Nate Reineke (00:13)
Hello, physician moms and dads. I'm Nate Renneke, certified financial planner and primary advisor.
Chelsea Jones (00:20)
I'm Chelsea Jones, also a certified financial planner and primary advisor here at Physician Family Financial Advisors.
Nate Reineke (00:28)
Chelsea, we have an asking for a friend today, which I'm excited about. So this is questions that maybe you're afraid to ask because they feel ⁓ elementary or they feel strange for some reason, something ⁓ you wouldn't want to ask, but maybe you would ask for a friend.
Chelsea Jones (00:32)
Excellent.
Mm-hmm.
Okay, so the question is asking for a friend. If I get a raise, will I actually make less money after taxes?
Nate Reineke (00:55)
I've gotten this question before. I got this question when I was like 17 at my first job. ⁓ People would not take overtime shifts because they noticed that they didn't make as much as normal. It's very interesting. A lot of it has to do with like withholding. You work more, you work overtime, or you get a bonus. It just doesn't feel like you got it all. ⁓ But you you...
Chelsea Jones (01:04)
Mm-hmm.
Nate Reineke (01:22)
What's your ⁓ take on this? guess why would someone ask this and then what's the answer?
Chelsea Jones (01:30)
Yeah, I've gotten this question before. I've gotten the question like, will I actually make less if I make more after taxes? And I've gotten the question where it's like, is it worth it for me to make more? Kind of alluding to the taxes, but I think those are two distinctly different questions. Is it worth it and will I actually make more? Two different questions. We're going to focus on the, do I take home less? ⁓
Nate Reineke (01:39)
Yeah.
Mm-hmm.
Mm-hmm.
Chelsea Jones (02:00)
No, you don't take home less after taxes. you make more money, you will always pocket more money ⁓ if we're just considering the amount of income taxes that you pay. ⁓ And the reason being, one misconception that I think people have is ⁓
Nate Reineke (02:02)
Yeah.
Yes.
Chelsea Jones (02:22)
like the graduated rates that we have, they're marginal rates. And so if you get bumped up from the 24 % tax bracket to the 32, that doesn't mean that your entire income is gonna, you're gonna pay 32 % of your entire income. It's just 32 % on every dollar that you make above the 24 % threshold. So.
Nate Reineke (02:36)
Mm-hmm.
Yeah. Yeah,
I think every time I explain this, I say marginal, you know, marginal tax brackets, and I think I lose people immediately. Because if you're asking this question, you probably don't understand what that is. So I'll try to, I'm going to try maybe try to say it in a different way. It's like, imagine you made
Chelsea Jones (03:02)
Mm-hmm.
Nate Reineke (03:05)
$5. That was your income. ⁓ The first dollar you make in the US is taxed ⁓ federally, like what the IRS is going to charge you. They're going to take 10 % of that first dollar. And then let's imagine that for every dollar, you go up in taxes. The next dollar that you make, they're going to take 12%.
So first dollar, take 10 cents. Next dollar, they take 12 cents. But they still only took 10 cents on the first dollar. They didn't take 12 cents on each dollar, on both dollars. They took 10 on the first, 12 on the second, 22 cents on the third dollar, 24 cents on the fourth dollar. Now, this is the biggest, the big jump is from 24 to the fifth dollar. So that fourth dollar, they took 24 cents.
Chelsea Jones (03:40)
Mm-hmm.
Nate Reineke (04:03)
and the fifth dollar they might take 32 cents. And the question of is it worth it is like, wow, that's a big jump. They took an additional 8%, eight pennies out of that dollar. And for a lot of physician families, like let's say if you have one doctor and one stay at home spouse, many times you hover around in the 24 % bracket.
Chelsea Jones (04:06)
Mm-hmm.
Mm-hmm.
