“Now I Know We’re on a Good Track!”

Jeff Witz CFP®

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How one young urologist got off to a great financial start

For most medical specialists, the 10-12 years of training (undergrad studies + medical school + residency + fellowship) are all-consuming. There’s little time–or motivation–for grappling with the unique financial challenges that new physicians face.

This dynamic often changes when doctors near the end of their training.

Dr. Samira Sharma (not her real name)1 is a great example. Here’s her story.

The Client

After completing a urology residency on the West Coast, Dr. Sharma accepted a job from a medical group in the Midwest. 

At 30 years old, her brain was spinning with the same questions all new doctors ask:

  • How can I be sure I’m getting the most from the benefit package my new employer offers?
  • What’s the smartest and fastest way to pay off my med school debt?
  • How much insurance is enough?

The Client meets MEDIQUS

MEDIQUS regularly sponsors workshops (Think: “Financial Planning 101” seminars) for medical residents who are nearing the end of their specialized training. 

Dr. Sharma attended one of our presentations and was intrigued enough to schedule an appointment.

Conversations and options

We started our consulting process with Dr. Sharma by reviewing her benefit package, and making sure she understood the health insurance, life insurance, and disability insurance her new employer was providing.

We also examined and explained the group’s 401(k) retirement plan and the employer’s contributions to that plan. Our goal was to make sure Dr. Sharma had a solid grasp of how to get the most from her benefits.

Next, we began a comprehensive financial analysis that would give Dr. Sharma and her husband a clear financial roadmap to follow as she began her career, and he started his new job. 

We looked at Dr. Sharma’s medical school debt, and shared some strategies that would allow her to pay that down ASAP.

We listened to the couple’s retirement goals and helped them hone in on an annual retirement spending amount they will need in retirement. 

We scrutinized the couple’s investments: the IRAs they had each opened prior to meeting with us, some cryptocurrency, a few individual tech stocks.We discussed options for growing their money more efficiently.

In response to Dr. Sharma’s questions–“Do I have enough life insurance and disability insurance? and “What about long-term care insurance? Is that really necessary?”–we had a robust conversation about risk management. 

Since the Sharmas have a one-year-old, they asked, “How much should we be saving monthly for our daughter to be able to attend a good, private university–and where should we invest that money?” We calculated some figures based on tuition trends and briefly outlined the pros and cons of 529 accounts and other college savings plans. 

Finally, we discussed estate planning.The Sharmas sheepishly admitted they didn’t yet have wills. We explained that process and explained why a trust might be wise, given their daughter’s age. We also emphasized the importance of ancillary documents like living wills and durable and medical powers of attorney.  

Recommendations

Dr. Sharma had said that while she wasn’t sure she’d be ready to retire at age 60, she wanted to at least be in a financial position where retirement was possible by that age. Given their goals, the Sharmas settled on an after-tax and inflation-adjusted amount of $120,000 in annual retirement income and stipulated that they wanted that to last until at least age 95.

To reach that target4, we told Dr. Sharma she would need to max out her 401(k) and get the maximum employer contribution. We also recommended she and her husband employ a “backdoor” Roth IRA strategy–utilizing Roth conversions as a way of bypassing the income limits on Roth IRA contributions.5

We pointed out that their existing IRAs were invested in target date funds (i.e., mutual funds where the fund manager invests aggressively in the early years, then moves to more conservative investments as the client nears retirement age). We expressed our concern with these types of funds–that individual investors don’t have any control over when a fund manager starts transitioning the account. It’s generally a “one size fits all” approach. 

Additionally, we recommended that the couple begin putting money regularly into a joint investment account. Though they will have to pay a capital gains tax on the growth in that account, the long-term capital gains rate may be lower than the tax bracket the Sharmas are likely to find themselves in at retirement.  

Dr. Sharma liked the options this kind of diversified arrangement would give her and her husband in retirement, so we discussed different possible investment allocations. Given their age and investment horizon, the couple felt comfortable with an allocation of 90% stocks and 10% bonds. 

We pointed out that the disability insurance offered by Dr. Sharma’s new employer was a fairly standard plan–60% of her salary up to a maximum monthly benefit of 10,000 a month. 

However, since her new salary would be significantly higher than $10,000 a month–and since most of the Sharma’s financial goals are tied to her ability to earn a high level of income–we recommended a supplemental disability policy to stack on top of the policy in her benefit package. 

We recommended a similar approach with her life insurance. If something happened to her, Dr. Sharma agreed she would want enough coverage to:

  • Pay off their mortgage. (She and her husband had expressed their desire to buy a home once they saved enough for a down payment.)
  • Provide the necessary funds for their daughter’s college tuition and expenses.
  • Provide living expenses for the 16-17 years until her daughter left for college

With a significant life insurance need, we recommended Dr. Sharma get part of the necessary coverage right away, and the rest once they bought their home.

