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Author Archives: LarsonFinancial

Four Ways to Supplement Your Retirement Savings

You’ve maximized your contribution to a 401k or 403b through employee deferral for 2019 (and employer deferral if you have your own plan) and find yourself with excess funds available to invest. Assuming you already have an emergency/opportunity fund, what else can you fund? What options do you have? Fortunately, there are numerous other products you can use to supplement your savings after your employee deferral. Here are some accounts you may want to consider:
  • Deferred Compensation Plan – Many doctors are employed by institutions that offer a type of plan that allows an employee to put away additional dollars annually. While there a variety of deferred compensation plans, the 457b plan is common for physicians at public or non-profit institutions. This plan allows a physician to contribute additional dollars from income on a tax-deferred basis.
  • Roth IRA – For physicians in practice, their income typically won’t not allow a direct contribution into a Roth IRA. However, because the IRS allows anyone to contribute to an IRA and there is no income cap for converting traditional IRA accounts to a Roth IRA, it is possible for anyone without other existing IRAs and with sufficient earned income to contribute to a non-deductible IRA and convert to a Roth IRA annually.
  • Health Savings Account – If your employer offers a health savings account (HSA), this is another place to put away monies on a pre-tax basis. Unlike health reimbursement or flexible spending accounts, the balance of the account can roll over from year to year and can be used later in life for large healthcare expenditures and other goals depending on your situation. The one caveat: An HSA is typically attached to a high-deductible health plan, so your out-of-pocket expenses will be higher annually.
  • Brokerage Account – While it is important to set aside monies for an emergency, retirement and other goals, for many doctors it can also be important to invest in an account that can be accessed without penalty at any point in the future. A brokerage account will experience volatility unlike a cash account so there is more risk involved. If you utilize a brokerage account, it is important to determine when and if you will need the money so you choose a portfolio with the appropriate level of risk.
Financial planning and investment management should be managed based on your specific situation. It is important to coordinate the two together, preferably with one professional who can assess your overall situation, including income, time horizon, risk tolerance, etc., as well as short-, mid- and long-term goals. Again, there is no cookie cutter approach to planning or investing. Be sure your financial professional understands you, your family and your goals.[/vc_column_text][/vc_column][/vc_row]

Do you find yourself with excess investible funds? We’ll work with you to develop a plan.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC. Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs. The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.

“Pay Yourself First” and Other Budgeting Tips

If you want to reach financial independence and achieve other long-term financial goals, I would argue the primary predictor of your success or failure is the way you manage the income jump from training into practice.

Many physicians compare themselves to their peers further along in their careers and assume that they too should buy a huge house, fill it with cool furniture and park two shiny new cars in the driveway to say, “I made it!” Very few clients in my practice went this route. The ones who did had some catching up to do.

For most people—physicians in particular—living on a budget may have negative connotations. It means the end of lattes, no chance at a luxury car, and never any fancy vacations; just paying down student loan debt and investing for some unimaginable future retirement date.

In my practice, that is not how most of my clients live. In fact, I don’t expect my clients to save every penny for the future and miss out on living now; I encourage them to enjoy the above-average income and to spend time doing things they enjoy. Instead, I ask my clients to do one thing: Pay yourself first.

The concept has been around for a long time and it’s simple. Before you spend money on anything else, make a commitment to set aside a percentage of your income or a flat dollar amount. To improve your chance of success, consider the following:

  • Automate your savings. Whatever you choose, percentage or flat amount, set up a monthly draft from your primary checking account to an account or accounts depending on where you plan to save/invest the money.
  • Choose a percentage or amount that will leave extra money in your checking account each month. This is simple psychology: It keeps you from feeling strapped for cash. As your account increases, it has the added benefit of providing additional funds for larger purchases, like a much needed and often overlooked vacation.
  • Reevaluate periodically as income increases or if you receive bonuses for RVU true ups or annual collections. As income increases, most physicians spending increases. Instead, I recommend increasing the percentage or flat dollar amount allocated to saving/investing.

Need help creating a budget that works for you? We can help.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.

Five Ways to Juggle Multiple Savings Goals

Many doctors may have competing short-term goals; saving for the down payment on their first home, a big vacation, new furniture, etc. Many people are comfortable maintaining one account for their emergency/opportunity fund and directing monies to this account systematically each month or when cash builds up in their checking account.

For others, though, one lump sum of money sitting in an account doesn’t help them to determine whether they can afford each of their goals or even reach their goals to begin with. For those clients, I tend to recommend a strategy of using multiple accounts to accumulate the funds to meet each goal.

