What is a Retirement QCD?

A Tax-Efficient Way to Donate Money to Charity

By Staff Reporters

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A qualified charitable distribution (QCD) is a withdrawal from an individual retirement arrangement (IRA) that’s made directly to an eligible charity.

CITE: https://www.r2library.com/Resource/Title/0826102549

IRA account holders who were at least age 70.5 as of Dec. 31, 2019, can contribute some or all of their IRAs to charity.

LINK: https://6acebc46b9e64340fdc1a8917e0c290a.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

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Creative Giving Strategies: The QCD - Nebraska Cultural Endowment

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It might seem counterintuitive that anyone would want to give their savings away after making contributions for years in anticipation of the day when they would retire, but there can be tax advantages for doing so.

IRS: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-distributions-withdrawals

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors : Best Practices from Leading Consultants and Certified Medical Planners™ book cover

RISK MANAGEMENT: https://www.routledge.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

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PODCAST: Google Starts a Health Insurance Stop-Loss Company

By Eric Bricker MD

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INSURANCE: https://www.amazon.com/Dictionary-Health-Insurance-Managed-Care/dp/0826149944/ref=sr_1_4?ie=UTF8&s=books&qid=1275315485&sr=1-4

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PODCAST: How Fees Impact Your Retirement Savings

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How 1% Fees Can Eat Up 30% of Your Nest Egg

By Sally Brandon

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In this brief video, Rebalance IRA‘s Vice President of Client Services, Sally Brandon, details the direct impact that hidden and unfair fees can have on your retirement nest egg.

The firm works to make sure you retire with as much of your hard-earned savings as possible.

How 1% Fees Can Eat Up 30% of Your Nest Egg

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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PODCAST: The Professional Edge in Financial Planning

By Sen G. TODD; Esq., CPA, CFP, MTax

To make a thorough or dramatic change

  1. Begin by taking the first step
  2. Will you make things change or will you let change happen to you
  3. Define your outcome
  4. If it was easy everyone would be a multi-millionaire – it is if you work with the right professional

Have you honestly considered what YOU get from planning? Your safe and secure retirement is YOUR responsibility. What steps should you take – If your climbing Mt. Everest, you don’t do it alone – you follow your Sherpa to guide you there. Why, they have already done this many times and are there to help you. This is similar to working with Estate Management Counselors – we are your guide – we have already assisted others in making the decisions you face.

Taking advantage of THE BUNDLE

To a prosperous and happy 2021!!

Sean G. Todd, Esq., M. Tax, CFP®, CPA

P.S. Your tax, estate and financial plan – done: THE BUNDLE

LISTEN HERE: https://professional-edge.captivate.fm/episode/transform-s2

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MORE: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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OUR NEW RADIO SHOW: Listen to Estate Management Consultants

The Professional Edge Radio Show

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By Sean G. Todd Esq., CPA, MTax, CFP™

[Registered Investment Advisor]

Sean G. Todd draws upon the substantial knowledge of tax and financial planning which he gained in his 20+ years of practice.  Sean is a licensed attorney with a Master of Taxation degree.  Sean is also a licensed Certified Financial Planner™ practitioner and a Certified Public Accountant.  He has extensive experience in the areas of Tax, Estate and Financial Planning.  Sean has been an adjunct professor at Oglethorpe University and Emory University in Atlanta.  He is currently teaching Federal Income Tax Planning at The University of Georgia.

Sean earned his Bachelor of Science in Business from Indiana University and his law degree from Ohio Northern College of Law.  In addition, Sean continued his education with a specialization in tax by earning a Master of Taxation degree from The University of Akron.  Sean has been a featured speaker at the National Self Storage Association meeting in Las Vegas, Nevada on several occasions.  He also lectures on topics dealing with estate and financial planning and the new tax laws. 

Clients benefit when working with Sean because of his practical experience. He has completed over 2,000 estate and financial plans for individuals and business owners in the State of Georgia, and clients also benefit from his professional training in investments, finance, accounting, estate planning, taxes and the law.  He has an unmatched ability to coordinate all the moving parts to objectively evaluate and provide effective professional advice to his clients. 

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Tune in Sundays 9-10:00 am EST

Topics include:

  • Tax Strategies
  • IRA Distribution Strategies
  • Retirement Income
  • Estate Planning
  • Asset Protection, and much more!

HISTORICAL REVIEW LISTEN HERE: https://www.emcadvisors.com/radioshow.html

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Editor’s Note: Be sure to visit and subscribe to this ME-P to learn much more from Sean G. Todd. He has deep subject matter expertise of the topics presented aligned with a pragmatic medical perspective from his sister who practices in the Midwest. And, be sure to directly tune into Professor Sean Todd’s own: “The Professional Edge Radio Show” every Sunday at 9-10 am, EST.

Dr. David Edward Marcinko MBA CMP™

[Editor-in-Chief]

THANK YOU

***

Capital Market Expectations, Asset Allocation and Safe Portfolio Withdrawal Rates

By Staff Reporters

From: Munich Personal RePEc Archive [MPRA]

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Economist Wade Donald Pfau wrote an article called, “Capital Market Expectations, Asset Allocation, and Safe Withdrawal more than a decade ago. Today, is is still a vital read.

Abstract

Most retirement withdrawal rate studies are either based on historical data or use a particular assumption about portfolio returns unique to the study in question.

But, financial advisors and planners may have their own capital market expectations for future returns from stocks, bonds, and other assets they deem suitable for their clients’ portfolios. These uniquely personal expectations may or may not bear resemblance to those used for making retirement withdrawal rate guidelines. The objective here is to provide a general framework for thinking about how to estimate sustainable withdrawal rates and appropriate asset allocations for clients based on one’s capital market expectations, as well as other inputs about the client including the planning horizon, tolerance for exhausting wealth, and personal concerns about holding riskier assets.

The study also tests the sensitivity of various assumptions for the recommended withdrawal rates and asset allocations, and finds that these assumptions are very important. Another common feature of existing studies is to focus on an optimal asset allocation, which is expected either to minimize the probability of failure for a given withdrawal rate, or to maximize the withdrawal rate for a given probability of failure. Retirement withdrawal rate studies are known in this regard for lending support to stock allocations in excess of 50 percent.

Assessment

This study shows that usually there are a wide range of asset allocations which can be expected to perform nearly as well as the optimal allocation, and that lower stock allocations are indeed justifiable in many cases.

Link: MPRA_paper_32973

About MPRA: http://mpra.ub.uni-muenchen.de/information.html

NOTE: Wade Donald Pfau is an Associate Professor of Economics at the National Graduate Institute for Policy Studies (GRIPS) in Tokyo, Japan. His PhD in economics was from Princeton University.

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

FINANCE: Financial Planning for Physicians and Advisors
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Product Details  Product Details

Social Security as an Asset Class?

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A High Guaranteed Return!

By Rick Kahler CFP® http://www.KahlerFinancial.com

Rick Kahler CFPOnce you hit age 62, what’s an investment class that can give you a high guaranteed return with almost no risk; Bonds, Equities, or Commodities?

Nope; it’s social security.

There’s just one catch. You can’t actually get your hands on the money until you’re 70.

The Catch

One of the most common issues for those approaching retirement age is determining the right time to file for Social Security. If you file at age 62, you will receive benefits longer. Yet your monthly benefit for the rest of your life will only be about 75% of the monthly amount you will receive if you file at your full retirement age of 66 to 67. If you wait even longer, the benefit amount is higher still.

Those who are unable to work and don’t have sufficient retirement savings may not have a choice about filing for Social Security early. Those who don’t have a compelling need for early Social Security income may still consider early filing as an option, with the idea of investing the money for their later retirement.

Recent Thoughts

According to a recent article by Karen DeMasters in Financial Advisor magazine, this is not a good choice. She cites research done by William Meyer and William Reichenstein of Social Security Solutions Inc (www.ssanalyzer.com) in Leawood, Kansas.

One big drawback to investing your Social Security benefits is the penalty you pay if you are still working. If, between age 62 and your full retirement age, you earn more than $15,120 a year, your benefits are reduced. So you’d start with a smaller benefit amount, have it cut even further, and not be left with a whole lot to invest.

Even more important, however, is a number that Meyer and Reichenstein emphasize: 8%. This is the amount that your Social Security benefit increases every year between age 62 and 70 that you delay filing. In essence, if you leave your Social Security benefits in the government’s hands instead of investing them yourself, you are guaranteed an 8% annual return on that part of your retirement portfolio. This doesn’t include cost-of-living increases.

Taking early benefits and investing them is only a good idea if you are sure you can get more than an 8% return. Any investment likely to produce a return higher than 8% would come with risks that are unacceptably high for a retirement-age portfolio.

Mature Woman

Social Security Risks

There are only two real risks associated with letting your Social Security benefits accumulate until later than age 62.

One is the possibility that Social Security won’t be there when you do retire. Given that the delay is only a few years and that Social Security is now the retirement plan of most Americans, this is extremely unlikely.

The second risk is that you won’t live long enough to collect an amount equal to what you would get if you started benefits early. Unless you are facing a terminal illness, however, chances are that waiting until at least full retirement age is still the wisest option.

Assessment

If your health is good and you don’t need retirement cash immediately, you are far better off to delay filing. Even if you are facing circumstances that might make early retirement a necessity, it’s a good idea to look at all your options and try to find creative ways to put off filing as long as possible.

Once you reach age 62, Social Security is always an option. It gives you a doorway out of the working world any time you really need to take it. But for every year you can delay walking through that door, you gain 8%. That’s an investment return well worth waiting for.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Product Details  Product Details

Social Security Politics and Mathematics

By Staff Reporters

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Although the future of Social Security remains in doubt, some congressional lawmakers are ensuring that most Social Security recipients get their money and then some. Sen. Bernie Sanders (I-Vt.) introduced the Social Security Expansion Act (SSEA) in June. The bill would allot $200 more per month for each Social Security recipient — a 12% boost in money, according to CBS News.

The bill was introduced after the Social Security Administration said that Americans would no longer receive benefits in 13 years, if congressional lawmakers do not address the funding shortage.

So who will receive these Social Security increases?

The people who are currently eligible for Social Security or anyone who turns 62 in 2023, which is the earliest age to collect Social Security, will be eligible to receive the extra $200 a month with their benefits.

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Now, at present for Social Security, 12.4% is taken out of each paycheck for people earning up to $147,000, with half paid by the employer and half paid by the worker. So, if you make $147,000 or less, you are paying 6.2% into Social Security. If you make, say, $1.47 million, you only pay 0.6% of your income to Social Security.

If the pending new SS bill is approved, the same rate would be taxed on individuals making $250,000 or more. Those making $147,000 or less would continue to pay the same rate as well, with a do-nut hole between the $147,000 and $250,000 — although that $147,000 typically goes up each year, as it is based on average income.

The increased funding — along with a change in the cost-of-living-adjustments (COLA) to the Consumer Price Index for the Elderly (CPI-E) — would help to increase benefits by an estimated $200 per month, or $2,400 per year, which bears out, according to an analysis by the Social Security Administration (SSA).

RELATED: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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Modern Portfolio Theory and Asset Allocation [Not Correlation]

THE CORRELATION HOT TOPIC

ACADEMIC C.V. | DAVID EDWARD MARCINKO

By Dr. David Edward Marcinko MBA CMP©

SPONSOR: http://www.CertifiedMedicalPlanner.org

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Modern Portfolio Theory approaches investing by examining the complete market and the full economy. MPT places a great emphasis on the correlation between investments. 

DEFINITION:

Correlation is a measure of how frequently one event tends to happen when another event happens. High positive correlation means two events usually happen together – high SAT scores and getting through college for instance. High negative correlation means two events tend not to happen together – high SATs and a poor grade record.

No correlation means the two events are independent of one another. In statistical terms two events that are perfectly correlated have a “correlation coefficient” of 1; two events that are perfectly negatively correlated have a correlation coefficient of -1; and two events that have zero correlation have a coefficient of 0.

Correlation has been used over the past twenty years by institutions and financial advisors to assemble portfolios of moderate risk.  In calculating correlation, a statistician would examine the possibility of two events happening together, namely:

  • If the probability of A happening is 1/X;
  • And the probability of B happening is 1/Y; then
  • The probability of A and B happening together is (1/X) times (1/Y), or 1/(X times Y).

