Example Plans
Physicians have complex financial situations – juggling income, benefits, debt, and various investment options.
Here are some examples of how we advise based on individual parameters and goals.
Christine
Early-Career Oncologist
Christine (oncologist) and Max (copy editor) came to us 2 years after Christine had finished fellowship. One of their primary concerns was Christine’s $370,000 of student loans, and how she could ensure that these would be forgiven through Public Service Loan Forgiveness. Importantly, she wasn’t sure that all her payments in residency had been properly certified and counted. Additionally, now that they had settled geographically after moving several times for Christine’s training, they were eager to buy a house, but weren’t sure of the budget for this, given the rest of their financial priorities. Some of these included wanting to have children, and understanding the financial planning considerations involved.
Christine and Max had accumulated what felt like a large cash position in the last few years and weren’t sure of how best to use that – whether to pay down debt, invest, or something else. They also had old retirement accounts, and Roth IRAs they could no longer fund because their income was too high, but didn’t know what the best strategy would be for these accounts. Finally, they were concerned about how much income tax they were paying, and most recently owed ~$11,000 in additional federal taxes when they filed.
Net Worth Summary
Cash $105,000
Taxable Investments $8,000
Pre-Tax Retirement $140,000
Roth Retirement $9,000
Total $262,000
Christine's Primary Questions:
Asset Location
Tax-Deferred: 53%
Taxable/Cash: 43%
Tax-Free: 4%
Financial Goals
Be positioned to retire by age 62 and maintain current standard of living of spending $15,000/month.
Maintain emergency fund of $65,000.
Be prepared to purchase home in 2-3 years.
Student loans forgiven or paid off within 5 years.
Implement benchmarks to maintain long-term financial security while establishing the ability to spend and enjoy resources now.
Recommended Plan
Recommended Savings
Max 401k (Employer) $4,500
Christine 403b (Employer) $15,000
Christine Pension (Employer) $6,000
Max Roth 401k (Employee) $23,500
Christine Roth 403b (Employee) $23,500
Max Roth IRA $7,000
Christine Roth IRA $7,000
HSA -
Taxable Account $30,000
Household Income $450,000
Current Action Items:
- Update employer retirement accounts:
- Increase Max’s 401k contributions to reach 2025 limit of $23,500 and change contributions to Roth from pre-tax.
- Ensure Christine’s 403b contributions reach limit.
- Update investment allocation to align with retirement timeline.
- Open IRAs for Max and Christine and begin to fund backdoor Roth IRAs at the maximum level each year.
- Review latest tax return and paystubs to determine more accurate Federal Tax withholding based on multiple income sources.
- Evaluate switching to IBR plan for Christine’s Federal student loans with goal of forgiveness in 3 years when 120 qualifying PSLF payments have been made.
- Review benefit elections to ensure employer benefits packages are being utilized appropriately for insurance coverage and tax favored accounts.
- Open and fund joint investment account to reach 15% household savings rate for retirement and utilize excess cash and save for home purchase and other short to mid-term goals.
Check-In Items (Future):
- Estate planning, will, and beneficiary updates.
- At next open enrollment, evaluate the cost/benefits of using a high deductible health insurance plan paired with a Health Savings Account (HSA).
Bill
Mid-Career Cardiologist
Bill had been practicing as an attending cardiologist for 12 years when he and his wife, Eileen, got in touch with our firm because they felt like there were “missing pieces” in their financial plan, and that the pieces they had in place were not coordinated with a holistic plan. Over the years, they had implemented different pieces with different advisors, but didn’t have a sense of how well they were tracking towards some of their primary goals: namely, funding college for their children, and making sure that they would be financially secure in retirement. Their children’s ages were 13, 10, and 8, and 529 plans had been set up, but Bill and Eileen were unsure about the amount of contributions they should be making, not wanting to over-fund these accounts, but also wanting to fund enough to meet their goals. Another aspect of their situation was that Bill had built a significant (over $1M) retirement balance in his employer’s plan, but had key questions:
- Should he have all of his money in the one target date fund?
- Were there other ways to save in this plan that he should pursue (i.e. mega back door roth, etc.)
- Should he be saving his contribution to Roth, pretax, or some combination?
Another important point of review for them was that they had at various times been sold a lot of different insurance policies, but it seemed like they were always supposed to be purchasing more insurance, even though they’d made substantial progress towards being financially independent. Finally, they were seriously thinking about purchasing another home in the same city, but with some more space. They were concerned that this could derail their goals of funding education and retirement, but wanted reassurance about what could be possible given their significant assets, and Bill’s income.
Net Worth Summary
Cash $145,000
Taxable Investments $350,000
Pre-Tax Retirement $1,057,000
Roth Retirement $34,000
Total $1,586,000
Bill's Primary Questions:
Asset Location
Tax-Deferred: 67%
Taxable/Cash: 31%
Tax-Free: 2%
Financial Goals
Develop and implement a comprehensive financial plan that incorporates all current assets and future goals.
Be positioned to retire at age 65 and maintain current standard of living of spending $20,000/month.
