of going in like, ⁓ I'm probably not the best. I'm just not going to put that.
Nate Reineke (15:02)
Nice. Yeah.
Yeah, right.
Mm-hmm.
Chelsea Jones (15:17)
Okay, so our last question here is from a cardiologist in Oregon. They said, I'm transitioning to retirement this year, but I will still be working for a part of the year. Does it make sense for me to contribute to my IRA? So this is one of those questions where the answer varies per client. Like it really depends on your situation. A little bit of context for this cardiologist. ⁓
Even though they're only working part of the year, they would still make too much to be able to deduct the contribution. You know, we've said, you know, we had a question previously, what do I do when I'm nearing retirement? And the main thing is defer, defer, defer, defer as much money as you can. They can't defer in this case. They're already taking some distributions from their retirement portfolio because not only are they only working part of the year, but they're working far less.
Nate Reineke (15:52)
Mm-hmm.
Mm-hmm.
Chelsea Jones (16:14)
than they did the previous year. So their income is much less than what they're used to. And so they're already taking some money out of their portfolio to cover expenses. ⁓ So what that means is that the earned income is already being spent. If they wanted to make this IRA contribution, they would have to take more money out of their portfolio to either cover the expense that the
Nate Reineke (16:16)
Mm-hmm.
Chelsea Jones (16:42)
IRA contribution would have covered in their regular income or, you know, that's, guess that's really it. They would have to take money out of their portfolio to make this contribution and not even be able to deduct it. ⁓ so we decided against it this year because we still have the opportunity to, ⁓ you know, consider conversions on the money that they have already deferred.
Nate Reineke (16:55)
Right.
Mm-hmm. Yeah. So conversions is total. mean, whenever someone's asking about an IRA, they're kind of they don't realize it, but they're asking sort of two different questions. It's like, should I get money into Roth or do I and then should I defer money? If you can defer money, you should. And then Roth is like a whole nother conversation, whole nother like, what can I convert? Can I contribute to an IRA and then do my back door or things like that?
Chelsea Jones (17:10)
So.
Mm-hmm.
Nate Reineke (17:38)
But this is one of those questions that is unique and hard to answer unless you know someone's exact situation.
Chelsea Jones (17:38)
Mm-hmm.
Nate Reineke (17:47)
Okay, think that is it for today. I would love to hear from everybody about our segment. We also have some other ideas for segments that we're going to be trying out ⁓ future episodes. But thank you everyone for listening. If you liked this episode, please be sure to subscribe so you don't miss when we release new episodes every week.
You can leave us a rating wherever you're listening. if you'd like to visit, if you'd like to work with us, you can go to physicianfamily.com, schedule an interview. If you aren't ready for that, send us a question at podcast at physicianfamily.com or feedback about ⁓ our segment that we did today. We'll answer your questions, even if it doesn't make it on the show. And remember until next time, you're not just making a living, you're making a life.