There are several laws of correlation including;

  1. Combining assets with a perfect positive correlation offers no reduction in portfolio risk.  These two assets will simply move in tandem with each other.
  2. Combining assets with zero correlation (statistically independent) reduces the risk of the portfolio.  If more assets with uncorrelated returns are added to the portfolio, significant risk reduction can be achieved.
  3. Combing assets with a perfect negative correlation could eliminate risk entirely.   This is the principle with “hedging strategies”.  These strategies are discussed later in the book.

Citation: https://www.r2library.com/Resource/Title/0826102549

BUT – CORRELATION IS NOT CAUSATION

https://medicalexecutivepost.com/2021/02/05/correlation-is-not-causation/

In the real world, negative correlations are very rare 

Most assets maintain a positive correlation with each other.  The goal of a prudent investor is to assemble a portfolio that contains uncorrelated assets.  When a portfolio contains assets that possess low correlations, the upward movement of one asset class will help offset the downward movement of another.  This is especially important when economic and market conditions change.

As a result, including assets in your portfolio that are not highly correlated will reduce the overall volatility (as measured by standard deviation) and may also increase long-term investment returns. This is the primary argument for including dissimilar asset classes in your portfolio. Keep in mind that this type of diversification does not guarantee you will avoid a loss.  It simply minimizes the chance of loss. 

In the table provided by Ibbotson, the average correlation between the five major asset classes is displayed. The lowest correlation is between the U.S. Treasury Bonds and the EAFE (international stocks).  The highest correlation is between the S&P 500 and the EAFE; 0.77 or 77 percent. This signifies a prominent level of correlation that has grown even larger during this decade.   Low correlations within the table appear most with U.S. Treasury Bills.

Historical Correlation of Asset Classes

Benchmark                             1          2          3         4         5         6            

1 U.S. Treasury Bill                  1.00    

2 U.S. Bonds                          0.73     1.00    

3 S&P 500                               0.03     0.34     1.00    

4 Commodities                         0.15     0.04     0.08      1.00      

5 International Stocks              -0.13    -0.31    0.77      0.14    1.00       

6 Real Estate                           0.11      0.43    0.81     -0.02    0.66     1.00

Table Source: Ibbotson 1980-2012

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Some Retirement Statistics and Questions for Physicians

Transitioning to the End of Your Medical Career

 BY DR. DAVID EDWARD MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

With the PP-ACA, increased compliance regulations and higher tax rates impending from the Biden administration – not to mention the corona pandemic, venture capital based healthcare corporations and telehealth – physicians are more concerned about their retirement and retirement planning than ever before; and with good reason. After payroll taxes, dividend taxes, limited itemized deductions, the new 3.8% surtax on net investment income and an extra 0.9% Medicare tax, for every dollar earned by a high earning physician, almost 50 cents can go to taxes!

Introduction

Retirement planning is not about cherry picking the best stocks, ETFs or mutual funds or how to beat the short term fluctuations in the market. It’s a disciplined long term strategy based on scientific evidence and a prudent process. You increase the probability of success by following this process and monitoring on a regular basis to make sure you are on track.

General Surveys

According to a survey from the Employee Benefit Research Institute [EBRI] and Greenwald & Associates; nearly half of workers without a retirement plan were not at all confident in their financial security, compared to 11 percent for those who participated in a plan, according to the 2014 Retirement Confidence Survey (RCS).

In addition, 35 percent of workers have not saved any money for retirement, while only 57 percent are actively saving for retirement. Thirty-six percent of workers said the total value of their savings and investments—not including the value of their home and defined benefit plan—was less than $1,000, up from 29 percent in the 2013 survey. But, when adjusted for those without a formal retirement plan, 73 percent have saved less than $1,000.

Debt is also a concern, with 20 percent of workers saying they have a major problem with debt. Thirty-eight percent indicate they have a minor problem with debt. And, only 44 percent of workers said they or their spouse have tried to calculate how much money they’ll need to save for retirement. But, those who have done the calculation tend to save more.

The biggest shift in the 24 years has been the number of workers who plan to work later in life. In 1991, 84 percent of workers indicated they plan to retire by age 65, versus only 9 percent who planned to work until at least age 70. In 2014, 50 percent plan on retiring by age 65; with 22 percent planning to work until they reach 70.

Physician Statistics

Now, compare and contrast the above to these statistics according to a 2018 survey of physicians on financial preparedness by American Medical Association [AMA] Insurance. The statistics are still alarming:

  • The top personal financial concern for all physicians is having enough money to retire.
  • Only 6% of physicians consider themselves ahead of schedule in retirement preparedness.
  • Nearly half feel they were behind
  • 41% of physicians average less than $500,000 in retirement savings.
  • Nearly 70% of physicians don’t have a long term care plan.
  • Only half of US physicians have a completed estate plan including an updated will and Medical directives.

Retired MD Doctor Retirement Gift Idea Retiring - Doctor ...

Thoughts to Ponder

And so, to help make your golden years comfortable and worry free, here are ten important retirement questions for all physicians to consider:

  1. How much money do you need to retire?
  2. What is your retirement cash flow?
  3. What is your retirement vision?
  4. How to stay on retirement track?
  5. How to maximize retirement plan contributions such as 401(k) or 403(b)?
  6. How to maximize retirement income from retirement plans?
  7. What are some other retirement plan savings options?
  8. What is your retirement plan and investing style?
  9. What is the role of social security in retirement planning?
  10. How to integrate retirement with estate planning?

The opinion of a competent Certified Medical Planner® can assist.

ASSESSMENT: Your thoughts, comments and input are appreciated.

Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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UPDATE: The Markets, SS COLAS, EY, and Monkey-Pox?

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Markets: Stocks sagged for the second straight day, with technology chip stocks taking some of the biggest blows. A new consumer report showed that Americans are not confident in the economy, but are confident that inflation will be remain for the next year.

A Social Security official earlier this month said he expects a COLA bump of about 8%, based on the current inflationary trends. But if inflation continues at its current pace — the cost of goods and services in May accelerated to 8.6% — seniors could receive a COLA hike of 10.8% in early 2023, according to a new analysis from the non-partisan Committee for a Responsible Federal Budget. If inflation grinds to a halt over the final months of 2022, seniors would receive a COLA increase of 7.3%, the group predicted. 

Ernst and Young (EY), one of the world’s largest auditing firms, has agreed to pay a $100 million SEC fine after admitting hundreds of its accountants have cheated on their ethics exams between 2017 and 2021.

US health officials ramped up their fight against the Monkeypox outbreak, expanding the group eligible to get vaccines and deploying more doses and testing capabilities.

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Behavioral Finance for Doctors?

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On the Psychology of Investing [Book Review]

By Peter Benedek, PhD CFA

Founder: www.RetirementAction.com

Some of the pioneers of behavioral finance are Drs. Kahneman, Twersky and Thaler. This short introduction to the subject is based on John Nofsinger’s little book entitled “Psychology of Investing” an excellent quick read for all medical professionals or anyone who is interested in learning more about behavioral finance.

Rational Decisions?

Much of modern finance is built on the assumption that investors “make rational decisions” and “are unbiased in their predictions about the future”, however this is not always the case.

Cognitive errors come from (1) prospect theory (people feel good/bad about gain/loss of $500, but not twice as good/bad about a gain/loss of $1,000; they feel worse about a $500 loss than feel good about a $500 gain); (2) mental accounting (meaning that people tend to create separate buckets which they examine individually), (3) Self-deception (e.g. overconfidence), (4) heuristic simplification (shortcuts) and (4) mood can affect ability to reach a logical conclusion.

John Nofsinger’s Book

The following are some of the major chapter headings in Nofsinger’s book, and represent some of the key behavioral finance concepts.

Overconfidence leads to: (1) excessive trading (which in turn results in lower returns due to costs incurred), (2) underestimation of risk (portfolios of decreasing risk were found for single men, married men, married women, and single women), (3) illusion of knowledge (you can get a lot more data nowadays on the internet) and (4) illusion of control (on-line trading).

Pride and Regret leads to: (1) disposition effect (not only selling winners and holding on to the losers, but selling winners too soon- confirming how smart I was, and losers to late- not admitting a bad call, even though selling losers increases one’s wealth due to the tax benefits), (2) reference points (the point from where one measures gains or losses is not necessarily the purchase price, but may perhaps be the most recent 52 week high and it is most likely changing continuously- clearly such a reference point will affect investor’s judgment by perhaps holding on to “loser” too long when in fact it was a winner.)

Considering the Past in decisions about the future, when future outcomes are independent of the past lead to a whole slew of more bad decisions, such as: (1) house money effect (willing to increase the level of risk taken after recent winnings- i.e. playing with house’s money), (2) risk aversion or snake-bite effect (becoming more risk averse after losing money), (3) trying to break-even (at times people will increase their willing to take higher risk to try to recover their losses- e.g. double or nothing), (4) endowment or status quo effect (often people are only prepared to sell something they own for more than they would be willing to buy it- i.e. for investments people tend to do nothing, just hold on to investments they already have) (5) memory and decision making ( decisions are affected by how long ago did the pain/pleasure occur or what was the sequence of pain and pleasure), (6) cognitive dissonance (people avoid important decisions or ignore negative information because of pain associated with circumstances).

Mental Accounting is the act of bucketizing investments and then reviewing the performance of the individual buckets separately (e.g. investing at low savings rate while paying high credit card interest rates).

Examples of mental accounting are: (1) matching costs to benefits (wanting to pay for vacation before taking it and getting paid for work after it was done, even though from perspective of time value of money the opposite should be preferred0, (2) aversion to debt (don’t like long-term debt for short-term benefit), (3) sunk-cost effect (illogically considering non-recoverable costs when making forward-going decisions). In investing, treating buckets separately and ignoring interaction (correlations) induces people not to sell losers (even though they get tax benefits), prevent them from investing in the stock market because it is too risky in isolation (however much less so when looked at as part of the complete portfolio including other asset classes and labor income and occupied real estate), thus they “do not maximize the return for a given level of risk taken).

In building portfolios, assets included should not be chosen on basis of risk and return only, but also correlation; even otherwise well educated individuals make the mistake of assuming that adding a risky asset to a portfolio will increase the overall risk, when in fact the opposite will occur depending on the correlation of the asset to be added with the portfolio (i.e. people misjudge or disregard interactions between buckets, which are key determinants of risk).

This can lead to: (1) building behavioral portfolios (i.e. safety, income, get rich, etc type sub-portfolios, resulting in goal diversification rather than asset diversification), (2) naïve diversification (when aiming for 50:50 stock:bond allocation implementing this as 50:50 in both tax-deferred (401(k)/RRSP) accounts and taxable accounts, rather than placing the bonds in the tax-deferred and stocks in taxable accounts respectively for tax advantages), (3) naïve diversification in retirement accounts (if five investment options are offered then investing 1/5th in each, thus getting an inappropriate level of diversification or no diversification depending on the available choices; or being too heavily invested in one’s employer’s stock).

Representativeness may lead investors to confusing a good company with a good investment (good company may already be overpriced in the market; extrapolating past returns or momentum investing), and familiarity to over-investment in one’s own employer (perhaps inappropriate as when stock tanks one’s job may also be at risk) or industry or country thus not having a properly diversified portfolio.

Emotions can affect investment decisions: mood/feelings/optimism will affect decision to buy or sell risky or conservative assets, even though the mood resulted from matters unrelated to investment. Social interactions such as friends/coworkers/clubs and the media (e.g. CNBC) can lead to herding effects like over (under) valuation.

Financial Strategies

Nofsinger finishes with a final chapter which includes strategies for:

(i) beating the biases: (1) Understand the biases, (2) define your investment objectives, (3) have quantitative investment criteria, i.e. understand why you are buying a specific investor (or even better invest in a passive fashion), (4) diversify among asset classes and within asset classes (and don’t over invest in your employer’s stock), and (5) control your investment environment (check on stock monthly, trade only monthly and review progress toward goals annually).

(ii) using biases for the good: (1) set new employee defaults for retirement plans to being enrolled, (2) get employees to commit some percent of future raises to automatically go toward retirement (save-more-tomorrow).

Assessment

Buy the book (you can get used copies at through Amazon for under $10). As indicated it is a quick read and occasionally you may even want to re-read it to insure you avoid the biases or use them for the good. Also, the book has long list of references for those inclined to delve into the subject more deeply.

You might even ask “How does all this Behavioral Finance coexist with Efficient Market theory?” and that’s a great question that I’ll leave for another time.

More: SSRN-id2596202

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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ENCORE: How to Interview an Investment Portfolio Manager?