Maintain emergency fund of $100,000.
Be prepared to fund college education for each child at 100% state school level.
Determine home budget and increase liquidity for potential move.
Recommended Plan
Recommended Savings
Bill 403b (Employer) $24,500
Bill Roth 403b (Employee) $23,500
Bill After-Tax 403b (Employee) $30,000
Eileen SEP IRA $5,000
Bill Roth IRA $7,000
HSA $8,550
Taxable Account $60,000
Household Income $725,000
Current Action Items:
- Update Bill’s 403b so that after-tax contributions are made in addition to the elective deferral limit enabling the “mega backdoor Roth” strategy.
- Adjust Bill’s 403b investment allocation to align with retirement timeline and broader financial picture.
- Fund Bill’s backdoor Roth IRA annually and convert Eileen’s small pre-tax IRA to enable future backdoor Roth contributions for her as well.
- Open SEP IRA for Eileen and fund maximum amount each year based on 1099 income. Convert to Roth each year because of aggregation rule for backdoor Roth IRA.
- Begin automatic savings of $5,000/month to taxable investment account.
- Restructure the taxable account for tax efficiency (reducing mutual funds) and lower short-term risk for a potential home purchase.
- Ensure HSA (health savings account) is invested moving forward for tax free growth and balance is allowed to grow while health expenses are paid from other “buckets”.
- Schedule separate conversation to discuss specifics of education goals and map out savings strategy combining 529 plans with taxable investment account earmarked for education.
Check-In Items (Future):
- Estate planning, will, and beneficiary updates.
- Conduct in-depth review of life and long-term disability insurance coverages.
Sandeep
Late-Career Internist
Sandeep, an internist, and Molly were entering their 60s, and when we first talked to them, they felt like they had a lot of stuff (accounts, investments, etc.) but no strategy. In fact, after adding up all the retirement, banking, investment, and insurance accounts, they realized they had 24 separate accounts! They were pretty sure that most of these investments and accounts weren’t coordinated in a cohesive financial plan or investment approach.
The total amount of their assets felt like they had done a good job of saving and growing their money, but they had a lot of questions about how they could use it for the most impact as they moved into the next stage of their life. One of their primary concerns was that though their previous financial advisor had helped them grow and invest their money, they had never paid attention to their largest asset – Sandeep’s retirement accounts at work. They were concerned about the possibility of a market downturn in the couple of years before Sandeep retired. Additionally, they had questions about when to turn on Social Security.
Over the last few years, they had become increasingly involved in a local charity, with Molly serving on the board, and had started giving a considerable amount each year to this charity out of their income. They wanted to know if they should consider other strategies that could benefit the charity even more and possibly help their tax situation. Their three children were grown, but Sandeep and Molly wanted to think about the pros and cons of gifting assets to their children now vs. later in retirement or through their estate.
Net Worth Summary
Cash $80,000
Taxable Investments $275,000
Pre-Tax Retirement $1,723,000
Roth Retirement $116,000
Total $2,194,000
Sandeep's Primary Questions:
Asset Location
Tax-Deferred: 79%
Taxable/Cash: 16%
Tax-Free: 5%
Financial Goals
Develop comprehensive financial plan to simplify and coordinate all aspects of retirement and investment assets.
Be positioned to transition to part-time at age 65 and then fully retire by age 70 while being able to spend $13,000/month in retirement.
Maintain emergency fund of $60,000.
Determine how best to help children financially and give to charity without compromising long-term financial stability.
Recommended Plan
Recommended Savings
Sandeep 403b (Employer) $18,500
Sandeep Roth 403b (Employee) $31,000
Sandeep 457b (Employee) -
Sandeep Roth IRA $8,000
Molly Roth IRA $8,000
HSA $9,550
Taxable Account $24,000
Household Income $320,000
Current Action Items:
- Consolidate eligible accounts and develop cohesive and simplified investment strategy that is tied to specific goals and time horizons. As part of this, evaluate the pros and cons of surrendering Sandeep’s qualified variable annuity.
- Increase Sandeep’s 403b contributions to 10% Roth so that age 50+ catch up contribution is fully maximized.
- Update investment allocation inside Sandeep’s 403b to reduce risk and build “runway” for retirement distributions within the next 7-10 years.
- Max out backdoor Roth IRAs each year from cash flow or from the taxable investment account. Increase equity exposure in these accounts as they are the most tax-efficient asset to pass on to children.
- Open a donor advised fund to maximize tax-efficient charitable giving. Fund with highly appreciated equity holdings inside the taxable investment account to avoid capital gains taxes.
- Begin automatic savings of $2,000/month to the taxable investment account to refill/replace previous charitable giving that was coming from the checking account.
- Review estate planning, wills, and beneficiary designations. Discuss the pros and cons of gifting assets to children now versus in the future.
Check-In Items (Future):
- Consider utilizing non-governmental 457(b) plan offered as Sandeep approaches retirement.
- Continue evaluating Social Security claiming strategies, taking household income and health into account.