Nate Reineke (04:30)
Right, because that bracket ends at just above 400,000. So imagine you make, even if you made 400,000, right, you're deferring some of that money into your 401k, you have a standard deduction, so you're really never paying that 32%, but as soon as you have a double doctor family, you go from 32%, you get into the 32 % bracket.
and pretty quickly get into the 35 % bracket. So the question of is it worth it is just saying, is it really worth it to make another dollar where they take an additional eight pennies?
Chelsea Jones (05:07)
Mm-hmm.
Nate Reineke (05:08)
And that just comes down to how much cash you need to fund your life, to fund your savings. But the gist of it is you will always make more money if you make more money. So there's no weird ⁓ ceiling to where it's just not worth it in this range to make an additional dollar from a pure math perspective. So no, the answer is no, you will not actually make less.
The answer is more nuanced about whether or not it's worth it. ⁓ But it becomes more and more valuable the more and more money you make. This is why it becomes more valuable the more money you make to defer the money into your 401k. And potentially, ⁓ this is also why doctors are unique in deferring money. Pre-tax money is more important sometimes than... ⁓
Chelsea Jones (05:51)
Mm-hmm.
Nate Reineke (06:04)
making Roth contributions where you pay the taxes and then save the money. Such a big gap right there.
Chelsea Jones (06:06)
Mm-hmm.
Yeah. Cause any money that you defer comes off the top. So it's not like you're deferring at the first dollar where they're only taking 12 cents. You're deferring the dollars where they're taking 32 cents or 35 cents. And so.
Nate Reineke (06:13)
Yes.
That's right.
Yep, exactly.
So if that bracket, this isn't the exact bracket, but let's say the bracket was 400,000, that's the most you could make before you jump into the 32 % bracket. Then, so if it's at 400, let's say you make 420,000. So they're going to tax that 20,000 at a higher rate, they're going to take the 24 % plus another eight. So you're paying 32%.
Chelsea Jones (06:28)
Mm-hmm.
Nate Reineke (06:49)
You can defer all of that in your 401k and never touch the 32 % bracket. That's why it's so valuable. Now, if you have children and maybe they got their first job, they're making $50,000 a year when you're in residency and they're only paying 12 % in taxes, it doesn't really get much lower than that. Even in retirement, it's going to be 10 % or sometimes the actual
Chelsea Jones (06:53)
Mm-hmm.
Mm-hmm.
Nate Reineke (07:16)
rate you pay in taxes is even lower. So for them, Roth is better and paying taxes upfront and contributing to a Roth would be better.
Chelsea Jones (07:24)
Mm-hmm.
Nate Reineke (07:26)
All right. Yeah. So that question does seem very simple, but it has a lot of meaning behind it it's kind of a loaded question. So it's okay to ask these types of questions because usually when you ask a simple question, there's a reason that this sort of, I wouldn't call it a rumor, but ⁓ these thoughts about do I actually make more money, they're not rooted in reality, but they have a reason why people say them. So bring them on, ask all your questions.
Chelsea Jones (07:54)
Yeah.
Okay. Moving on to our regular questions. The first one comes from an ENT in New York. They said, have a whole life policy that I want to get out of, but I don't qualify for low cost term insurance anymore. What should I do?
Nate Reineke (08:13)
Yes, this is we've been seeing a lot more ⁓ whole life policies come through. Lots of new clients are trying to determine whether or not they should get rid of it or not. And here's the danger is that when when people read online about whole life policies, generally the what they see, they read an article that says like, stay away. And not everybody should stay away. But I have yet to
Chelsea Jones (08:36)
Mm-hmm.
Nate Reineke (08:41)
come across someone that's a fresh physician coming right out of residency that should just go out and buy a whole life policy. It's very uncommon. ⁓ So ⁓ you get nervous, right? We see a physician come in. They're like, my gosh, I've been paying 10, 20, 30, sometimes $100,000 a year in premiums. And I have these whole life policies. I want to get rid of them. I want to kick them to the curb. And while I... ⁓
understand the sentiment. It just doesn't happen like that. It doesn't happen so fast. There's things to consider. So the things to consider, the taxes to get rid of it, the surrender charges to get rid of it, and your basis in the policy, which is how much you put in versus how much if you were to surrender the policy, how much you get out. There's all these things to consider. But let's just set that aside for now and consider the other thing that almost nobody considers.