If you prefer the multiple account strategy, I have a few suggestions you may find helpful:

  • Determine the purpose of the money. Most people should have an emergency reserve of 3-6 months of income, depending on their personal situation. Start with this fund and list the other purposes.
  • Determine the amount you need for each goal. Write down the expected amount for each goal and be very specific.
  • Determine the time horizon for each goal. It is important to identify when you will need the money, so you can determine how much to set aside each month to reach that particular goal.
  • Determine your monthly excess cash flow. After your fixed and necessary variable monthly expenses, calculate how much money is left over each month to put toward savings goals. I highly recommend a budgeting exercise; however, if you haven’t done one and choose not to do a budget, perhaps you know how much your checking account builds up each month. If so, unless you alter your spending habits, this is your monthly excess.
  • Determine where to put the money. This will vary by person or family depending on income, time horizon and risk tolerance to name a few. If you are incredibly conservative and reaching the goals will be close, multiple accounts that preserve the monies are probably best.

If, on the other hand you are much more aggressive, are comfortable with delaying the goals due to a decrease in principal or have a longer time horizon to meet the goal, you may want to consider other investment options.

It’s important to remember online savings accounts tend to pay a higher interest rate than typical brick-and-mortar banks, so it is beneficial to do some research unless you already have a financial advisor. They should know which options are best or be able to find out for you. Your financial advisor can make recommendations based on your overall comfort and knowledge of investments.

If you’re struggling to juggle multiple savings goals, our advisors can help.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.

For Disability Coverage, Should You Go Your Own Way?

For a physician, purchasing an individual long-term disability policy to replace or supplement group disability through your employer can be fundamental to the financial planning process and a basic asset protection tool; in brief, the policy protects one’s ability to earn an income.

As you transition from school to residency or fellowship, you may see that your employer offers a group disability policy. Although you may have access to long-term disability coverage at a nominal cost or even no-cost, the differences between group and individual coverage can be vast and the policy offered should be reviewed by your advisor before enrolling in the coverage. You may want to consider an individual policy, and here’s why:

  • Definition of own occupation: Oftentimes, an employer-sponsored policy will protect an insured in their specialty for 24 months, after which the definition is even broader—basically, if you can work, you are not considered disabled. With an individual policy, an insured can obtain a definition of disability, what I call “True” own occupation coverage; meaning, if the insured cannot work in his/her specialty but can work in another capacity, say teaching at a medical school, the disability benefit will continue.
  • Portability: Some employers do offer long-term disability coverage that can be converted to an individual policy when an employee leaves the employer. This is not always the case and, even if the coverage is portable, it is typically subpar to the long-term coverage an insured can obtain individually. Individual policies are owned by the insured and cover the individual at any employer.
  • Taxability: If the employer pays for the coverage, the benefits received are taxable to the insured. If the insured pays for the coverage with after-tax dollars, the benefits are not taxable.

Despite some of the benefits of individual coverage, group disability offered through an employer may be necessary for those physicians unable to obtain individual coverage due to pre-existing health conditions. And depending on the employer type, the coverage may provide the physician’s needs at a lower price. Be sure to review with your advisor to get all the relevant information before making a decision.

Not sure if an individual disability policy is right for you?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.

Before You Take That Job, Review the Benefits

Employee benefits are an integral component of a physician’s overall financial plan, and your financial advisor should review these benefit offerings with you to determine which of those options best meet your needs.

When discussing with your advisor, covering every aspect of your potential benefit package is the goal, but here are a few highlights to pay attention to:

  • Retirement plans: Most employers offer a retirement plan to their employees. Your financial advisor should discuss the plan offerings to ensure you are maximizing matching dollars and your total contribution. For many physicians, their retirement plan will be one of their largest assets to fund retirement. Additionally, many employers offer a Roth option for employee deferrals in addition to the typical pre-tax or Traditional employee deferral. Your advisor should discuss the tax implications of each option and how it fits into your overall investment strategy.
  • Long-term disability: If your employer provides disability benefits, it is important for you to understand the coverage offered and how it integrates with any existing individual disability insurance you own or are considering purchasing. Most employer long-term disability plans have a definition of disability that only protects physicians in their specialty for a limited time. If you are required to pay a portion of the cost of coverage, you can often opt out of coverage to increase the amount of individual coverage you can purchase, which may be the best option for many physicians. For others, the long-term disability benefits could fill a gap in their financial plan and your advisor should help you maximize this offering as necessary.
  • Medical coverage: Many employers now offer a high-deductible option in the medical coverage choices. Depending on your family situation, a Health Maintenance Organization (HMO) or Preferred Provider Organization (PPO) option may be optimal. However, it is important to understand the benefits of choosing a plan with current tax savings even though there may be higher out-of-pocket expenses.

Reviewing benefits for a new job is important, but don’t limit the benefit review to a new job only. Open enrollment is an important time in the ongoing financial planning process, and your financial advisor should take an active role in helping you determine which employee benefits to adjust as your individual or family circumstances change over time.

Are you in need of a benefit review with a financial advisor?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services.  Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.