New Attending

Summary

Dr. Hodgkins is a 33 year-old interventional cardiologist. Although she clearly has the ability and interest to manage her own finances, her demanding workload leaves little time to devote to it.

Several insurance salesmen have approached her about purchasing life insurance or other products “as investments.” She feels overwhelmed by the options and phone calls. She also has a significant collection of 403(b)s from prior jobs and feels anxious that her money is “all over the place.”

Essentially, she would just like to make sure that she’s taken care of all the basics, and that she’s not doing anything wildly imprudent.

Overview

• Age 33

• “New” Interventional Cardiologist

• Annual Income: $320,000

• Educational Debt: $217,000

• No credit card debt

• Currently renting

• $120,000 of retirement savings spread across several accounts from old employers

• No taxable investments

• No current life insurance, disability insurance, or estate planning

Primary Concerns

• Retirement assets are spread across several accounts at different institutions.

• Wants assurance that she is “on track” financially, and what improvements, if any, should be made.

• Interested if there is an optimal strategy for her student loans.

how we might help

Initial conversations surface some additional goals. We learn that Dr. Hodgkins would ultimately like to move across country to be closer to family.

Next, we begin by entering her financial information into our software to build a visualization of her current financial picture. From there, we can spot areas with room for improvement.

• We build a picture of her assets, liabilities, and monthly cash flow.

• Her emergency savings is a bit short of the recommended 6-month reserve. Our first recommendation is to topoff the emergency fund.

• Upon reviewing her student loans, we determine that she was in deferral or forbearance throughout most of her training, and has little progress towards PSLF. As she is not currently employed by a nonprofit, we suggest a private refinance at competitive rates, and aggressive repayment.

• Prepare an analysis showing that she can afford to buy a house in her current city. The report shows her estimated principal, interest, taxes, and insurance.

• We discuss how “doctor loans” work and provide her a list of mortgage brokers that specialize in physician loans.

• On her W2, I notice that she is not maxing out all retirement accounts available to her: 403(b) and 457(b). I explain the significant tax benefits of these accounts and encourage her to consider increasing her contribution.

• We prepare a scenario for an out-of-state move in the year 2025, the year her current employment contract ends. The report reflects a projected change in living expenses, an expected drop in income, and lower state tax based on the change in location. Dr. Hodgkins reviews side-by-side numbers comparing the “stay” scenario vs. the “move” scenario.

• Dr. Hodgkins completes our investment risk tolerance survey, and together we craft an investment policy statement (IPS) that will detail how her investments will be allocated.

• We open a brokerage account and help her setup auto-contributions.

• I open a Roth IRA for her and explain how 2-step “backdoor” Roth contributions work. We setup a timeline for doing one this year.

• We explain how she can rollover her “old” 403(b)s into her current plan. We suggest this instead of a rollover to an IRA so that she does not bump into the pro-rata rule when doing backdoor Roth contributions in the future. We collect all of the necessary paperwork at each institution and provide it to her.

• I offer to prepare her tax return this year in partnership with a trusted CPA.

• Although she has modest group life and disability insurance, we calculate that she needs to increase her coverage.

  • As she currently has no dependents, we prioritize disability insurance so that she is protected in the event she finds herself unable to work. We suggest the following riders: own occupation, inflation adjusted, partial disability, future increase, and student loan repayment.

  • We advise her to apply immediately, as she is currently young and in excellent health. We connect her with our trusted insurance broker and facilitate the process each step of the way.

• We highlight the need for estate planning, and provide a list of estate planning attorney for her to consider. She specifically needs

  • Last will and testament

  • Power of Attorney

  • Advance medical directive

  • Medical power of attorney

• Lastly, I input each recommendation into the planning software. We visualize the aggregate effect on her financial life over the next several years, and compare it to her current trajectory.

This is a lot to handle all at once. Since she has partnered with us in an ongoing planning engagement, we set goals for the year and tackle a few items every few months. We meet quarterly to review her progress, and to adjust as needed.

Disclaimer: This scenario is an amalgam of different planning issues I have encountered with various clients. It is a realistic, yet fictitious illustration of how I might serve a particular type of client. Keeping in mind that no two clients, situations, or experiences are exactly alike, these scenarios are not to be construed as financial advice nor as an endorsement by any of our firm’s past or current clients, nor any assurance that I may be able to help you achieve the same results.