Chelsea Jones (09:19)
Mm-hmm.
Mm-hmm.
Nate Reineke (09:40)
At least, no, no, if you're not a financial professional, you wouldn't think about this. Most of the time when people wake up and realize that they should not have a whole life policy, they're several years into their policy, which from a policy standpoint is not always a horrible thing just because they have escaped the surrender charges. And it's usually pretty straightforward to get out. They can just surrender the policy,
and depending on all those things I just discussed that we're setting aside for a moment, sometimes they can get out pretty cleanly. It's just a sunk cost. You paid those charges upfront. You paid your salesperson quite a bit of money, but you can move on. The thing to think about here though is not just I've been in it 10 years. It is also you are 10 years older. And if you bought the policy, go ahead.
Chelsea Jones (10:30)
I
was going to say, if you surrender it, you're stopping premium payments, but you're giving up the life insurance.
Nate Reineke (10:40)
That's right. Yeah. So there's a life insurance aspect of this, which is in a guaranteed return in there. That's like why it's so expensive. It's guaranteed. You're 10 years older. So imagine you bought the policy at 35 years old. 10 years from then you're 45. And it's not so easy anymore to go out and get this low cost insurance. You know, there could be just a couple small things that many middle aged people deal with that aren't
Chelsea Jones (10:42)
So.
Mm-hmm.
Nate Reineke (11:08)
huge concerns to your health, but it is on life insurance. And so this person is saying, hey, I went out to look at getting term life. Probably, you know, we recommended, hey, you should get some term life insurance. And it's expensive. Like, it's no longer cheap. Like when I was supposed to buy it and it was going to be, you know, 30 bucks a month. And now it's however much. It's a lot. ⁓ So what can you do? You feel stuck.
Chelsea Jones (11:11)
Yeah.
Nate Reineke (11:37)
You feel like you have to continue to make a thousand dollar payment toward this policy. But the good thing is you a lot of times you don't have to do that. So it's not perfectly clean. It's it's not a totally satisfying answer, but you can get everything you need. So here's what you need. OK, you want to get the money out if for some reason you decide whole life's not good for you, but you want to maintain the level of insurance that you know you need. So you determine how much insurance you need.
Chelsea Jones (11:38)
Mm-hmm.
Mm-hmm.
Nate Reineke (12:07)
You go to your whole life, the person who, or I guess the company, sometimes it's better to go to the company so you don't have to deal with the insurance agent again, because they're going to tell you, know, like, well, this policy is mature, it's taken care of itself, you don't have to make these premium payments anymore. It's a lot of times that is missing the point. There's some opportunity costs you're missing out by having money in a whole life policy. So you go to the company and you say, hey, I want to explore
Chelsea Jones (12:29)
Mm-hmm.
Nate Reineke (12:35)
how much term life insurance I could get with the basis that's in this policy. So let's imagine there's a $50,000 basis. You're essentially asking how much term life insurance can I get with the $50,000 that is in this policy if I just convert it to paid up term life insurance. Therefore, you do not have to pay the premiums at all on that standalone term policy because they're just going to convert it over.
Chelsea Jones (12:56)
Mm-hmm.
Nate Reineke (13:03)
The reason to do this isn't just, I'm going to use that money and it's still the same price. The reason to do this is a lot of times there's no health check. They just convert it. So that is the thing.
Chelsea Jones (13:14)
Which is really good
too if you're no longer insurable.
Nate Reineke (13:17)
That's right. If you are
no longer insurable, this is something you really can't miss because once you surrender the policy, it's over. Now you have to go get insurance and it's going to be expensive. ⁓ just to add one more thing here, it's always ⁓ painful to think about how you could have gotten it for cheaper.
