James M. Dahle, MD, FACEP CSRO Fellows Conference February 17, 2018

Transcription

1 James M. Dahle, MD, FACEP CSRO Fellows Conference February 17, 2018

2 Money Doesn t Bring Happiness (at least beyond ~$75K) You didn t go into medicine primarily for the money and neither did I Ignore money at your own peril

3 Ripped Off -Recruiters, realtors, lenders, insurance agents, financial advisors, appraiser May The Website February The Book Millionaire By 38 January The Online Course

4 Website is for profit Free to you, but I sell ads on it All financial conflicts of interest disclosed Book and course sales pay me royalties I still practice medicine ¾ time I am not a licensed accountant, attorney, or financial advisor This presentation is for entertainment and informational purposes only, and IS NOT accounting, legal, or financial advice.

5 1. The Secret to Physician Financial Independence 2. Continuing Financial Education 3. Choosing an Advisor 4. A Student Loan Plan 5. An Insurance Plan 6. A Home Purchase Plan 7. An Investing Plan

6 Make a lot of money Don t spend a lot of money Make your money work as hard as you do Don t lose your money Creditors Taxes Death, disability Speculative investments You ve already won the game (the rest is easy) Convert your high income into a high net worth

7 LIVE LIKE A RESIDENT!

8 Live like a resident while in training Continue to live like a resident for a few more years Carve out a massive chunk of your income with which to build wealth Pay off loans Save up down payment Max out retirement accounts Then enjoy the good life after 2-5 years

9 Average Rheumatology Salary ~$234K 12% increase from 2015 in Medscape survey Average Fellow Salary ~ $55K $234K Gross $175K Net $50K to live Leaves $125K to build wealth $200K in loans can be gone in 19 months

10 Buy a multi-million dollar house before you graduate with zero down Buy a doctor car and a doctor s spouse car on credit before you graduate You aren t what you drive Enroll 4 kids in private schools Grow into or beyond your income as quickly as possible Drag your loans out for decades Spend $225K on an income of $200K Assume a 4X increase in gross income = a 4X increase in net income Plan to pay more in tax than you made as a fellow

11 1. The Secret To Physician Financial Independence 2. Continuing Financial Education 3. Choosing an Advisor 4. A Student Loan Plan 5. An Insurance Plan 6. A Home Purchase Plan 7. An Investing Plan 8. An Estate Plan 9. An Asset Protection Plan

12 Med School/Residency made you a clinical expert No business training No personal financial or investment training A Pension Fund Manager in a 401(k) World Family CFO Not automatic

13 You must spend time learning about finances/business You cannot win the game if you don t learn the rules Continuing financial education Follow a blog or two Read a financial book each year The $2M Book Hire professionals to teach you, not just do it for you

14 You must also spend the time to take care of your finances/business You cannot be 100% clinical and be financially successful

15 1. The Secret To Physician Financial Independence 2. Continuing Financial Education 3. Choosing an Advisor 4. A Student Loan Plan 5. An Insurance Plan 6. A Home Purchase Plan 7. An Investing Plan 8. An Estate Plan 9. An Asset Protection Plan

16 Remember that personal statement "You are engaged in a life-and-death struggle with the financial services industry.... If you act on the assumption that every broker, insurance salesman... and financial advisor you encounter is a hardened criminal, you will do just fine. - William Bernstein, MD

17 10) Unsolicited s 9) Typical internet forum 8) The Doctor s Lounge 7) Family or friend who recently started with financial services firm 6) Anyone you attend church with 5) Your stomach 4) Your TV 3) Your insurance agent 2) Local stock broker 1) Local bank or credit union

18 1) Commitment to profession CFA, CFP, ChFC, CPA/PFS 2) More experience than you 3) No commissions (Fee-only) 4) Fiduciary Duty 5) Knowledge of investing literature 6) Experience with physician-specific issues Taxes Student loan issues Retirement account issues

19 If you pay just 2% of your portfolio each year in fees, commissions, and expenses, how much less would you end up with? 30 years, 8% pre-fee returns, saving $50K a year. $6.1M vs $4.2M Is that advisor really worth nearly $2M to you? 5+ years of your gross salary? $80K/year in retirement? Even after-inflation it s still > $1M ($3.5M vs $2.5M)

