Society for Academic Emergency Medicine Financial Planning
Society for Academic Emergency Medicine Absolutely Necessary Absolutely Necessary (Survival) Insure Against What If Insurance Protection Emergency Cash Fund Debt Management Retirement Planning Estate Planning Life Plan
Society for Academic Emergency Medicine Debt Management Get in the Habit of PAYING YOURSELF FIRST!!!
Society for Academic Emergency Medicine Budgeting Income minus Expenses
Society for Academic Emergency Medicine Budgeting Goals u Must Define and Articulate *Student loan repayment *Retirement planning *Education funding for kids *Cash savings *Buying home *Eliminating BAD debt *Buying into group *Fancy Car and Toys
Society for Academic Emergency Medicine Assign Value/Priorities u Importance to you/family u Timeline u Intelligent repayment of debt u Fear of debt u Need for toys *Beware of Golden Handcuffs u Financial Independence u Avoiding Frustration
Society for Academic Emergency Medicine Debt Management u Which should you pay off first? *$100,000 Student loan at 3% *$5,000 Credit Card at 18% *$250,000 Mortgage at 6% fixed
Society for Academic Emergency Medicine Fear of Debt u Not all debt is bad u Realize that on average the stock market makes 8-12% a year historically u Realize that as a resident you dont make much *Compare you student loan debt in relation to 10 of working as a physician *Defer you student loans *Stretch out you repayment periods *Pay yourself first!!
Society for Academic Emergency Medicine Emergency Cash Fund u Experts say 3-6 months of expenses u This depends on your comfort zone/situation u Do you have short term disability? u Long term disability doesnt kick in for 3-9 months u Cash keeps you in control
Society for Academic Emergency Medicine Emergency Cash Fund u Make use of a money market account *Higher yield and easily liquid *Some are tax free u Should develop systematic and disciplined method to build cash reserves *Monthly budgeted draft u Goal is to try and avoid bad debt (credit cards)
Society for Academic Emergency Medicine Credit Cards u Try to get rid of this debt first *Worst kind of debt *Transfer money lowest credit cards *Goal is to ALWAYS pay off at end of month *Only use cards that give you something back with no yearly fees u Free Cash back cards are out there u Fund Retirement First?!?!?!
Society for Academic Emergency Medicine Retirement Can EM Residents Save For Retirement? Yes!
Society for Academic Emergency Medicine Why Invest Now? Here are the monthly investments required at different ages to accumulate $1,000,000 by age 65, assuming a 10%* compounded rate of return. Age When Investments Begin Monthly Investments Required to Reach Goal 25 $158 35 $442 45 $1,316 55 $4,882
Society for Academic Emergency Medicine Why Invest Now? 6%8%10%12% $57,435 $100,627 $174,494 $299,599 $0 $100,000 $200,000 $300,000 $400,000 $500,000 Illustration of the growth of an assumed $10,000 investment compounded annually over a 30- year period at differing rates of return.*
Society for Academic Emergency Medicine Save, Save, Save u Can you put aside $333+ a month? *Moonlighting? *Not paying school loans *Not overpaying credit cards? *Not drinking Starbucks daily *Limiting expenses
Society for Academic Emergency Medicine Credit Cards Roth IRA (10% each Year) Yr 1 $4000 $400 $4400 Yr 2 $4000 $840 $9240 Yr 3 $4000 $1324 $14564 Yr 4 $4000 $1856 $20420 Graduate No more contributions Break even in ~62 months Keeps growing tax free Credit Card (20% each Yr) Yr 1 $-4000 $-800 $-4800 Yr 2 $-4000 $-1760 $-10560 Yr 3 $-4000 $-2912 $-17472 Yr 4 $-4000 $-4294 $-25766 Graduate Payoff $1000 a month Done 33 month ~$33262 total payment
Society for Academic Emergency Medicine Where to Invest? u ROTH IRA *Up to $4000/year -- After Taxes u 401k/403b *Up to $15,000/year --Before Taxes u SEP IRA *20% of moonlighting income up to $44,000 *Tax deductible