But sometimes people say, have these little health issues and the term policy wasn't as cheap as I thought. And what that actually means is instead of paying $30 a month, you pay $150 a month. Just understand, it's still cheaper. Okay, it's still, you're still not putting $1,000 in, you're only putting 150. Then you can still take this cash at 50 grand or 100 grand and go invest it somewhere where you can get a better expected rate of return. So,
Chelsea Jones (13:54)
Still cheaper than the whole life.
You
Mm-hmm.
Nate Reineke (14:12)
Take your time, even paying it for 10 years. ⁓ And most of the time by the end of this, everybody's happy as long as they can try to forget the sunk cost, but that is in the past. So just move forward. And every time I've seen someone get out of these, whether or it's paid up or ⁓ just surrendering the policy, they tend to feel a lot more secure. They maybe even can save a little bit less for retirement because they're taking that cash, putting it to better use.
Chelsea Jones (14:24)
Mm-hmm.
Nate Reineke (14:41)
but they oftentimes forget the good feeling that they will get by not putting more money into the policy. So take it slow, do your due diligence and consider the fact that you need to come out of this thing with some quality term insurance.
Chelsea Jones (14:49)
Mm-hmm.
Okay, our next question comes from a neurologist in California. They said, in-laws want to contribute money to my children's college fund each month. Should we have them do a grandparent 529? I've heard they're more beneficial now. So this is great question. This is a question that I just got the other day. And the, I've heard their more beneficial part is alluding to, you know, recent legislation that,
Nate Reineke (15:14)
Mm-hmm.
Chelsea Jones (15:27)
Basically for the FAFSA, the Free Application for Federal Student Aid, I think that's what it stands for. ⁓ Prior to recent years, Grandparent 529s were included as income for the child. So it would reduce the amount of aid that you would get. But now they're
Nate Reineke (15:32)
Mm-hmm.
Right.
There was this... So in the past, you would have to wait to use your grandparent 529. It wouldn't be on the FAFSA, but you would wait until maybe senior year and use it because by the time it would have shown up on the FAFSA, that income is no longer relevant. there's still a workaround. Yeah, two years. There you go. So what is it now?
Chelsea Jones (15:54)
year.
Yeah, because there's a two year look back, I think. Yeah.
⁓ Now, grandparent 529s are just completely excluded from FAFSA. They're not included in the estimated family contribution anymore. And so they have no bearing on whether or not your child would get federal aid. ⁓ Now, for the families that we work with, grandparent 529s are more beneficial than parent 529s in that way.
Nate Reineke (16:14)
Mm-hmm.
Chelsea Jones (16:36)
But the thing to remember is that the families that we work with, physician families, the parents make enough to basically disqualify their children from receiving need-based federal aid. And so most likely whether or not the grandparents put money in a 529 or the parents put money in a 529, they probably won't qualify for any need-based aid. And so it doesn't really make a difference.
Nate Reineke (16:57)
Yeah. Yeah.
It's unfortunate because everybody is trying their best to cut down the cost of college and put themselves in the best position. What I would say is we don't know what legislation is going to be when your child goes off to college. Do your best. If grandparents want to contribute to their own 529, let them. It's just best practice. again, that's a good point, too. Check which state they're in. If they can get a tax break, then they certainly should, because the alternative would be that grandparents contribute to your 529.
Chelsea Jones (17:06)
Yeah.
Yeah, they might get a tax break. Yeah.
Mm-hmm.
Nate Reineke (17:33)
which they can, know, 529s have that set up where you can gift money in to your 529. ⁓ So there's no reason for them not to, ⁓ but it probably won't help. And so the risk here is that potentially grandparents aren't investing the money the way that you might expect or the way that your plan calls for. So just, if you can be involved,
Chelsea Jones (17:44)
Mm-hmm.