Selection Criteria Critical for Physicians

By Dr. David Edward Marcinko; MBA, CMP™

[Publisher-in-Chief and former certified financial plannerdem2]

Recently in the Atlanta area, two high-profile financial advisors and portfolio investment managers have been charged with client embezzlement, malfeasance, and more!

The first was Kirk Wright, a Harvard-educated fund manager who was convicted last week in a fraud scheme that bilked investors out of tens of millions of dollars.  He later hanged himself, according to the Fulton County Georgia medical examiner’s office.  A federal jury convicted Wright last week on all 47 counts of mail fraud, securities fraud and money laundering stemming from a scam run through his firm, International Management Associates. High-profile clients included sports-stars, celebrities and several well-known local physicians.

The second, Frederick J. Barton, received a Securities and Exchange Commission (SEC) civil action letter on June 3rd, 2008. Barton, formerly a registered representative of a national, registered broker-dealer and two entities he controlled: TwinSpan Capital Management, LLC (TwinSpan), an investment adviser formerly registered with the Commission, and Barton Asset Management, LLC (Barton Asset Management). The Commission alleges that, between 1999 and 2007, Barton, acting individually or through TwinSpan or Barton Asset Management, engaged in three separate securities frauds-including one involving a patient suffering from Alzheimer’s disease-and through his misconduct obtained over $3 million in ill-gotten gains. The Commission further alleges that he then spent his ill-gotten gains, among other things, to send his children to an exclusive private school, fund his own investment portfolio, and service his credit card debts. 

Manager Selection

So, how can the medical professional reduce the potential for similar behavior from his/her portfolio manager?

The first way is to skip the middle-man and “do-it-yourself.” But, doctors are sometimes hard-pressed to following this directive because of time constraints, knowledge paucity, fear/greed and/or disinterest; among other reasons.

The second way, of course, is to outsource the task by hiring a financial advisor. But, how do you find a financial advisor (easy), and more importantly, how do you discern a good fit (personally and professionally)? Still, there is no guarantee of honesty or capability.

But, your odds can be improved with insider knowledge of the financial services industry; a common-theme of the ME-P. And so, the following checklist may be a good place to start the selection, or triage process.  

SAMPLE: Engagement Letter

Mr. Joseph H. Sample

Vice President

Medical Capital Management of Nevada, LLC

RE: Letter to Request Pre-Interview Information from Portfolio Manager

Dear [Mr. Name]:

Thank you for agreeing to meet with us on [date, time] in our office. We are in the process of interviewing several portfolio investment managers.

So that we may obtain consistent information in our evaluation, we would appreciate the coverage of specific areas during your presentation. We are particularly interested in information regarding your approach to investment management in the following areas:

Investment philosophy and approach

• Describe your management style and any changes you have made over the past decade.

• Describe your investment decision-making process.

• Do you make the decisions or do you rely on others, and if so, who?

• Describe your sources of research.

• What contact, if any, do you have with the management of companies in which you invest?

• Briefly describe the sell disciplines employed by you and your firm.

• Describe whether/how you use top-down or bottom-up approaches to investment selection.

• Are you value or growth orientated; hedged or not; domestic or international?

Track record

• Please supply performance data by 5, 10 and 15-year intervals.

• Please supply performance records compared to benchmarks you feel appropriate.

• If balanced management, please provide performance data by asset class.

• Provide MPT or APT statistics such as beta, alpha, standard deviations, etc.

• What are your cash holdings; fully invested or selectively invested at various times?

• Turnover history and number of securities, industries and sectors; are guidelines in place?

• Typical portfolio percentage of largest ten positions.

Firm/advisor background

Please provide us with information regarding your background, including general information about the organization. In particular, please cover:

• The stability of ownership, managers, analysts or others directly involved in management.

• Who makes the investment decisions and how the firm dictates policy to managers?

• A description of expenses, including management fees, commissions, and other expenses.

• A detailed description of the growth of money under management over the past ten years.

• Please discuss the flexibility in design and management of a client’s portfolio by managers.

• If your firm is multidisciplined, what are your areas of expertise?

• Who is the custodian of securities? Does the firm have insurance?

Manager background

Please provide the resume(s) of the manager(s) as well as information about the manager’s style and consistency. Additional items of interest include:

• The manager’s record with other firms, if employed less than ten years.

• How the manager does research, including use of analysts and outside research?

• Regarding the decision process, what steps does the manager actually take?

• Manager’s ownership status in the firm?

• History of asset growth under the specific manager.

• Examples of past successes and failures on investment decisions.

Statistics

Please provide the following statistical information:

• Price/earnings ratios compared to market

• Price/book ratios compared to market

• Average earnings growth data

• Average market cap of companies in portfolio

• Average dividend yield information

• Average maturity and/or duration of fixed-income portfolios (and how this is managed)

• Average credit rating of fixed-income portfolios

• Where short-term funds are invested

Communication

• How often do you provide portfolio and performance reports?

• How do you compare performance to the market? What benchmarks do you use?

• Who will meet with us (and how often)?

• Who is the primary and secondary contact?

• Does the firm provide investment newsletters or promotional literature, with sample?

• Is the portfolio manager(s) available to meet or discuss issues with the client or advisor?

Compliance

• Are you a fiduciary? Will you sign-off as same?

• Are you a stoke-broker or registered representative?

• What securities licenses do you hold?

• Are you independent?

• Who is your broker-dealer?

• Who is your custodian and clearinghouse?

• Are you a RIA or RIA representative?

• May we please see you ADV Parts I, II, III

• May we review a sample investment policy statement?

• May we see your CRD report?

• Must we sign an arbitration clause?

• What educational degrees have earned?

• What financial/securities designation do you hold?

• What peer-reviewed or non-peered reviewed material have you published, and where? 

• What medical specificity do you possess?

• Do you hold the AIF® and/or AIFA® designations, and adhere to its code-of-ethics?

• Are you a [CMP] Certified Medical Planner™?

• Are you a [CFP] Certified Financial Planner™ with health economics knowledge?

• How do/can you demonstrate you specific knowledge on the heath care space?

Thank you.

Dr. Michael B. Sample; MD/DO

Managing Partner – Medical Associates of Nevada, PC  

Assessment

Some financial advisors, insurance agents, portfolio and wealth managers speak of “prospecting”, “hunting” or “screening” clients. In fact, potential doctor-clients are often, not-so-charmingly called, “prospects”.

Don’t you think it’s about time that the “tables-are-turned” by informed medical professionals, as the “hunted-becomes-the-hunter”, by the informed physician? Triage well, and always remember; caveat emptor and vendor emptor!

What other criteria should be included in this engagement letter, or personal interview itself? What has been your experience with portfolio manager selection? How do you select same, and what has been your success rate? Why don’t you do-it-yourself? Please comment and opine.

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Dr. Marcinko Interviewed on Physician Retirement and Succession Planning

imba inc

                  Physicians Have Unique Challenges, Opportunities

By Ann Miller RN MHA CMP

[Executive-Director]

Medical Executive-Post Publisher-in-Chief, Dr. David Edward Marcinko MBA CMP™, and financial planner Paul Larson CFP™, were interviewed by Sharon Fitzgerald for Medical News, Inc. Here is a reprint of that interview.

Doctors Squeezed from both Ends

Physicians today “are getting squeezed from both ends” when it comes to their finances, according Paul Larson, president of Larson Financial Group. On one end, collections and reimbursements are down; on the other end, taxes are up. That’s why financial planning, including a far-sighted strategy for retirement, is a necessity.

Larson Speaks

“We help these doctors function like a CEO and help them quarterback their plan,” said Larson, a Certified Financial Planner™ whose company serves thousands of physicians and dentists exclusively. Headquartered in St. Louis, Larson Financial boasts 19 locations.

Larson launched his company after working with a few physicians and recognizing that these clients face unique financial challenges and yet have exceptional opportunities, as well.

What makes medical practitioners unique? One thing, Larson said, is because they start their jobs much later in life than most people. Physicians wrap up residency or fellowship, on average, at the age of 32 or even older. “The delayed start really changes how much money they need to be saving to accomplish these goals like retirement or college for their kids,” he said.

Another thing that puts physicians in a unique category is that most begin their careers with a student-loan debt of $175,000 or more. Larson said that there’s “an emotional component” to debt, and many physicians want to wipe that slate clean before they begin retirement saving.

Larson also said doctors are unique because they are a lawsuit target – and he wasn’t talking about medical malpractice suits. “You can amass wealth as a doctor, get sued in five years and then lose everything that you worked so hard to save,” he said. He shared the story of a client who was in a fender-bender and got out of his car wearing his white lab coat. “It was bad,” Larson said, and the suit has dogged the client for years.

The Three Mistake of Retirement Planning

Larson said he consistently sees physicians making three mistakes that may put a comfortable retirement at risk.

  1. The first is assuming that funding a retirement plan, such as a 401(k), is sufficient. It’s not. “There’s no way possible for you to save enough money that way to get to that goal,” he said. That’s primarily due to limits imposed by the Internal Revenue Service, which allows a maximum contribution of $49,000 annually if self-employed and just $16,500 annually until the age of 50. He recommends that physicians throughout their career sock away 20 percent of gross income in vehicles outside of their retirement plan.
  2. The second common mistake is making investments that are inefficient from a tax perspective. In particular, real estate or bond investments in a taxable account prompt capital gains with each dividend, and that’s no way to make money, he said.
  3. The third mistake, and it’s a big one, is paying too much to have their money managed. A stockbroker, for example, takes a fee for buying mutual funds and then the likes of Fidelity or Janus tacks on an internal fee as well. “It’s like driving a boat with an anchor hanging off the back,” Larson said.

Marcinko Speaks

Dr. David E. Marcinko MBADr. David E. Marcinko MBA MEd CPHQ, a physician and [former] certified financial planner] and founder of the more specific program for physician-focused fiduciary financial advisors and consultants www.CertifiedMedicalPlanner.org, sees another common mistake that wreaks havoc with a physician’s retirement plans – divorce.

He said clients come to him “looking to invest in the next Google or Facebook, and yet they will get divorced two or three times, and they’ll be whacked 50 percent of their net income each time. It just doesn’t make sense.”

Marcinko practiced medicine for 16 years until about 10 years ago, when he sold his practice and ambulatory surgical center to a public company, re-schooled and retired. Then, his second career in financial planning and investment advising began. “I’m a doctor who went to business school about 20 years ago, before it was in fashion. Much to my mother’s chagrin, by the way,” he quipped. Marcinko has written 27 books about practice management, hospital administration and business, physician finances, risk management, retirement planning and practice succession. He’s the founder of the Georgia-based Institute of Medical Business Advisors Inc.

ECON

Succession Planning for Doctors

Succession planning, Marcinko said, ideally should begin five years before retirement – and even earlier if possible. When assisting a client with succession, Marcinko examines two to three years of financial statements, balance sheets, cash-flow statements, statements of earnings, and profit and loss statements, yet he said “the $50,000 question” remains: How does a doctor find someone suited to take over his or her life’s work? “We are pretty much dead-set against the practice broker, the third-party intermediary, and are highly in favor of the one-on-one mentor philosophy,” Marcinko explained.

“There is more than enough opportunity to befriend or mentor several medical students or interns or residents or fellows that you might feel akin to, and then develop that relationship over the years.” He said third-party brokers “are like real-estate agents, they want to make the sale”; thus, they aren’t as concerned with finding a match that will ensure a smooth transition.

The only problem with the mentoring strategy, Marcinko acknowledged, is that mentoring takes time, and that’s a commodity most physicians have too little of. Nonetheless, succession is too important not to invest the time necessary to ensure it goes off without a hitch.

Times are different today because the economy doesn’t allow physicians to gradually bow out of a practice. “My overhead doesn’t go down if I go part-time. SO, if I want to sell my practice for a premium price, I need to keep the numbers up,” he noted.

Assessment

Dr. Marcinko’s retirement investment advice – and it’s the advice he gives to anyone – is to invest 15-20 percent of your income in an Vanguard indexed mutual fund or diversified ETF for the next 30-50 years. “We all want to make it more complicated than it really is, don’t we?” he said.

QUESTION: What makes a physician moving toward retirement different from most others employees or professionals? Marcinko’s answer was simple: “They probably had a better shot in life to have a successful retirement, and if they don’t make it, shame on them. That’s the difference.”

More:

Conclusion

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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FINANCE: Financial Planning for Physicians and Advisors
INSURANCE: Risk Management and Insurance Strategies for Physicians and Advisors

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Of Financial Certifications and Designations

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The “Too Numerous to Count” Syndrome

[By Dr. David Edward Marcinko; MBA, CMP™]

Dr. MarcinkoThe following list of certifications enumerates only a partial exposure of the often nebulous field of “financial planning credentials” that presently exist in the market place. 