Society for Academic Emergency Medicine DEPOSITACCUMULATIONDISTRIBUTION Tax Deductible (Before Tax $s) Tax Deferred (Funds not Available) Taxable (Income & Estate) Not Deductible (After Tax $s) Tax Deferred (Funds Available with Municipal Bonds) Can be Tax Free or Taxable… You Choose Possible IRS penalties for withdrawals prior to age 59 ½! Not Deductible (After Tax $s) Partially Tax Deferred and Partially Tax Free Partially Taxable And Partially Tax Free IRS penalties for retirement withdrawals prior to age 59 ½ ! 1 401(k)s & 403(b)s TRADITIONAL IRAs SEP & SIMPLE IRAs KEOGH, PSP & MPP ESOPs 2 LIFE INSURANCE ANNUITIES MUNICIPAL BONDS ROTH IRAs 529/COVERDALE IRAs 3 CDs, SAVINGS, STOCKS, BONDS MUTUAL FUNDS PARTNERSHIPS Three Phases of Investment
Society for Academic Emergency Medicine 100,000 200,000 300,000 400,000 500,000 600,000 700,000 $323,143 5 yrs10 yrs15 yrs20 yrs Years Growth if tax-deferred $672,750 Growth if taxable $303,467 Tax- deferred after taxes $445,941 Assumptions: $100,000 investment 10% net annual compounded rate of return* 39.6% tax bracket *Hypothetical rate of return for illustrative purposes only. Return is net of expense. The Value of Tax Deferred
Society for Academic Emergency Medicine Goal is to Understand and Minimize Income Taxes 7% 8% 9%Tax Deferred EQUALS 11.66%13.33%15% Taxable
Society for Academic Emergency Medicine ROTH IRA u Should be your first place to put money!! *Money is tax deferred and Tax Free in Distribution *Can only put money into Roth as a resident u Cannot fund if make more that $110,000 single or $160,000 jointly *Can pull out for down payments on first home, higher education, some rare other reasons (dont recommend). *Pull out at age 59 ½
Society for Academic Emergency Medicine Louisiana Deferred Compensation Plan (457b) u You should all be in this NOW!!! u You can take the 7.5% you pay to Social Security and put this into your own portfolio u All Pre-Tax Money u Max of $15,000 a year u Can offset contribution with moonlighting pay or recent raise u Can take it with you to other job or financial institution u No Matching
Society for Academic Emergency Medicine 401k/403b/457 u For Future Job *Pretax money placed into investment *All growth Tax Deferred *Some Jobs Match (always at least put match percentage or you are giving away free money) *Hope that your tax bracket will be lower when you are older *Distribution at age 59 ½ *Can take it with you to other job or financial institution
Society for Academic Emergency Medicine Why 401k/403b/457? u No Investment *Salary $3000/month *25% tax bracket is $750/month *Take home pay $2250/month u Investing $500/month *Salary $3000/month - $500/month contribution *New Salary $2500/month *25% tax bracket is $625/month *Take Home pay $1875/month *$375 less take home but $500 into retirement ($125 less taxes paid)
Society for Academic Emergency Medicine SEP IRA u In most cases, third option for resident u Can only invest if Moonlighting (Independent ContractorForm 1099) u Most of times, fund if Roth IRA and matched 401k/403b fully funded u Then 401k/403b/SEP IRA act the same just depends on what kind of job you have
Society for Academic Emergency Medicine Insurance u Medical u Disability u Life u Other *Auto *Home/Rental *Umbrella
Society for Academic Emergency Medicine Medical Insurance u COBRA *Do not let your insurance lapse (especially if you or your family have pre-existing conditions) *GME must provide *Usually have 30-60 days to pay premiums *Important to know when exactly your contract begins
Society for Academic Emergency Medicine Disability Insurance Most Important Thing to do BEFORE Residency Ends!!!
Society for Academic Emergency Medicine Disability Insurance Everything you own, plan to own, or plan to pay off, depends on your ability to earn an income.
Society for Academic Emergency Medicine Disability Insurance u GME provides *Usually either 50-60-66 2/3-80% of your current paycheck *$3000/month pretaxyour benefit would be $1800 *This money is taxable *Payable to age 65 u WARNING: Not all plans are created equally!!