Nate Reineke (18:02)
Make sure that they have a nice fund in there or like a years to college fund or a nice index fund in there. And other than that, you know, just try to get balances every once in a while so that you can appropriately plan. You know, a lot of times I hear this constantly where grandparents will say, I'm contributing to, you know, don't worry too much about college. We've been contributing and
Chelsea Jones (18:02)
Mm-hmm.
Mm-hmm.
Nate Reineke (18:29)
they are way, way out of touch with the cost of college. When you went to college, ⁓ the cost pales in comparison to now or what it might be 10 or 18 years from now. no shame on what they're contributing, but just make sure it's enough and certainly just take the best practice or route of just them contributing to a grandparent 529.
Chelsea Jones (18:32)
the cost. Yeah.
Yeah. Yeah. This is kind of, kind of like the asking for a friend question in the sense that like the contributions are still going to be helpful. More money is more money towards their college fund. ⁓ it's just the vehicle matters a little bit less here because whether the grandparent owns the five to nine or the parent does, it's still the college fund. Make sure it's invested appropriately and it'll get the job done.
Nate Reineke (19:05)
Yes.
Mm-hmm.
Mm-hmm. Yeah, when I say best practices,
I mean, there are always scenarios where this could help. know, and many physicians have children later in life, and for all we know, they could retire. ⁓ Still, they're going to have a ton of money on their balance sheet, which makes ⁓ aid very difficult to get. But who knows? Things happen. You could...
Chelsea Jones (19:34)
Mm-hmm.
Nate Reineke (19:44)
lose your job, could have an existential experience where you spend all your money and stop being a doctor, who knows? But ⁓ more than likely, it's not going to help and you can just let them invest for the one person chance that something strange happens.
Chelsea Jones (19:50)
Mm-hmm.
Okay, the next question comes from a dermatologist in New Hampshire. They said, circumstances have changed and we now need to buy a bigger house while raising our children. We don't want to lose progress on our college and retirement plans. How should we consider this decision?
Nate Reineke (20:20)
Yeah. I hear this quite a bit and I think times are changing whether or not people realize it or not that ⁓ many people are okay with downsizing nowadays. You know, I think many of us still think about maybe our grandparents that lived in the same house for 50 years. ⁓ That's not as common anymore. My thesis is that it's because of Zillow.
and it's so easy to move now. It's also probably because of LinkedIn and what's the other job site?
Chelsea Jones (20:58)
indeed or the yeah
Nate Reineke (21:00)
Indeed, things like that. It's so easy to move, so easy to change jobs that people just
don't stay in the same job or the same geographical location for 40 years anymore. ⁓ So people are more and more ⁓ receptive to the idea of downsizing. So here's the thing. If you buy a big old house, you don't have to think of it as sunk cost.
Chelsea Jones (21:21)
Mm-hmm.
Nate Reineke (21:30)
if you plan to downsize. ⁓ You can buy a house, let's say you're in a million dollar house and you want to buy a 1.5 million dollar house. You could plan to pay down the house to where you downsize and you move the ⁓ equity that you still hold in the house back into retirement when your kids move out. So in that sense, it doesn't have to get in the way of retirement. But there's some
Chelsea Jones (21:33)
Mm-hmm.
Mm-hmm.
Nate Reineke (21:59)
cautionary tales of people who said, yeah, we're going to downsize. They moved into the house, they fell in love with it. And by the time they retire, they don't want to move. So you need to be really honest with yourself about whether or not you're actually going to move because if that happens to you, it's going to be painful at the end of the road. But here's the big one. Here's where it actually impacts college and retirement. And it is cash flow. If you buy that $1.5 million house and
Chelsea Jones (22:01)
Mm-hmm.
Nate Reineke (22:26)
The limiting factor is you don't think you can fully pay it off before you retire. Well, then downsize. If you buy that $1.5 million house and you think, can't save for retirement in college because these mortgage payments are absurd. You just simply can't make that move. You have to change something. Your plan has to change. Retire later. You have to make more money. Maybe you're moving to a place where you can make more money.