Good … and Not So

Some of these professional designations are awarded to individuals in the financial planning or financial “advisory” space after [some] diligent study and [often not so] arduous testing; others not so.

Disclaimer: I am a reformed Certified Financial Planner®, Series 7 [stock-broker], 63 and 65 license holder, and RIA representative who also held all applicable insurance and security licenses.

The individuals hold not only proper education [some only reguire a HS diploma or GED] as evidenced by the credential; the holders are often people of ethics [hopefully] and competence [usually]. But, not all credentials are the same. Some credentialing bodies have higher educational requirements that also require years of experience and a thorough background search. Others are awarded after only a few hours of study and, most all, remain non-fiduciary in nature.

Too Many To Count – Syndrome

In medicine, the abbreviation TNTC is well known. Sometime, I think this term is better applicable to the plethora of “credentials” in the financial services industry.

dhimc-book1

The Designation Line-up

A brief description for some of these financial designations [not degrees] follows:

  • AAMS – Accredited Asset Management Specialist
  • AEP – Accredited Estate Planner
  • AFC – Accredited Financial Counselor
  • AIF – Accredited Investment Fiduciary
  • AIFA – Accredited Investment Fiduciary Auditor
  • APP – Asset Protection Planner
  • BCA – Board Certified in Annuities
  • BCAA – Board Certified in Asset Allocation
  • BCE – Board Certified in Estate Planning
  • BCM – Board Certified in Mutual Funds
  • BCS – Board Certified in Securities
  • C3DWP – 3 Dimensional Wealth Practitioners
  • CAA – Certified Annuity Advisor
  • CAC – Certified Annuity Consultant
  • CAIA – Chartered Alternative Investment Analyst
  • CAM – Chartered Asset Manager
  • CAS – Chartered Annuity Specialist
  • CCPS – Certified College Planning Specialist
  • CDFA – Certified Divorce Financial Analyst
  • CEA – Certified Estate Advisor
  • CEBS – Certified Employee Benefit Specialist
  • CEP – Certified Estate Planner
  • CEPP – Chartered Estate Planning Practitioner
  • CFA – Chartered Financial Analyst
  • CFE – Certified Financial Educator
  • CFG – Certified Financial Gerontologist
  • CFP – Certified Financial Planner
  • CFPN – Christian Financial Professionals Network 
  • CFS – Certified Fund Specialist
  • CIC – Chartered Investment Counselor
  • CIMA – Certified Investment Analyst
  • CIMC – Certified Investment Management Consultant
  • CLTC – Certified in Long Term Care
  • CMFC – Chartered Mutual Fund Counselor
  • CMP – Certified Medical Planner™
  • CPC – Certified Pension Consultant
  • CPHQ – Certified Professional in Healthcare Quality
  • CPHQ – Certified Physician in Healthcare Quality
  • CPM – Chartered Portfolio Manager
  • CRA – Certified Retirement Administrator
  • CRC – Certified Retirement Counselor
  • CRFA – Certified Retirement Financial Advisor
  • CRP – Certified Risk Professional
  • CRPC – Chartered Retirement Planning Counselor
  • CRPS – Chartered Retirement Plan Specialist
  • CSA – Certified Senior Advisor
  • CSC – Certified Senior Consultant
  • CSFP – Certified Senior Financial Planner
  • CSS – Certified Senior Specialist
  • CTEP – Chartered Trust and Estate Planner
  • CTFA – Certified Trust and Financial Advisor
  • CWC – Certified Wealth Counselor
  • CWM – Chartered Wealth Manager
  • CWPP – Certified Wealth Preservation Planner
  • ECS –  Elder Care Specialist
  • FAD – financial Analyst Designate
  • FIC – Fraternal Insurance Counselor
  • FLMI – Fellow Life Management Institute
  • FRM – Financial Risk Manager
  • FSS – Financial Services Specialist
  • LIFA – Licensed Insurance Financial Analyst
  • MFP – Master Financial Professional
  • MSFS – Masters of Science Financial Service Degree
  • PFS – Personal Financial Specialist
  • PPC – Professional Plan Consultant
  • QFP – Qualified Financial Planner
  • REBC – Registered Employee Benefits Consultant
  • RFA – Registered Financial Associate
  • RFC – Registered Financial Consultant
  • RFG – Registered Financial Gerontologist
  • RFP – Registered Financial Planner
  • RFS – Registered Financial Specialist
  • RHU – Registered Health Underwriter
  • RPA – Registered Plans Associate
  • WMS – Wealth Management Specialist

This list is intentionally incomplete and it is not intended to be an endorsement of any credential by the Institute of Medical Business Advisors, Inc www.MedicalBusinessAdvisors.com

Alphabet Soup

Obviously, these “professional” designations spread across multiple industries. For example there is an alphabet of designations in the brokerage and securities field, another alphabet in the insurance industry and within the insurance industry, designations exist for those who meet face to face with prospective customers, another for those who provide client service and yet another in underwriting the various insurance products. Certainly when the designations are complied in a list such as that above, they present a dizzying array of apparent qualifications.

Assessment

While in general, education for the financial service [and medical] professional is good for everybody, there are certain things that you should do as proper due diligence to protect your family and your financial assets. What are they?

Disclaimer: I am also founder of the Certified Medical Planner™ online educational program in health economics for financial advisors and medical management consultants. www.CertifiedMedicalPlanner.org

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Link: http://feeds.feedburner.com/HealthcareFinancialsthePostForcxos

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

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MEDICAL RISK MANAGEMENT, Liability Insurance and Asset Protection Strategies

FOR PHYSICIANS AND THEIR FINANCIAL ADVISORS

SPONSOR: http://www.CertifiedMedicalPlanner.org

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REVIEWS:

“Physicians who don’t understand modern risk management, insurance, business, and asset protection principles are sitting ducks waiting to be taken advantage of by unscrupulous insurance agents and financial advisors; and even their own prospective employers or partners. This comprehensive volume from Dr. David Marcinko and his co-authors will go a long way toward educating physicians on these critical subjects that were never taught in medical school or residency training.”
Dr. James M. Dahle, MD, FACEP, Editor of The White Coat Investor, Salt Lake City, Utah, USA


“With time at a premium, and so much vital information packed into one well organized resource, this comprehensive textbook should be on the desk of everyone serving in the healthcare ecosystem. The time you spend reading this frank and compelling book will be richly rewarded.”
—Dr. J. Wesley Boyd, MD, PhD, MA, Harvard Medical School, Boston, Massachusetts, USA

ASSESSMENT: Your thoughts are appreciated.

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Determining Your [PHYSICIAN] Retirement Vision?

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Determining Your Retirement Vision

Dr David E Marcinko MBABy Dr. David Edward Marcinko MBA CMP®

http://www.CertifiedMedicalPlanner.org

There’s an aspect to retirement that many physicians do not plan for … the transition from work and practice to retirement. Your work has been an important part of your life.  That’s why the emotional adjustments of retirement may be some of the most difficult ones.

Examples:

For example, what would you like to do in retirement? Your retirement vision will be unique to you. You are retiring to something not from something that you envisioned. When you have more time, you would like to do more travelling, play golf or visit more often, family and friends. Would you relocate closer to your kids? Learn a new art or take a new class? Fund your grandchildren’s education? Do you have philanthropic goals? Perhaps you would like to help your church, school or favorite charity? If your net worth is above certain limits, it would be wise to take a serious look at these goals. With proper planning, there might be some tax benefits too. Then you have to figure how much each goal is going to cost you.

Lists

If have a list of retirement goals, you need to prioritize which goal is most important. You can rate them on a scale of 1 to 10; 10 being the most important. Then, you can differentiate between wants and needs. Needs are things that are absolutely necessary for you to retire; while wants are things that still allow retirement but would just be nice to have.

Recent studies indicate there are three phases in retirement, each with a different spending pattern [Richard Greenberg CFP®, Gardena CA, personal communication].

The three phases are:

  1. The Early Retirement Years. There is a pent-up demand to take advantage of all the free time retirement affords. You can travel to exotic places, buy an RV and explore forty-nine states, go on month-long sailing vacations. It’s possible during these years that after-tax expenses increase during these initial years, especially if the mortgage hasn’t been paid off yet. Usually the early years last about ten years until most retirees are in their 70’s.
  2. Middle Years. People decide to slow down on the exploration. This is when people start simplifying their life. They may sell their house and downsize to a condo or townhouse. They may relocate to an area they discovered during their travels, or to an area close to family and friends, to an area with a warm climate or to an area with low or no state taxes. People also do their most important estate planning during these years. They are concerned about leaving a legacy, taking care of their children and grandchildren and fulfilling charitable intent. This a time when people spend more time in the local area. They may start taking extension or college classes. They spend more time volunteering at various non-profits and helping out older and less healthy retirees. People often spend less during these years. This period starts when a retiree is in his or her mid to late 70’s and can last up to 20 years, usually to mid to late-80’s.
  3. Late Years. This is when you may need assistance in our daily activities. You may receive care at home, in a nursing home or an assisted care facility. Most of the care options are very expensive. It’s possible that these years might be more expensive than your pre-retirement expenses. This is especially true if both spouses need some sort of assisted care. This period usually starts when the retiree is their 80’s; however they can sometimes start in the middle to the late 70’s.

[A] Planning issues – early career

Most retirement lifestyle issues do not have to be addressed at this point. Keeping a healthy, balanced lifestyle will help to ensure a more productive retirement.  This is the time to focus on the financial aspects of retirement planning.

[B] Planning issues – mid career

If early retirement is a major objective, start thinking about activities that will fill up your time during retirement. Maintaining your health is more critical, since your health habits at this time will often dictate how healthy you will be in retirement. 

[C] Planning issues – late career

Three to five years before you retire, start making the transition from work to retirement.

  1. Try out different hobbies;
  2. Find activities that will give you a purpose in retirement;
  3. Establish friendships outside of the office or hospital;
  4. Discuss retirement plans with your spouse.
  5. If you plan to relocate to a new place, it is important to rent a place in that area and stay for few months and see if you like it. Making a drastic change like relocating and then finding you don’t like the new town or state might be very costly mistake. The key is to gradually make the transition. 

Conclusion

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SECURE Act 2.0 and Retirement Planning?

By Staff Reporters

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On March 29, the House of Representatives voted 414-5 in favor of the Securing a Strong Retirement Act of 2022. If passed by the Senate, and then signed into law by President Joe Biden, the act could represent a massive economic policy shift regarding retirement savings and investment.

The retirement savings legislation, also known as SECURE Act 2.0, expands on the original SECURE Act and includes provisions to boost the required minimum distribution (RMD) age from 72 to 75 over time, broaden automatic enrollment in retirement plans, and enhance 403(b) plans.

READ: https://waysandmeans.house.gov/media-center/press-releases/soon-ways-and-means-secure-20-heading-house-floor

***

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How the “6 percent rule” can help with a pension plan payout decision

A general guide

[By staff reporters]

As a general guide, according to financial advisor Wes Moss, if your monthly pension check equals 6 percent or more of the lump-sum offer, then you may want to go for the perpetual monthly payment. If the number is below 6 percent, then you could do as well (or better) by taking the lump sum and investing it, and then paying yourself each year (like a personal pension that you control).

Here’s how the math works:

Take your monthly pension offer and multiply it by 12, then divide that number by the lump-sum offer.

Example 1: $1,000 a month for life beginning at age 65 or $160,000 lump sum today?

$1,000 x 12 = $12,000 divided by $160,000 equals 7.5 percent.

Here, you would have to make approximately 7.5 percent per year on the $160,000 to earn the same $12,000 a year. Earning 7.5 percent a year consistently and over many years is a tall order. Taking the monthly amount in this case (7.5 percent is greater than 6 percent) may likely be a better deal over the long haul.

Example 2: $708 a month for life or a $170,000 lump sum today?

$708 x 12 = $8,496 divided by $170,000 equals 5 percent.

In this scenario, the monthly pension amount is offering you a return for life of about 5 percent. Remember, for the first 20 years even earning zero percent, you could do the same before you run out of money. If you made even a modest return (say, 2 percent per year), you would be far ahead of what the monthly pension would pay you. In this case, 5 percent is less than the benchmark of 6 percent, so you might be better off taking the lump sum of $170,000.

When You Should Take the Lump Sum Over the Pension

Assessment

Your thoughts are appreciated.

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Can Doctors Afford to Retire Early – TODAY?