And speaking of their future home, we recommended a high-yield savings account for their “down payment savings.” Given their desire to buy that home within three years, we didn’t want to see them put their down payment money at risk in the stock market.

Concerning college savings, the Sharmas liked the tax advantages of a 529 account, but since that money can only be used for educational purposes, and since there’s no way to know for sure their daughter will attend college, they opted for this recommendation: Put half into a 529, and the other half into a joint account that she and her husband would open in their names. This way, if the daughter didn’t go the traditional college route, there would at least be money for her to start a business, make a down payment on a house, or pay for a wedding.  

After considering all these details and options…

Results

Dr. Sharma and her husband decided they wanted to work with our team at MEDIQUS. 

In our first two years, here’s what we’ve accomplished together:

  • Dr. and Mr. Sharma moved their Roth IRAs under the management of MEDIQUS. We reinvested those assets into closely monitored Roth IRA funds that align more closely with the risk levels they’re comfortable with.  
  • We moved estate planning to the top of the Sharma’s priority list, encouraging them to create wills and recommended a joint trust to tie in the ownership of the investment account.
  • We helped the couple supplement their various insurance coverages, so their goals and financial needs would be met if either unexpectedly passed away.
  • We began a student loan repayment plan that should have them debt-free in five years. Once this is accomplished, they’ll be able to redirect those monthly payments toward other savings and/or investment accounts.
  • We set up a joint investment account earmarked for their daughter’s college education. The couple is also contributing to a 529 plan.
  • After two years of saving for a down payment, the couple is pleased that they are now less than a year out from being able to make that home purchase.

Recently, Dr. Sharma told us she feels “100% more confident about my family’s future. I was so afraid that even with this big increase in income, we might mess up our finances somehow. Now, I know we’re on a good track.”

What about you?

If you’re a young doctor who’s realizing, “My training equipped me with countless medical insights, but zero financial skills,” reach out to our team at MEDIQUS. 

Simply click here, fill out the short form, and we’ll be in touch right away. Or call 800-883-8555 and speak to an advisor.

Currently, we serve more than 400 medical professionals and some 80 not-for-profit organizations–mostly in the medical field. We have clients in 40+ states and four countries. 

We’d love to serve you too. 

What does it look like to work with MEDIQUS?

It’s not complicated.

  1. We talk. You schedule an initial meeting so we can learn about your financial goals and explain our MEDIQUS philosophy and process. If we’re a fit, we gather all your pertinent financial information.
  1. We analyze and recommend. We do a careful study of your current situation. In light of your goals, we prepare a comprehensive analysis of your financial strengths and weaknesses. We then present your best options and make our recommendations.
  1. You relax! Based on your wishes, we work with your other advisors (attorneys, CPAs, etc.) to implement the strategies best able to get the results you’re seeking.

¹ This case study is for illustrative purposes only. It is not a guarantee or indicator of future results. Results can differ substantially. Some details have been hidden or changed to protect the identity of MEDIQUS clients.

This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact MEDIQUS Asset Advisors, Inc. or consult with the professional advisor of their choosing.

² Investment advisory services offered through MEDIQUS Asset Advisors, Inc. Securities offered through Ausdal Financial Partners, Inc. Member FINRA/SIPC ∙ 5187 Utica Ridge Rd ∙ Davenport, IA 52807 ∙ 563-326-2064. MEDIQUS Asset Advisors and Ausdal Financial Partners, Inc. are independently owned and operated.

Investments are not FDIC-insured and are not deposits of or guaranteed by a bank. The material has been prepared or distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy.

Investing involves risk, including risk of loss. Before investing, you should consider the investment objectives, risks, charges, and expenses associated with investment products. Investment decisions should be based on an individual’s own goals, time horizon and tolerance for risk. Past performance is no guarantee of future results. Diversification and asset allocation do not ensure a profit or guarantee against loss. Consult your financial professional before making any investments.

³ While members of our team are educated as attorneys, MEDIQUS Asset Advisors, Inc. does not provide legal advice. You should consult your own legal advisors before engaging in any transaction or regarding any legal questions you may have.

⁴ Monte Carlo simulations are used to show how variations in rates of return each year can affect your results. A Monte Carlo simulation calculates the results of your Plan by running it many times, each time using a different sequence of returns. Some sequences of returns will give you better results, and some will give you worse results. These multiple trials provide a range of possible results, some successful (you would have met all your goals) and some unsuccessful (you would not have met all your goals). The percentage of trials that were successful is shown as the probability that your Plan, with all its underlying assumptions, could be successful.

⁵ Effective June 21, 2005, Internal Revenue Service regulations require that certain types of written advice include a disclaimer. To the extent the preceding message contains written advice relating to a Federal tax issue, the written advice is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer, for the purposes of avoiding Federal tax penalties, and was not written to support the promotion or marketing of the transaction or matters discussed herein.

MEDIQUS Asset Advisors, Inc. does not provide tax, legal or accounting advice. The information contained in this report is for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction or regarding any questions you may have with respect to this communication.

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