Chelsea Jones (22:51)
Mm-hmm.
Nate Reineke (22:56)
but cashflow is the big ⁓ piece here. If it's just, hey, we can afford it, but we weren't planning on having to pay an additional $500,000 toward a house before we retire, which happens often, right about this time, when I hear this question, it's like they're 15 years away from retirement, now they have to get a 15 year mortgage, and it just ruins the rest of their savings plans. the two are different.
Chelsea Jones (23:18)
Mm-hmm.
Nate Reineke (23:25)
⁓ If you're in a position to make the payment now, but maybe not later, you can downsize. If this is going to get in the way of saving for college and retirement, you need to make other plans. And that is to update your retirement plan and college plan or buy a different house.
Chelsea Jones (23:40)
Mm-hmm.
Nate Reineke (23:41)
I don't know about you, when I was growing up, people shared rooms all the time. Okay. That's nice. Yeah.
Chelsea Jones (23:45)
Yeah. Well, I was the only girl in my siblings, so I always got my own room, but my brother shared a room.
Well, actually when we were really young, we all three shared one room. didn't always have my own. All right. Final question. And this one is a bit of a doozy. It seems like a simple question, but can really get into it. It's from a pulmonary critical care doc in Florida. They said, I have life and disability insurance at work. Do I need more?
Nate Reineke (23:57)
That was probably fun.
All right, yeah.
Mm-hmm.
Yeah. Yeah, this is another insurance question. Look, everybody feels like they're getting screwed over by their insurance agent. And I get it. OK, so we are all allergic to insurance. But there's two types of insurance that physicians need. They actually need it. And this is why we don't take commissions for insurance advice. We don't get kickbacks. We don't sell it. It's so that I could give this advice.
Chelsea Jones (24:28)
Mm-hmm.
Mm.
Nate Reineke (24:46)
while our audience knows that I have no finance, I get no financial gain out of telling you about the insurance you actually need. That's so important to us. I was out to lunch with the insurance agent that we often refer people to and he begged me to split the commission because he's like, man, you send me all these great people, these great doctors come to me and I like what I'm buying. He was buying me pizza. He's like, all I can do is buy you a slice of pizza like once a year.
Chelsea Jones (24:52)
Mm-hmm.
Nate Reineke (25:14)
I'm like, I said, you don't understand the ability to give these recommendations without them feeling like I'm selling them something. Like selling them a bad product, which is what they're used to, means everything to me. Hopefully it means a lot to them. So please, please hear me when I say you need own occupation disability insurance. That means that if you can't be a doctor,
Chelsea Jones (25:26)
Mm-hmm.
Mm-hmm.
Yes.
Nate Reineke (25:45)
or you can't practice it within your own specialty as a physician, then you get paid. And the reason that's important is a lot of times your group policy is not like that. It is a general disability policy, meaning you have to legitimately be disabled. If you can go work at Walmart, you might not get paid. Okay? And even some
Chelsea Jones (25:50)
Mm-hmm.
You're not disabled. Yeah.
Nate Reineke (26:15)
disability policies through your work will have an own occupation element to them, but it's not very strong. Maybe it's a one-year ONOC or a two-year ONOC. But the reality is just assume most of the time without looking at the policy for each individual person, which we do, most of the time I go into it with the assumption that it is not own occupation. The other piece of this is there is usually a cap.
Chelsea Jones (26:23)
Mm-hmm.
Nate Reineke (26:44)
So when you go buy individual private coverage, you can actually replace the amount of income that you would need to do two things. Most people think about paying their bills, but you still got to retire. So you have to be able to save money too. And so let's say it's, you're allowed to replace 60 % of your pay, but a lot of times at work, they'll have a cap. A lot of times it's $10,000 a month.
Chelsea Jones (26:45)
Mm-hmm.
Mm-hmm.
Yeah.