By Staff Reporters

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You’ve got a sense of your ideal retirement age. And you’ve probably made certain plans based on that timeline. But what if you’re forced to retire sooner than you expect? Aging baby-boomers, corporate medicine, the medical practice great resignation and/or the pandemic, etc?

RESIGNATION: https://medicalexecutivepost.com/2021/12/12/healthcare-industry-hit-with-the-great-resignation-retirement/

Early retirement is nothing new, but it’s clear how much the COVID-19 pandemic has affected an aging workforce. Whether due to downsizing, objections to vaccine mandates, concerns about exposure risks, other health issues, or the desire for more leisure time, the retired general population grew by 3.5 million over the past two years—compared to an annual average of 1 million between 2008 and 2019—according to the Pew Research Center.1 At the same time, a survey conducted by the National Institute on Retirement Security revealed that more than half of Americans are concerned that the COVID-19 pandemic has impacted their ability to achieve a secure retirement.2

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There’s no need to panic, but those numbers make one thing clear, says Rob Williams, managing director of financial planning, retirement income, and wealth management for the Schwab Center for Financial Research. Flexible and personalized financial planning that addresses how you’d cope if you had to retire early can help you make the best use of all your resources. 

So – Here are six steps to follow. We’ll use as an example a person who’s seeing if they could retire five years early, but the steps remain the same regardless of your individual time frame.

Step 1: Think strategically about pension and Social Security benefits

For most retirees, Social Security and (to a lesser degree) pensions are the two primary sources of regular income in retirement. You usually can collect these payments early—at age 62 for Social Security and sometimes as early as age 55 with a pension. However, taking benefits early will mean that you get smaller monthly benefits for the rest of your life. That can matter to your bottom line, even if you expect Social Security to be merely the icing on your retirement cake.

On the Social Security website, you can find a projection of what your benefits would be if you were pushed to claim them several years early. But if you’re part of a two-income couple, you may want to make an appointment at a Social Security office or with a financial professional to weigh the potential options.

For example, when you die, your spouse is eligible to receive your monthly benefit if it’s higher than his or her own. But if you claim your benefits early, thus receiving a reduced amount, you’re likewise limiting your spouse’s potential survivor benefit.

If you have a pension, your employer’s pension administrator can help estimate your monthly pension payments at various ages. Once you have these estimates, you’ll have a good idea of how much monthly income you can count on at any given point in time.

***

Step 2: Pressure-test your 401(k)

In addition to weighing different strategies to maximize your Social Security and/or pension, evaluate how much income you could potentially derive from your personal retirement savings—and there’s a silver lining here if you’re forced to retire early. 

Rule of 55

Let’s say you leave your job at any time during or after the calendar year you turn 55 (or age 50 if you’re a public safety employee with a government defined-benefit plan). Under a little-known separation-of-service provision, often referred to as the “rule of 55,” you may be able take distributions (though some plans may allow only one lump-sum withdrawal) from your 401(k), 403(b), or other qualified retirement plan free of the usual 10% early-withdrawal penalties. However, be aware that you’ll still owe ordinary income taxes on the amount distributed. 

This exception applies only to the plan (including any consolidated accounts) that you were contributing to when you separated from service. It does not extend to IRAs. 

4% rule

There’s also a simple rule of thumb suggesting that if you spend 4% or less of your savings in your first year of retirement and then adjust for inflation each year following, your savings are likely to last for at least 30 years—given that you make no other changes to your withdrawals, such as a lump sum withdrawal for a one-time expense or a slight reduction in withdrawals during a down market. 

To see how much monthly income you could count on if you retired as expected in five years, multiply your current savings by 4% and divide by 12. For example, $1 million x .04 = $40,000. Divide that by 12 to get $3,333 per month in year one of retirement. (Again, you could increase that amount with inflation each year thereafter.) Then do the same calculation based on your current savings to see how much you’d have to live on if you retired today. Keep in mind that your money will have to last five years longer in this instance.

Knowing the monthly amount your current savings can generate will give you a clearer sense of whether you’ll have a shortfall—and how large or small it might be. Use our retirement savings calculator to test different saving amounts and time frames.

Step 3: Don’t forget about health insurance, doctor!

Nobody wants to spend down a big chunk of their retirement savings on unanticipated healthcare costs in the years between early retirement and Medicare eligibility at age 65. If you lose your employer-sponsored health insurance, you’ll want to find some coverage until you can apply for Medicare. 

Your options may include continuing employer-sponsored coverage through COBRA, insurance enrollment through the Health Insurance Marketplace at HealthCare.gov, or joining your spouse’s health insurance plan. You may also find discounted coverage through organizations you belong to—for example, the AARP. 

Step 4: Create a post-retirement budget

To make sure your retirement savings will cover your expenses, add up the monthly income you could get from pensions, Social Security, and your savings. Then, compare the total to your anticipated monthly expenses (including income taxes) if you were to retire five years early and are eligible, and choose to file, for Social Security and pension benefits earlier. 

Take into account various life events and expenditures you may encounter. You may not pay off your mortgage by the date you’d planned. Your spouse might still be working (which can add income but also prolong certain expenses). Or your children might not be out of college yet. 

You’re probably fine if you anticipate that your monthly expenses will be lower than your income. But if you think your expenses would be higher than your early-retirement income, some suggest that you take one or more of these measures:

  • Retire later; practice longer.
  • Save more now to fill some of the potential gap.
  • Trim your budget so there’s less of a gap down the road.
  • Consider options for medical consulting or part-time work—and begin to explore some of those opportunities now.

To the last point, finding a physician job later in life can be challenging, but certain employment agencies specialize in this area. If you can find work you like that covers a portion of your expenses, you’ll have the option of delaying Social Security and your company pension to get higher payments later—and you can avoid dipping into your retirement savings prematurely. 

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Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Step 5: Protect your portfolio

When you retire early, you have to walk a fine line with your portfolio’s asset allocation—investing aggressively enough that your money has the potential to grow over a long retirement, but also conservatively enough to minimize the chance of big losses, particularly at the outset.

“Risk management is especially important during the first few years of retirement or if you retire early,” Rob notes, because it can be difficult to bounce back from a loss when you’re drawing down income from your portfolio and reducing the overall number of shares you own.  

To strike a balance between growth and security, start by making sure you have enough money stashed in relatively liquid, relatively stable investments—such as money market accounts, CDs, or high-quality short-term bonds—to cover at least a year or two of living expenses. Divide the rest of your portfolio among stocks, bonds, and other fixed-income investments. And don’t hesitate to seek professional help to arrive at the right mix. 

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Many people are unaccustomed to thinking about their expenses because they simply spend what they make when working, Rob says. But one of the most valuable decisions you can make about your life in retirement is to reevaluate where your money is going now.

This serves two aims. First, it’s a reality check on the spending plan you’ve envisioned for retirement, which may be idealized (e.g., “I’ll do all the home maintenance and repairs!”). Second, it enables you to adjust your spending habits ahead of schedule—whichever schedule you end up following. This gives you more control and potentially more income. 

Step 6: Reevaluate your current spending

For example, if you’re not averse to downsizing, moving to a less expensive home could reduce your monthly mortgage, property tax, and insurance payments while freeing up equity that could also be invested to provide additional monthly income.

“When you are saving for retirement, time is on your side”. You lose that advantage when you’re forced to retire early, but having a backup plan that anticipates the possibility of an early retirement can make the unknowns you face a lot less daunting.

CITE: https://www.r2library.com/Resource/Title/082610254

References:

1Richard Fry, “Amid the Pandemic, A Rising Share Of Older U.S. Adults Are Now Retired”, Pew Research Center, 11/04/2021, https://www.pewresearch.org/fact-tank/2021/11/04/amid-the-pandemic-a-rising-share-of-older-u-s-adults-are-now-retired/.

2Tyler Bond, Don Doonan and Kelly Kenneally, “Retirement Insecurity 2021: Americans’ Views of Retirement”, Nirsonline.Org, 02/2021, https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf.

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Term Life Insurance Can Protect [Physician] Retirement Plan Contributions

Term Life Insurance Can Protect Retirement Plan Contributions

By Rick Kahler CFP®

Some of the typical reasons for life insurance are to replace a breadwinner’s salary, pay off large debts, and pay estate taxes. Another reason to carry life insurance—if it’s the right kind—can be to fund a retirement plan.

Illustration

To illustrate, let’s imagine a couple, both 55, with two grown children, two good jobs, and no debts. They began funding their retirement only recently. Leigh’s entire salary of $124,000 a year goes into company retirement plan options: $64,000 into the 401(k) and profit sharing plan and $60,000 into the Cash Balance plan. The couple lives on Mischa’s salary of $60,000 a year.

Their financial planner has calculated that in 10 years they will have a good chance of having $1,500,000 saved in retirement plans. This amount will allow both of them to retire, continue to live on $60,000 a year for the rest of their lives, and have enough to fund long-term care for one of them or leave a nice inheritance to their kids.

The death, disability, or loss of a job of either of them is not a threat to their current lifestyle. However, it is a threat to their retirement plan. And the loss of Leigh’s job is the biggest threat. While finding a new job that would allow retirement plan contributions to resume is possible, it is not guaranteed.

Nothing can be done to insure against the loss of a job, but there are ways insurance could help protect this couple. They could purchase disability insurance to replace 60% of the income of either partner. This would allow them to still make a reduced contribution to their retirement plan.

Premature Death

But what happens if either of them should die prematurely, especially Leigh? It’s doubtful Mischa could cut expenses enough to put anything significant toward retirement, instead having to work as long as possible and then rely heavily on Social Security.

This a where a 10-year term life insurance policy on Leigh would make a significant difference. If they purchased a $1,000,000 term policy on Leigh now, the premium (for a nonsmoker in good health) would be around $1200 annually. Should Leigh die this year, if Mischa invested the insurance payment it would have a high probability of growing to $1,500,000 in ten years. This would allow Mischa to retire comfortably.

However, the older Leigh and Mischa get, the less they need the insurance. If Leigh died in the fifth year of the policy, the five years of savings plus the insurance proceeds would accrue more than $2,000,000 over the following five years.

One cost-saving strategy would be to buy two $500,000 10-year term policies and drop one after five years. This would still provide for a total of around $1,500,000 in retirement funds for Mischa by age 65 if Leigh should die before that time.

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If you proposed this plan to a life insurance agent, they might suggest putting Leigh’s salary into a cash value policy instead of buying term.

Let’s look at that

Contributing $124,000 into the retirement plan saves $24,000 a year in income taxes, so only $100,000 a year would be available to buy insurance. This amount would cover a policy with a $1.9 million death benefit and a cash value guaranteed to grow to $1,036,328 in 10 years. Given the extra tax payments, plus premium costs of $1 million over 10 years, that’s not a good investment for our couple. The commission of $72,500 makes it a great investment for the salesperson, though.

Assessment

Besides, in this circumstance, life insurance is not meant as an investment. It is an affordable way to replace the income that covers Leigh’s retirement contribution. 

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements.

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PODCAST: How Modernized Self-Directed IRAs Help Democratize [Physician] Retirement

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In this podcast, host Dara Albright and guest, Eric Satz, Founder and CEO of Alto IRA, discuss how modern Self-Directed IRAs (SDIRAs) are democratizing retirement planning by providing all Americans with the ability to add non-correlated alternative asset classes to tax-advantaged accounts.

The single greatest – and free – investment tool is also disclosed.

***

What are the Advantages of Rolling the Money of My Retirement Plan into an  IRA? - Protection Point Advisors, Inc.

Discussion highlights include:

  • How SDIRAs offer wealth building opportunities for “not-yet accredited investors”;
  • How SDIRAs have evolved to accommodate micro-sized alternative investments; 
  • Why alternative assets belong in retirement vehicles;
  • Three reasons most retirement savers are underweighted in non-correlated assets;
  • Trading cryptocurrencies without tax consequences; 
  • Why RIAs are looking to ALTO for clients’ crypto allocation;
  • How to open a cryptoIRA account.

PODCAST: https://dwealthmuse.podbean.com/e/episode-12-how-modernized-selfdirected-iras-help-democratize-retirement-1623424270/

Your comments are appreciated.

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PODCASTS: The GREAT ECONOMIC MODERATION / RESIGNATION in Medicine?

A HISTORICAL REVIEW WITH UPDATE

Dr. David Edward Marcinko | The Leading Business Education Network for  Doctors, Financial Advisors and Health Industry Consultants

By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

What was the Great Economic Moderation?