20 Neufeld- Journal of Financial Planning 2014

21 1) Commissions loaded mutual funds commissions on insurance-based investing products (3-8% load, high expenses, bad products) 2) Asset Under Management Fee (0.15%-2%) ($ ,000 on a $1M portfolio) 3) Annual retainer ($ ) or set fee for plan ($ ) 4) Hourly rate (typically $ /hour) All have conflicts of interest, but look at the bottom line how much per year for how much work

22 1. The Secret To Physician Financial Independence 2. Continuing Financial Education 3. Choosing an Advisor 4. A Student Loan Plan 5. An Insurance Plan 6. A Home Purchase Plan 7. An Investing Plan 8. An Estate Plan 9. An Asset Protection Plan

23 Started Med School in Tuition was $10K per year Mean debt in 1999 ~$122K (Inflation adjusted) Mean educational debt in 2015 ~ $230K for DOs, $183K for MDs $300-$450K is becoming more common No more subsidized loans starting 2012 Government won t refinance them when rates fall Current resident loans? 5.4%-10%

24 Monthly payment on $400K at 7.5% = ~$4900 per month for 10 years If Gross income = $210K, and net income = $161K, $4900 per month is 37% of net income It s only getting worse

25 ICR IBR PAYE REPAYE PSLF If you owe money, you need to become an expert in this or hire an expert in this.

26 # People Poverty Line 150% of Poverty Line $50K - 150% of Poverty ICR IBR PAYE REPAYE 1 11,770 $17,655 $32,345 $ $ $ $ ,930 $23,895 $26,105 $ $ $ $ ,090 $30,135 $19,865 $ $ $ $ ,250 $36,375 $13,625 $ $ $ $ ,410 $42,615 $7,385 $ $92.31 $61.54 $ ,570 $48,855 $1,145 $19.08 $14.31 $9.54 $ ,730 $55,095 $0 $0.00 $0.00 $0.00 $ ,890 $61,335 $0 $0.00 $0.00 $0.00 $0.00

27 Payments have nothing to do with interest rate Payments have nothing to do with debt burden They are based solely on income and number of people in your family

28 Income Based Repayment The New, Better ICR (lower payments, more hardship features) Only income-based plan allowed if you have FFEL loans instead of Direct Loans Payments = 15% of Discretionary Income with a maximum of regular payment on a 10 year plan Taxable forgiveness after 25 years of payments Payments count toward PSLF

29 Pay As You Earn The New, Better IBR Not eligible if loans from pre-2007 or if no loans after 2011-must use IBR instead Payments = 10% of Discretionary Income with a maximum of regular payment on a 10 year plan Taxable forgiveness after 20 years of payments Payments count toward PSLF

30 Revised Pay As You Earn The New, Better and Worse PAYE Payments = 10% of Discretionary Income WITHOUT a maximum Taxable forgiveness after 25 years of payments (20 for undergrad loans) Payments count toward PSLF Subsidized interest during residency Higher Payments AFTER residency

31 Public Service Loan Forgiveness ICR, IBR, PAYE, and REPAYE payments count 120 payments while working for a 501(c)3 Tax-free forgiveness Most residencies and fellowships are 501(c)3s Most academic positions are 501(c)3s Many doctors working at non-profit hospitals are not employees of 501(c)3s VA, military, CHCs, public health etc

32 Why PSLF Works Lower payments during training Amount forgiven = difference between residency payments and regular payments Amount forgiven equals about what you owed at med school graduation PSLF best option if you qualify Many 501(c)3 jobs don t even pay less (yet) The Gamble and its solution

33 Student Loan Refinancing Impossible after 2008 Financial Possible again starting in 2013 Typical rates for an attending with good financials Variable 5 year of 2-4% Fixed 5 year of 3.5-5% Variable 10 year of 3-4.5% Fixed 10 year of 4.5-6% You can typically get these once you have an attending contract in hand

34 You must qualify All docs not offered the same rates You may not be offered the same terms Highly dependent on debt levels, income levels, and credit Now possible to refinance during fellowship