Nate Reineke (27:11)
A doctor's family can't save for retirement, save for college and pay their bills off $10,000 a month. So you need individual disability coverage. And this is part of feeling secure about your plan. Like a lot of people save for retirement and they're just worried about the what ifs. This is one of those what ifs that is worth covering. ⁓ The other issue is a portability issue. If you have a policy
Chelsea Jones (27:26)
Mm-hmm.
Nate Reineke (27:41)
at work and you change jobs or you lose your job, you don't get to take it with you. But with an individual policy, it goes with you wherever you're going. So the answer, I haven't found anybody that shouldn't have their own individual policy. OK, so ⁓ yes, you do need more coverage, more than likely ⁓ for disability at work. ⁓
Chelsea Jones (27:52)
Mm-hmm.
Nate Reineke (28:11)
You need true own occupation policy that protects your specialty for the entire length of the claim and stays with you regardless of where you work. ⁓ Life insurance. This is still, you almost always need another term life insurance policy outside of work. It's not because the term life insurance policy you get at work is inherently bad.
It's just that the limits are really low. So there are ⁓ rules that will not allow your employer to give you enough coverage. It's a fringe benefit. And if you want more coverage than like the typical will give you a hundred grand, ⁓ then you have to pay for it. And paying for it, usually on these group policies, you can get a better rate. You can get better coverage ⁓ by just going private.
So get a term policy that actually matches your plan. But circling back to that first question about whole life insurance policies, with these group policies, sometimes someone who is uninsurable can get more coverage from their group policy. And it actually is worth paying for inside the group policy. But if you're healthy, especially if you're young, go get your term policy now. Set yourself up and remember this as soon as
Chelsea Jones (29:27)
Mm-hmm.
Nate Reineke (29:38)
Soon as someone comes to me and they say, do I really need three or $4 million in term policy? You can cancel it. So get a few policies, get three $1 million policies with different terms. And if at the end of the day, you are as financially successful as you hope to be and you've built up a whole bunch of cash and you feel like you're self-insured, just cancel the policy. So the answer...
Chelsea Jones (29:45)
Mm-hmm.
Mm-hmm. Yeah. And it's not like
a whole life policy where you, it's expensive to get out of or can be expensive to get out of.
Nate Reineke (30:06)
That's right.
That's right. Yeah. And the last piece of all this is if you're paying your own ⁓ policy premiums, this is for life insurance or disability, and it's not coming through pre-tax at work, then when you actually get, if God forbid, you get the benefit because you became disabled or you died prematurely, it all comes out tax free. So ⁓ it's important to get this coverage. Yes.
Chelsea Jones (30:31)
Mm-hmm.
Nate Reineke (30:35)
Sometimes it can be expensive. It's one of those expenses that is just worth it for physicians.
Chelsea Jones (30:41)
Yeah. And I'm pretty sure life insurance policies, the benefits always tax free to the beneficiary. But if your employer's paying for the premium, it's just taxed as income to you. Right? Yeah.
Nate Reineke (30:48)
Yes, that's true.
to you. Yeah, sorry. I misspoke.
think I went off in my head to disability is the one that's important. If you want to be paying these premiums and if you can, you want to pay the premium post tax at work. And usually they think this is a tax benefit. Why wouldn't you want to do this pre-tax? But if you tell your HR, hey, I actually want to pay this post tax, then you can get the benefit. You can get the benefit tax free.
Chelsea Jones (31:00)
Mm-hmm.
Mm-hmm.
Yeah. I'd rather pay tax on the 50 bucks a month premium that the group policy pays than, you know, have to pay income taxes on $10,000 a month of benefits.
Nate Reineke (31:23)
Yes.
Right. Because the group
That's right. That's right. Yeah. The group policy tends, you know, it's not nearly as expensive as when you go get your individual policy.
Chelsea Jones (31:39)
Yeah, because it's not as strong.
Nate Reineke (31:41)
Yeah.
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