The Great Moderation is the name given to the period of decreased macroeconomic volatility experienced in the United States starting in the 1980s.

CITE: https://www.r2library.com/Resource/Title/0826102549

During this period, the standard deviation of quarterly real gross domestic product (GDP) declined by half and the standard deviation of inflation declined by two-thirds, according to figures reported by former U.S. Federal Reserve Chair Ben Bernanke. The Great Moderation can be summed up as a multi-decade period of low inflation and positive economic growth.

But, what about health economics, writ large? And, the actual practice of medicine by physicians in the trenches. Consider this historical review.

GOLDEN AGE OF MEDICINE

The ‘golden age of medicine’ – the first half of the 20th century, reaching its zenith with Jonas Salk’s 1955 polio vaccine – was a time of profound advances in surgical techniques, immunization, drug discovery, and the control of infectious disease; however, when the burden of disease shifted to lifestyle-driven, chronic, non-communicable diseases, the golden era slipped away. Although modifiable lifestyle practices now account for some 80% of premature mortality, medicine remains loathe to embrace lifestyle interventions as medicine Here, we argue that a 21st century golden age of medicine can be realized; the path to this era requires a transformation of medical school recruitment and training in ways that prioritize a broad view of lifestyle medicine. Moving beyond the basic principles of modifiable lifestyle practices as therapeutic interventions, each person/community should be viewed as a biological manifestation of accumulated experiences (and choices) made within the dynamic social, political, economic and cultural ecosystems that comprise their total life history. This requires an understanding that powerful forces operate within these ecosystems; marketing and neoliberal forces push an exclusive ‘personal responsibility’ view of health – blaming the individual, and deflecting from the large-scale influences that maintain health inequalities and threaten planetary health. The latter term denotes the interconnections between the sustainable vitality of person and place at all scales. We emphasize that barriers to planetary health and the clinical application of lifestyle medicine – including authoritarianism and social dominance orientation – are maintaining an unhealthy status quo.

NOTE: https://pubmed.ncbi.nlm.nih.gov/31828026/

GOLDEN AGE OF MEDICAL PRACTICE

To listen to all those desperate to reform health care, you get the impression that physicians are pretty horrible people. We are all sexist, greedy, money grubbing tyrants who will perform unnecessary tests and procedures just to make money. We don’t care about quality or cost. We are killing off 250,000 patients every year with our ignored “errors.”

We purposely keep our patients in pain, or we addict them to narcotics just to shut them up. We are constantly told by lawyers that lawsuits are necessary to protect patients from doctors. We provide unsafe drugs just because the drug reps give us free pens and coffee cups. The government must step in to clean up the mess.

PODCAST: https://www.kevinmd.com/blog/2017/08/9-reasons-golden-age-medicine-golden.html

GOLDEN AGE OF PATIENT TRUST

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THE GREAT PHYSICIAN RETIREMENT AND RESIGNATION: https://medicalexecutivepost.com/2021/11/09/healthcare-industry-hit-with-the-great-resignation-retirement/

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RETIREMENT PLANNING: https://www.routledge.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

***

Stress Testing your Investment Portfolio

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What is Your Risk Number?

DG

[By David Gratke]

Are your current investments aligned with YOUR investment goals and expectations in 2022?

As we all know, the global financial markets have responded tremendously to the past seven years of Global Central Bank monetary polices. i.e. asset prices, stocks, bonds and real estate have all gone up in price as a result. But now, we have the pandemic and Ukraine war to consider.

So, when have you last ‘stress-tested’ your portfolio to see how durable it may through various market cycles? And, how do you determine if your current investment holdings are right for you? Maybe they are too conservative, or just the opposite, still too aggressive?  Maybe they are right where they need to be, but how do you know, how do you measure that?

  • Capture you Risk Tolerance
  • See if your portfolio fits you.
  • OK, How do I Start?

By simply answering a few questions, and spending 10 minutes of your time, based upon the size of your investment portfolio, you will quickly determine your own tolerance for risk.

Comparing your Risk Number to your Portfolio

Now that you have calculated your Risk Number, how does that number compare to your actual portfolio holdings? Is the portfolio you have today, the one you started with some time ago regarding risk and return? Is it still in alignment with your original expectations?

Does your portfolio have?

  • Too much risk?
  • Is it too conservative?
  • Or, is it just right
  • What if the market drops significantly? Instead, what if the market goes up significantly? See how your current portfolio will fair in any one of these market conditions:
  • Let’s put your portfolio onto the treadmill; just like the doctor’s office.
  • How do you know, how do you measure?

Let’s Stress Test your Portfolio

  1. Bull Market (Prices generally rise)
  2. Bear Market (Prices generally fall)
  3. Financial Crisis
  4. Rising Interest Rates

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ScreenShot2015-06-01at11_34_02AM_113439

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  • Are the results in alignment with your expectations?
  • Any ‘hot spots’ you need to know about?
  • Are there any individual holdings that will cause you loss of sleep over?
  • Maybe investments don’t generate enough income?
  • Maybe investments fluctuate too much in price?
  • Now you can have a look and see if there are any ‘hot spots’ where you may need to re-balance a portion of your holdings based upon these findings.

***

2

Yes! That feels like me

***

Congratulations. Once you have determined your Risk Number, and perhaps re-aligned your current portfolio to your Risk Number, then yes, you DO have the portfolio that is right for you, one that ‘feels like you’.

ABOUT

David Gratke is chief executive officer of Gratke Wealth LLC in Beaverton, Ore. A Registered Investment Advisory Firm.

***

Conclusion

Your thoughts and comments on this ME-P are appreciated. How does the current market tumult affect this ME-P or your own investing strategy? Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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“Physicians who don’t understand modern risk management, insurance, business and asset protection principles are sitting ducks waiting to be taken advantage of by unscrupulous insurance agents and financial advisors; and even their own prospective employers or partners. This comprehensive volume from Dr. David Marcinko, and his co-authors, will go a long way toward educating physicians on these critical subjects that were never taught in medical school or residency training.”

Dr. James M. Dahle MD FACEP [Editor of The White Coat Investor, Salt Lake City, Utah]

***

USA “With time at a premium, and so much vital information packed into one well organized resource, this comprehensive textbook should be on the desk of everyone serving in the healthcare ecosystem. The time you spend reading this frank and compelling book will be richly rewarded.”

Dr. J. Wesley Boyd MD PhD MA [Harvard Medical School, Boston, Massachusetts, USA]

PODCAST: 50% of Medical Treatments Have Unknown Effectiveness

By Eric Bricker MD

***

***

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Obtain an ME-P Second Opinion Right Here!

 2nd Opinions

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  • Objective, affordable, medically focused and personalized
  • Rendered by a prescreened financial consultant or medical management advisor
  • Offered on a pay-as-you-go basis, by phone or secure e-mail transmission.

2nd Opinions

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Typical Topics 

  • Financial Planning
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    * Financial Education/Coaching (corporate, groups)

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[PHYSICIAN FOCUSED FINANCIAL PLANNING AND RISK MANAGEMENT COMPANION TEXTBOOK SET]

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Dr. Dave Marcinko at YOUR Service in 2022

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By Ann Miller RN MHA

Professor and physician executive David Edward Marcinko MBBS DPM MBA MEd BSc CMP® is originally from Loyola University MD, Temple University in Philadelphia and the Milton S. Hershey Medical Center in PA; Oglethorpe University, and Atlanta Hospital & Medical Center in GA; and the Aachen City University Hospital, Koln-Germany. He is one of the most innovative global thought leaders in health care business and entrepreneurship today.

Dr. Marcinko is a multi-degreed educator, board certified physician, surgical fellow, hospital medical staff President, Chief Education Officer and philanthropist with more than 400 published papers; 5,150 op-ed pieces and over 125+ international presentations to his credit; including the top 10 biggest pharmaceutical companies and financial services firms in the nation. He is also a best-selling Amazon author with 30 published text books in four languages [National Institute of Health, Library of Congress and Library of Medicine].

Dr. Marcinko is past Editor-in-Chief of the prestigious “Journal of Health Care Finance”, and a former Certified Financial Planner®, who was named “Health Economist of the Year” in 2001. He is a Federal and State court approved expert witness featured in hundreds of peer reviewed medical, business, management and trade publications [AMA, ADA, APMA, AAOS, Physicians Practice, Investment Advisor, Physician’s Money Digest and MD News].

As a licensed insurance agent, RIA and SEC registered endowment fund manager, Dr. Marcinko is Founding Dean of the fiduciary focused CERTIFIED MEDICAL PLANNER® chartered designation education program; as well as Chief Editor of the HEALTH DICTIONARY SERIES® Wiki Project. His professional memberships include: ASHE, AHIMA, ACHE, ACME, ACPE, MGMA, FMMA and HIMSS.

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PENSION PLANS: Defined Benefit V. Defined Contribution Types

KNOW THE DIFFERENCE

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Defined Benefit Pension Plan

A defined benefit (DB) pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum or combination thereof on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns. Traditionally, many governmental and public entities, as well as a large number of corporations, provide defined benefit plans, sometimes as a means of compensating workers in lieu of increased pay.

Defined Contribution Pension Plan

A defined contribution (DC) plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employee contributions and, if applicable, employer contributions) plus any investment earnings on the money in the account. In defined contribution plans, future benefits fluctuate on the basis of investment earnings. The most common type of defined contribution plan is a savings and thrift plan. Under this type of plan, the employee contributes a predetermined portion of his or her earnings (usually pretax) to an individual account, all or part of which is matched by the employer.

CITE: Wilipedia

CITE: https://www.r2library.com/Resource/Title/0826102549

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Are Target Date Mutual Funds a Good Choice?

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An Easy Answer to Retirement Planning -or- MisStep?

By David Wallace [Search and social media marketer from Anthem, Arizona]

Investing in a target date mutual fund seems like the easy answer to retirement planning.

But, how can a single fund be appropriate for thousands of investors, doctors and medical professionals?

Assessment

Check out the above infographic to see the limitations of target date funds.

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Healthcare Industry Hit with the Great Resignation & Retirement

Healthcare Industry Hit with the Great Resignation & Retirement

BY HEALTH CAPITAL CONSULTANTS, LLC

The COVID-19 pandemic has served as a catalyst for two current healthcare workforce trends: the Great Retirement and the Great Resignation.

CITE: https://www.r2library.com/Resource/Title/0826102549

While the Great Resignation among physicians and other clinicians has been well reported, a potential onslaught of retirements by senior executives may further impact hospitals and health systems at an already precarious time.

Should you quit, or wait to be fired?

This Health Capital Topics article will discuss some of the key challenges and issues surrounding healthcare’s Great Retirement and Great Resignation. (Read more…) 

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WHAT IS “MEDICAL SENTINEL” CASE SURVEILLANCE IN PUBLIC HEALTH?

WHAT IS “MEDICAL SENTINEL” CASE SURVEILLANCE IN PUBLIC HEALTH?
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By Dr. David E. Marcinko MBA
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SENTINEL SURVEILLANCE is a medical case observation system in which a designated group of reporting sources, hospitals and agencies agrees to report all cases of one or more notify-able conditions; such as the Corona Virus.
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I first became interested in this concept during the HIV/AIDS epidemic of the early 1980s. In fact, it prompted me to later become a Certified Physician in Healthcare Quality [CPHQ].
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Now recently, Deborah Leah Birx MD coordinator for the White House Corona Virus Task Force mentioned the term on the daily presidential briefings.
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Your comments are appreciated.
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INHERITED Retirement Accounts and Uncle Sam

IRS Tax Implications

By Staff Reporters

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If you inherited a tax-deferred retirement plan, such as a traditional IRA, you’ll have to pay taxes on the money. But you can make the tax hit less onerous.

Spouses can roll the money into their own IRAs and postpone distributions—and taxes—until they’re 70½. All other beneficiaries who want to continue to benefit from tax-deferred growth must roll the money into a separate account known as an inherited IRA. Make sure the IRA is rolled directly into your inherited IRA. If you take a check, you won’t be allowed to deposit the money. Rather, the IRS will treat it as a distribution and you’ll owe taxes on the entire amount.

Once you’ve rolled the money into an inherited IRA, you must take required minimum distributions every year—and pay taxes on the money—based on your age and life expectancy. Deadlines are critical: You must take your first RMD by December 31st. of the year following the death of your parent (or whoever left you the account). Otherwise, you’ll be required to deplete the entire account within five years after the year following your parent’s death.