Society for Academic Emergency Medicine Disability Insurance u There are special Disability Insurance plans that are only available for residents!!! u Benefits *Usually starts at $4000/month benefit (more than you make now) *Can get a rider that allows you to increase to $10,000/month benefit *Can take it with you after you graduate *Can stack on top of your jobs current disability plan
Society for Academic Emergency Medicine Disability Insurance
Society for Academic Emergency Medicine Disability Insurance u Must have these Characteristic *Cannot be dropped or amended by the insurer *The premiums cannot be increased *Protects your right to work in your own medical specialty *Ability to control benefits through Guaranteed Purchase options (Rider to increase amount) *Cost of living adjustments features *Consider catastrophic or long term care provisions u $181-418 a month depending on coverage
Society for Academic Emergency Medicine Disability Insurance u Carriers *Guardian *MetLife *Standard *Union Central *Principal Financial
Society for Academic Emergency Medicine Life Insurance u Why do you need it now? *The younger you are, the cheaper it is *The healthier you are, the cheaper it is *Lock it in now at the youngest and healthiest you will ever be *Prepares you for future need at todays prices u Married or kids later in life
Society for Academic Emergency Medicine Life Insurance u 2 Types of Life Insurance *Term Life Insurance u Limited Term (10, 20, 30 years) u Cheap (32 year old--~$450/yr for $1,000,000 coverage) u Good to cover for early unexpected death *Permanent Life Insurance u Lasts for life u More expensive u Many types: Whole Life, Universal Life, Variable Life u Good as a method of saving more money
Society for Academic Emergency Medicine Life Insurance u Variable Life Insurance *You can add to the cash value *Grows Tax Deferred in an account inside your life insurance *You can pull cash out (that you put in) at any time and use it but your relatives wont get that *You dieFamily gets your death benefit and whatever you put inJackpot *You dont dieYou can pull it out as you need it like a loan (emergency cash fund?)
Society for Academic Emergency Medicine Other Insurance u Auto Insurance *Dont forget to cover appropriately as net worth goes up, (can come after salary if not covered) u Homeowner Insurance *Dont forget to cover for appropriate cost of rebuilding home u Umbrella Insurance * Extra insurance that protect for catastrophe attached around car and home
Society for Academic Emergency Medicine Estate Planning Decisions are easier to make while you are ALIVE!
Society for Academic Emergency Medicine Estate Planning u Basics *Will *Living Will *Durable Power of Attorney *Healthcare Power of Attorney u Advanced *Trusts *Inheritance planning *Gifts
Society for Academic Emergency Medicine Financial Planner/Team Do you really know what you are doing?
Society for Academic Emergency Medicine Financial Planner/Team u If yes, Proceed u If no, Consider hiring someone you TRUST! *Remember that poor investments or poor allocation could cost you $1000s-$10,000s. Especially as you get older *Do you have the time to manage this? *Do you know all the legal loopholes *Is it worth your time? *Can you work one shift a year for the comfort of mind
Society for Academic Emergency Medicine FINANCIAL GENERAL MANAGER Coordinates Team on Your Behalf MORTGAGE BROKER CERTIFIED PUBLIC ACCOUNTANT ESTATE PLANNING ATTORNEY PROPERTY & CASUALTY AGENT Home/Auto/Umbrella CONTRACT ATTORNEY INSURANCE SPECIALIST GME OFFICE INVESTMENT ADVISOR Financial Planner/Team
Society for Academic Emergency Medicine Final Thoughts u Define what you want u Pay Yourself FIRST u Purchase disability insurance before leaving residency u Keep medical insuranceCobra u Maximize retirement savings u Minimize income tax u Make your student loans a long term deal u Delegate non-medical skills u Plan your estate while you can
Society for Academic Emergency Medicine Author Credit – Financial Planning Armando Hevia MD Questions
Society for Academic Emergency Medicine Postresidency Tools of the Trade CD 1) Career Planning – Garmel 2) Careers in Academic EM – Sokolove 3) Private Practice Career Options - Holliman 4) Fellowship/EM Organizations – Coates/Cheng 5) CV – Garmel 6) Interviewing – Garmel 7) Contracts for Emergency Physicians – Franks 8) Salary & Benefits – Hevia 9) Malpractice – Derse/Cheng 10) Clinical Teaching in the ED – Wald 11) Teaching Tips – Ankel 12) Mentoring - Ramundo 13) Negotiation – Ramundo 14) ABEM Certifications – Cheng 15) Patient Satisfaction – Cheng 16) Billing, Coding & Documenting – Cheng/Hall 17) Financial Planning – Hevia 18) Time Management – Promes 19) Balancing Work & Family – Promes & Datner 20) Physician Wellness & Burnout – Conrad /Wadman 21) Professionalism – Fredrick 22) Cases for professionalism & ethics – SAEM 23) Medical Directorship – Proctor 24) Academic Career Guide Chapter 1-8 – Nottingham 25) Academic career Guide Chapter 9-16 – Noeller