35 Darien Rowayton Bank (DRB) Social Finance (SoFi) Common Bond Credible Lend Key Earnest Link Capital 10+ more

36 Darien Rowayton Bank $100 a month payments in training Rates at high end of ranges Link Capital $0 payments in training Rates at high end of ranges RePAYE may be better Lower payments vs more interest

37 1. The Secret To Physician Financial Independence 2. Continuing Financial Education 3. Choosing an Advisor 4. A Student Loan Plan 5. An Insurance Plan 6. A Home Purchase Plan 7. An Investing Plan 8. An Estate Plan 9. An Asset Protection Plan

38 1. High deductibles, low premiums 2. Health Insurance 3. Term Life Insurance- Buy $1-5M of 30 year level 4. Disability insurance 5. Umbrella Policy- Buy $1-5M 6. Malpractice 7. Don t Mix Insurance and Investing Doctors, especially new ones, don t need Whole Life

39 1. The Secret To Physician Financial Independence 2. Continuing Financial Education 3. Choosing an Advisor 4. A Student Loan Plan 5. An Insurance Plan 6. A Home Purchase Plan 7. An Investing Plan

40 Your Home- The biggest expense of your life Rent for a few months = unpressured buyer Negotiate well Your realtor works for the seller Know what a house is worth and don t overpay Buy what you need, not what you want or think you deserve Higher taxes, principal, interest, utilities, furnishings, maintenance etc. $2250 roof vs $14000 roof Image Credit: Brendel, Wikimedia

41 Mortgage no larger than 2X your income (even though a calculator will tell you 4-6X is okay) All housing expenses (including utilities) < 20% of total income, not 28%/36% the industry uses.

42 20% down saves you money PMI, lower rate, lower fees, fewer points etc Doctor loans available, but not necessarily better Refinance when rates drop The Benefits of the No-Cost Mortgage Try to avoid telling anyone you re a doctor or you ll pay the doctor price The Radiologist Next Door $630K vs $482K. Both now worth ~$730K again. Same schools, same nice view

43 1. The Secret To Physician Financial Independence 2. Continuing Financial Education 3. Choosing an Advisor 4. A Student Loan Plan 5. An Insurance Plan 6. A Home Purchase Plan 7. An Investing Plan

44 You need a plan likely to succeed no matter what happens in the future Nobody knows nothing CXO Advisory group evaluated stock market predictions 6,582 stock market predictions 1998 to gurus 47.4% accurate

45 On Persistence in Mutual Fund Performance, Carhart, 1997 Analyzed 1892 funds from Average actively managed fund underperformed by 1.8%.

46 "Of the 355 equity funds in 1970, fully 233 of those funds have gone out of business. Only 24 outpaced the market by more than 1% a year. These are terrible odds." Jack Bogle "A low-cost index fund is the most sensible equity investment for the great majority of investors. My mentor, Ben Graham, took this position many years ago, and everything I have seen since convinces me of its truth." Warren Buffet

47 Broadly diversified between asset classes Stocks, bonds, real estate etc Broadly diversified within asset classes Index funds hold thousands of securities Low cost 2-20 basis points per year Appropriate amount of risk Fixed asset allocation Rebalance periodically When you realize nobody knows nothing it frees you to quit wasting time on activities that don t add value

48 Asset protection Most states protect 401(k)s and IRAs from your creditors Estate planning Easy to designate beneficiaries, plus stretch IRAs Cheaper rebalancing No taxes due upon selling an asset Better behavior Penalties make it less likely you ll raid the account inappropriately But still plenty of ways around Age 59 ½ rule

49 Lower taxes = Higher returns Source: Retire Secure by James Lange

50 Everyone is different. Learn what you have. 403(b)-$18.5K + match 401(k)/Profit-sharing plan- $55K Defined benefit/cash Balance plan- $10-200K 457 Plan- $18.5K Individual 401(k)- $55K Personal backdoor Roth IRA- $5.5K Spousal backdoor Roth IRA-$5.5K Stealth IRA- $3,450 ($6,900)

51 1. Live Like A Resident 2. Read a Financial Book/Blog Every Year 3. Hire a low-cost, fee only advisor or DIY 4. Go for loan forgiveness or refinance loans 5. Health, disability, term life, umbrella 6. Buy a home when job is stable, don t pay PMI 7. Use primarily index funds as investments and place them in retirement accounts

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