The December 31st. deadline is also important if you are one of several beneficiaries of an inherited IRA. If you fail to split the IRA among the beneficiaries by that date, your RMDs will be based on the life expectancy of the oldest beneficiary, which may force you to take larger distributions than if the RMDs were based on your age and life expectancy.

You can take out more than the RMD, but setting up an inherited IRA gives you more control over your tax liabilities. You can, for example, take the minimum amount required while you’re working, then increase withdrawals when you’re retired and in a lower tax bracket.

CITE: https://www.r2library.com/Resource/Title/0826102549

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Have you Inherited an IRA? It's time to compare your options

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Did you inherit a Roth IRA? And so, as long as the original owner funded the Roth at least five years before he or she died, you don’t have to pay taxes on the money. You can’t, however, let it grow tax-free forever. If you don’t need the money, you can transfer it to an inherited Roth IRA and take RMDs under the same rules governing a traditional inherited IRA. But with a Roth, your RMDs won’t be taxed.

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SOME TAX BENEFITS: Senior Healthcare Professionals

By Staff Reporters

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See the source image

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Tax planning can be quite a tedious process, but there are benefits for all seniors to make it less taxing. And senor medical professionals should take particular note:

  • Free Advice: IRS-certified volunteers will help older taxpayers with tax return preparation and electronic filing between January 1st and April 15th each year.
  • No Withdrawal Penalties: Anyone aged 59 years or over can withdraw money from an IRA, without incurring the common 10% tax.
  • Catch-Up Contributions: Healthcare Workers aged 50 or older can defer income tax on an extra $6,500 or a total of $26,000 if contributed to a 401(k) plan, resulting in a tax savings of $6,240 for an older worker in the 24% tax bracket.
  • Additional IRA Contribution: Workers age 50 and older can contribute an additional $1,000 to an IRA, or a total of $7,000 in 2020.
  • CITE: https://www.r2library.com/Resource/Title/082610254

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PHYSICIANS BEWARE: Traditional Financial Planning “Rules of Thumb”

DOCTORS AND MEDICAL PROFESSIONALS BEWARE?

We ARE Different

By Dr. David E. Marcinko MBA CMP®

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  • While financial planning rules of thumbs are useful to people as general guidelines, they may be too oversimplified in many situations, leading to underestimating or overestimating an individual’s needs. This may be especially true for physicians and many medical professionals. Rules of thumb do not account for specific circumstances or factors occurring at a particular time, or that could change over time, which should be considered for making sound financial decisions.
  • Great Health Industry Resignation: https://medicalexecutivepost.com/2021/12/12/healthcare-industry-hit-with-the-great-resignation-retirement/

For example, in a tight job market, an emergency fund amounting to six months of household expenses does not consider the possibility of extended unemployment. I’ve always suggested 2-3 years for doctors. Venture capitalist lay-offs of physicians during the pandemic confirm this often criticized benchmark opinion of mine.

As another example, buying life insurance based on a multiple of income does not account for the specific needs of the surviving family, which include a mortgage, the need for college funding and an extended survivor income for a non-working spouse. Again a huge home mortgage, or several children or dependents, may be the financial bane of physician colleagues and life insurance.

CITE: https://www.r2library.com/Resource/Title/082610254

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EXAMPLES: Old/New Rules

  • A home purchase should cost less than an amount equal to two and a half years of your annual income. I think physicians in practice for 3-5 years might go up to 3.5X annual income; ceteras paribus.
  • Save at least 10-15% of your take-home income for retirement. Seek to save 20% or more.
  • Have at least five times your gross salary in life insurance death benefit. Consider 10X this amount in term insurance if young, and/or with several children or other special circumstances.
  • Pay off your highest-interest credit cards first. Agreed.
  • The stock market has a long-term average return of 10%. Agreed, but appreciated risk adjusted rates of return..
  • You should have an emergency fund equal to six months’ worth of household expenses. Doctors should seek 2-3 years.
  • Your age represents the percentage of bonds you should have in your portfolio. Risk tolerance and assets may be more vital.
  • Your age subtracted from 100 represents the percentage of stocks you should have in your portfolio. Risk tolerance and assets may still be more vital.
  • A balanced portfolio is 60% stocks, 40% bonds. With historic low interest rates, cash may be a more flexible alternative than bonds; also avoid most bond mutual funds as they usually never mature.

There are also rules of thumb for determining how much net worth you will need to retire comfortably at a normal retirement age. Here is the calculation that Investopedia uses to determine your net worth:

Compensation in the Physician Specialties: Mostly Stable - NEJM  CareerCenter Resources

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IRS Tax Reduction Issues for Self-Employed Physician Executives

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By Dr. David Edward Marcinko MBA CMP®

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INTRODUCTION

Whether you do contract work or have your own small business, tax deductions for the self-employed physician consultant and/or medical executive or nurse consultant, etc., can add up to substantial tax savings.

Welcome Tax Season: https://www.msn.com/en-us/money/taxes/tax-season-2022-irs-now-accepting-tax-returns-what-to-know-before-filing-taxes-about-your-refund/ar-AAT53rR?li=BBnb7Kz


With self-employment comes freedom, responsibility, and a lot of expense. While most self-employed people celebrate the first two, they cringe at the latter, especially at tax time. They might not be aware of some of the tax write-offs to which they are entitled.

When it comes time to file your returns, don’t hesitate to claim the benefits you get for being the boss. As a self-employed success story, you’ve earned them.

FORM 1099 NEC: Form 1099 NEC is one of several IRS tax forms used in the United States to prepare and file an information return to report various types of income other than wages, salaries, and tips. The term information return is used in contrast to the term tax return although the latter term is sometimes used colloquially to describe both kinds of returns.

READ: https://turbotax.intuit.com/tax-tips/self-employment-taxes/how-to-file-taxes-with-irs-form-1099-misc/L3UAsiVBq?tblci=GiC9aWPDzN9yXLpSuE8LDo3YRMDPuoFwO9ycCY6qixKJ8CC8ykEo94-H7prplp7cAQ

CITE: https://www.r2library.com/Resource/Title/082610254

“Many times an overlooked deduction is educational expenses. If one is taking courses or buying research material to be more effective in their work, this can be deductible.”

Individual Retirement Plans (IRAs)

One of the best tax write-offs for the self-employed physician consultant is a retirement plan. A person with no employees can set up an individual 401 (k). “You can contribute $19,500 in 2021 as a 401(k) deferral, plus 25 percent of net income.”

If you have employees, consider a SIMPLE (Savings Incentive Match Plan for Employees) IRA—an IRA-based plan that gives small employers a simplified method to make contributions to their employees’ retirement. As of 2021, an employee may defer up to $13,500 and employees over 50 may contribute an additional $3,000.

“A third retirement plan is Simplified Employee Pension IRA (SEP IRA).” The employer may contribute the lesser of 25 percent of income or $58,000 in 2021. If the employer has eligible employees, an equal percentage of their income must be contributed.

Recall that retirement plans are “absolutely the No. 1 tax deduction. The government is helping fund retirement.”

Business use of home or dwelling

Now, most self-employed taxpayers’ businesses start as home-based businesses. These people need to know portions of business costs are deductible and so “It is very important that you keep track of expenses relating to your housing costs.”

If your gross income from your business exceeds your total expenses, then you can deduct all of your expenses related to the business use of your home. If your gross income is less than your total expenses, your deduction will be limited to the difference between your gross income and the sum of all business expenses you would pay if the business was not in your home. Those expenses could include telephone lines, the Internet, and other costs to do business.

You must also have a home office that is truly used for work and the Internal Revenue Service may require you to document this.

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Deducting automobile expenses

If you travel for business, even short distances within your own city, you may deduct the dollar value of business miles traveled on your tax return. The taxpayer may file the actual expense s/he incurred, or use the standard mileage rate prescribed by the IRS, which is 56 cents as of 2021. The IRS allowable mileage rates should be checked every year as they can change.

“If you decide to use actual car expenses, be sure to include payments, depreciation, registration, insurance, garage rent, licenses, repairs and maintenance, and parking and toll fees.” AND, “If you decide to use the standard mileage rate, it would be in your best interest to keep a log—daily, weekly or monthly—of miles driven to distinguish personal use from business use.”

Depreciation of property and equipment

Some self-employed people may purchase property and equipment for a business. If they expect that property to last longer than one year, it should be depreciated on the tax return.

Claims regarding property, according to the IRS, must meet the following criteria: You must own the property and it must be used or held to generate income. The property should have an estimated useful life, meaning you should be able to guess how long you can generate income with it. It may not have a useful life of one year or less, and may not be purchased and disposed of in the same year.

Certain repairs on property used for business may also be deducted.

Educational expenses

Any educational expense is potentially tax-deductible.

“Many times an overlooked deduction is educational expenses. “If one is taking courses or buying research material to be more effective in their work, this can be deductible.”

Think about any books, web courses, local college courses, or other classes or materials that you have purchased to improve your job or business. It’s easy to forget a work-related webinar or business e-book that was purchased online, so remember to save e-receipts.

Also recall that subscriptions to trade or professional publications and donations to business organizations, both of which are frequently necessary for the continuation and growth of your business.

Other areas to explore

Other deductions that can be easily missed are advertising and promotional expenses, banking fees, and air, bus, or train fare. Restaurant meals and other entertainment costs may be written off as long as they are necessary business expenses.

And, consider health insurance premiums, which in most cases represent a credit rather than a tax deduction. “A credit goes directly against one’s taxes, rather than a reduction of income.”

Regardless of which expenses you discover that you may write off, the most important thing is to keep accurate records throughout the year. Save receipts, including e-mail receipts, and file or log them so you have easy access to them at tax time. Not only does keeping receipts, mileage logs, and other expense records make filing taxes easier, but it also facilitates a system that allows you to track changes from year to year.

***

Long-term tax-saving strategies

Don’t just look at last-minute write-offs when considering self-employment tax deductions. Think about laying down some long-term strategies for money savings from year to year—particularly if you are a high earner.

“Accountants typically tell you what you have to pay but they don’t always tell you strategies to reduce your payments.”

To reduce your gross taxable income, consider setting up a defined-benefit pension plan. This plan is based on your age and income: The older you are and the higher your earnings, the more you are allowed to contribute. An alternative plan is an age-weighted profit-sharing plan, which is similar and can benefit those who have several employees.

Another strategy for high-earning business owners who own their own building through a limited liability company or similar business structure is to pay themselves rent. This rent is used to pay down the mortgage, but it is also considered a business expense for tax purposes.

Self-employed professionals required to have liability insurance should consider setting up their own insurance company. A captive insurance company is one that insures the risks of the business—or businesses, in the case of a cooperative. Its premiums can be tax-deductible.

But, if money accumulates and claims are minimal, the money taken out is taxable under capital gains. This is not a retirement strategy, but that it can save you money by allowing you to “pay yourself” instead of an insurance company and still deduct the premiums.

Assessment

With any of these more complicated, long-term strategies, consult with a business attorney, CPA/EA or financial planner to ensure you have the best plan possible for your business.

***

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Medical FINANCIAL PLANNING “Holistic” STRATEGIES

BY AND FOR PHYSICIANS AND THEIR ADVISORS

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Personal Financial Planning for Physicians and Medical Colleagues

ME Inc = Going it Alone but with a Team

BY DR. DAVID EDWARD MARCINKO MBA CMP®

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The physician, nurse, or other medical professional should easily recognize that there are a vast array of opportunities, obstacles, and pitfalls when it comes to managing one’s finances.  Still, with some modicum of effort, the basic aspects of insurance, investments, taxes, accounting, portfolio management, retirement and estate planning, debt reduction, asset protection and practice management can be largely self-taught. Yet, it is realized that nuances and subtleties can make a well-intentioned financial plan fall short.  The devil truly is in the details.  Moreover, none of these areas can be addressed in isolation. It is common for a solution in one area to cause a new set of problems in another. 

Accordingly, most health care practitioners would be well served to hire [independent, hourly compensated and prn] financial help. Unlike some medical problems, financial issues may not cause any “pain” or other obvious symptoms.  Medical professionals tend to have far more complex financial situations than most lay people. Despite the complexities of the new world of health reform, far too many either do nothing; or give up all control totally, to an external advisor. This either/or mistake can be costly in many ways, and should be avoided. 

In reality, and at various time in their careers, the medical professional needs a team comprised of at least a financial analyst, lawyer, management consultant, risk manager [actuary, mathematician or insurance counselor] and accountant. At various points in time, each member of the team, or significant others, will properly assume a role of more or less importance, but the doctor must usually remain the “quarterback” or leader; in the absence of a truly informed other, or Certified Medical Planner™.

This is necessary because only the doctor has the personal self-mandate with skin in the game, to take a big picture view.  And, rightly or wrongly, investments dominate the information available regarding personal finance and the attention of most physicians.  One is much more likely to need or want to discuss the financial markets with their financial advisor than private letter rulings by the IRS, or with their estate planning attorney or tax accountant. While hiring for expertise is a good idea, there is sinister way advisors goad doctors into using all their retail services; all of the time. That artifice is – the value of time. 

True integrated physician focused and financial planning is at its core a service business, not a product or sales endeavor. And, increasingly money is more likely to be at the top of the list for providers as the healthcare environment is contracting.

So, eschewing the quarterback model of advice, and choosing to self-educate thru this book and elsewhere, may be one of the best efforts a smart physician can make.

ASSESSMENT: Your thoughts are appreciated.

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Physician Retirement Portfolio Real Estate?

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Inefficient and Illiquid … But?

By Rick Kahler MS CFP® http://www.KahlerFinancial.com

Rick Kahler MS CFPWhat’s the best way to hold real estate in a retirement portfolio? For many investors, the answer seems to be “not at all.” That’s not the right answer. This asset class, appropriately owned, can help support you well in retirement.

Not like Stocks

Unlike stocks, which trade on a highly efficient and liquid exchange, trading real estate is inefficient and illiquid. The ease of buying and selling stocks is one of the major reasons the asset class is over-represented in most portfolios.

Based on the fascination of the financial press with the stock market, it’s easy to get the impression that stocks comprise the largest financial asset class. According to Matthew Yglesias, author of The Rent Is Too Damn High, the total value of commercial real estate in the US as of December 2013 was $20 trillion. This equals the value of publicly traded stock. (The largest asset class is bonds with $37 trillion.)

While one could make a strong argument for owning equal amounts of real estate and stocks in most retirement portfolios, very few hold any real estate at all.

Direct Ownership

Probably the worst way to hold real estate is to own it directly. The only popular retirement plan that allows direct ownership of real estate is the self-directed IRA. Unfortunately, the government discourages holding real estate this way by taxing it unfavorably. As I’ve described in a previous column, it’s not a good idea.

RLPs

Registered Limited Partnerships [RLPs] were a popular way to own real estate in the 1980’s. While someone must have made money on these investments, I don’t think it was the investors. I don’t know an investor who made a dime, but I do know some distributors and promoters who got very rich with them. The problem wasn’t the real estate but the lack of transparency inherent in a limited partnership. This allowed promoters and distributors to hide high fees and commissions that didn’t give the investors a chance of profiting.

REITs

Gradually, the real estate investment trust gained popularity as another investment vehicle for owning real estate. A publicly traded REIT is similar to an ETF (a form of a mutual fund) that trades on the major exchanges and invests directly in real estate. REITs receive beneficial tax breaks, must pass through 90% of their cash flow to investors, have a high degree of transparency, and are highly liquid. They also tend to specialize in certain types of real estate, so rather than hold REITs individually; I prefer to own a mutual fund that owns a diversified assortment.

The fees and commissions associated with REITs are very low, which helps make them a good choice for investment portfolios. It is also another reason they don’t often show up there, since most financial vehicles are sold, not bought. Mutual funds, annuities, and cash value insurance pay much higher commissions than exchange traded REITs.

Wall Street solved that problem by creating the non-traded REIT, which does not trade on a securities exchange and therefore is highly illiquid. The benefits touted by salespeople are the potential for higher dividends, plus lower volatility than publicly traded REITs. Here’s the downside: Their lower volatility is an illusion created by their high illiquidity. They also lack transparency, which gives cover to charging high fees and commissions. The non-traded REIT is scarily like its older cousin of the 1980’s, the registered limited partnership.

USA

Assessment

Including real estate in a retirement portfolio can be a good idea as long as the ownership is properly structured. A mutual fund that holds a broad diversification of publicly traded REITS is one way to help you build a strong foundation for retirement.

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Conclusion

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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners(TM)

RISK FACTORS COMMON TO PHYSICIANS

SOME COMMON RISK FACTORS FOR MEDICAL COLLEAGUES TO APPRECIATE

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

AN INCOMPLETE LIST = T.N.T.C.

  • Do you and or any family members drive a vehicle?
  • Do you have employees?
  • Do you have a professional malpractice exposure?
  • Do you have legal responsibility to protect medical, EMRs or personal and patient financial data?
  • Are you married and do you have assets not protected by a prenuptial agreement?
  • Do you have a current tax obligation?
  • Do you own a business?
  • Are you a board member, officer, or director of a corporation, foundation, religious or educational organization?
  • Do you engage in activities like hunting, flying, boating, etc?
  • Do you have business or domestic partners whose actions create joint and several liabilities for you?
  • Do you have personal guarantees on real estate or for business loans; or family members?
  • Do you have tail liability for professional services performed in the past?
  • Have you made specific legal or financial representations that others have relied upon in a business context?
  • What kind and what dollar amount of insurance and legal planning have you implemented against these exposures?

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FOREWORD BY J. WESLEY BOYD MD PhD MA

[Professor of Psychiatry Harvard and Yale University]

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ASSESSMENT: Your thoughts and comments are appreciated.

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THANK YOU

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CAUTION: Avoid 401-K Retirement Plan RMD Forgetfulness?

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DON’T FORGET to make mandatory withdrawals in retirement!

By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Once you do retire, and put your physician or medical career behind you, it’s important to realize that, at some point, the IRS expects you to draw down your 401(k) balance. Starting at age 72, you need to take required minimum distributions (RMDs).

Your annual RMD amount depends on the balance of your 401(k) and a formula that determines your life expectancy.

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RMD Age Jumps to 72 in 2020 After SECURE Act - 401K Specialist

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QUERY: But – What happens if you don’t take your RMD for the year?

ANSWER: Well, you could end up paying a penalty. In fact, it’s a pretty hefty penalty of up to 50% of the amount you were supposed to withdraw. Paying that penalty can be pretty costly for someone living in retirement. As long as you’re vigilant and stay on top of the situation, though, you can avoid the penalty as well as these other costly 401(k) mistakes.

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YOUR COMMENTS ARE
APPRECIATED.

Thank You

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors : Best Practices from Leading Consultants and Certified Medical Planners™ book cover

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ORDER: https://www.routledge.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

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PODCAST: Healthcare Bio-Statistics

Data Science in Healthcare

BY ERIC BRICKER MD

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YOUR COMMENTS ARE APPRECIATED.

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BIO-STATISTICS COURSE: https://www.youtube.com/watch?v=1Q6_LRZwZrc-

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Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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PODCAST: On Older Doctors Selling Out to PRIVATE EQUITY

BY ERIC BRICKER MD

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YOUR COMMENTS ARE APPRECIATED.

Thank You.

CITE: https://www.r2library.com/Resource/Title/0826102549

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The “BACK-DOOR” & MEGA Roth IRA?

A conversion can get you into a Roth IRA—even if your income is too high

By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

If you’re a physician looking to get ahead on planning for retirement, you’re likely familiar with individual retirement accounts, or IRAs. An IRA is a tax-advantaged vehicle that helps you grow your retirement savings. Roth IRAs are particularly attractive, because you don’t pay taxes on withdrawals in retirement.

CITE: https://www.r2library.com/Resource/Title/0826102549

There’s one problem: you can’t contribute to a Roth IRA directly if you make above a certain income. A backdoor IRA, though, can solve your problem by allowing you to convert a traditional IRA into a Roth.

Here’s how it works:

First, place your contribution in a traditional IRA—which has no income limits.

Then, move the money into a Roth IRA using a Roth conversion.

But make sure you understand the tax consequences before using this strategy.

Review Roth IRA income limits

See the source image

How a MEGA Backdoor Roth Works

The mega backdoor Roth allows you to put up to $38,500 in a Roth IRA or Roth 401(k) in 2021, on top of the regular contribution limits for those accounts. If you have a Roth 401(k) at work (and the plan allows for the mega option as described below), generally you can choose whether the final destination of your mega contributions is the Roth 401(k) or a Roth IRA. If your employer offers only a traditional 401(k), then your mega contributions would end up in a Roth IRA.

Here’s a quick summary of what you need to have in place for the ideal mega backdoor Roth strategy:

  • A 401(k) plan that allows “after-tax contributions.” After-tax contributions are a separate bucket of money from your traditional and Roth 401(k) contributions. About 43% of 401(k) plans allow after-tax contributions, according to a 2017 survey of large and midsize employers by consulting firm Willis Towers Watson.
  • Your employer offers either in-service distributions to a Roth IRA — that is, you can take money out of the 401(k) plan while you’re still working at the company — or lets you move money from the after-tax portion of your plan into the Roth 401(k) part of the plan. If you’re not sure, ask your human resources department or plan administrator.
  • You’ve got money left over to save, even after maxing out your regular 401(k) and Roth IRA contributions.

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YOUR COMMENTS ARE APPRECIATED.

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Thank You

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What is the IRS RULE of 55?

ON Retirement PLANS AND Planning

By Dr. David E. Marcinko MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

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Taking a distribution from a tax qualified retirement plan, such as a 401(k), prior to age 59 1/2 is generally subject to a 10 percent early withdrawal tax penalty.

However, the IRS rule of 55 may allow you to receive a distribution after attaining age 55 (and before age 59 1/2 ) without triggering the early penalty if your plan provides for such distributions.

What is the rule of 55? https://www.experian.com/blogs/ask-experian/what-is-the-rule-of-55/

The distribution would still be subject to an income tax withholding rate of 20 percent, however. (If it turns out that 20 percent is more than you owe based on your total taxable income, you will get a refund after filing your yearly tax return.)

CITE: https://www.r2library.com/Resource/Title/0826102549

It’s important to note that the rule of 55 does not apply to traditional or Roth IRAs.

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what is the IRS rule of 55?

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YOUR COMMENTS ARE APPRECIATED.

Thank You

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The TRI-PHASIC Road from Medical Practice to Retirement Planning for Doctors

BY DR. DAVID E. MARCINKO MBA CMP®

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SPONSOR: http://www.CertifiedMedicalPlanner.org

Determining Your Retirement Vision

There’s an aspect to retirement that many physicians do not plan for … the transition from work and practice to retirement.  Your work has been an important part of your life.  That’s why the emotional adjustments of retirement may be some of the most difficult ones.

For example, what would you like to do in retirement? Your retirement vision will be unique to you. You are retiring to something not from something that you envisioned. When you have more time, you would like to do more traveling, play golf or visit more often, family and friends. Would you relocate closer to your kids?  Learn a new art or take a new class? Fund your grandchildren’s education? Do you have philanthropic goals? Perhaps you would like to help your church, school or favorite charity? If your net worth is above certain limits, it would be wise to take a serious look at these goals. With proper planning, there might be some tax benefits too. Then you have to figure how much each goal is going to cost you.

If have a list of retirement goals, you need to prioritize which goal is most important. You can rate them on a scale of 1 to 10; 10 being the most important. Then, you can differentiate between wants and needs. Needs are things that are absolutely necessary for you to retire; while wants are things that still allow retirement but would just be nice to have.

CITE: https://www.r2library.com/Resource/Title/0826102549

Recent studies indicate there are three phases in retirement, each with a different spending pattern [Richard Greenberg CFP®, Gardena CA, personal communication]. The three phases are:

  1. The Early Retirement Years. There is a pent-up demand to take advantage of all the free time retirement affords. You can travel to exotic places, buy an RV and explore forty-nine states, go on month-long sailing vacations. It’s possible during these years that after-tax expenses increase during these initial years, especially if the mortgage hasn’t been paid off yet. Usually the early years last about ten years until most retirees are in their 70’s.
  • Middle Years. People decide to slow down on the exploration.  This is when people start simplifying their life.  They may sell their house and downsize to a condo or townhouse.  They may relocate to an area they discovered during their travels, or to an area close to family and friends, to an area with a warm climate or to an area with low or no state taxes.  People also do their most important estate planning during these years.  They are concerned about leaving a legacy, taking care of their children and grandchildren and fulfilling charitable intent. This a time when people spend more time in the local area.  They may start taking extension or college classes.  They spend more time volunteering at various non-profits and helping out older and less healthy retirees. People often spend less during these years. This period starts when a retiree is in his or her mid to late 70’s and can last up to 20 years, usually to mid to late-80’s.
  • Late Years. This is when you may need assistance in our daily activities.  You may receive care at home, in a nursing home or an assisted care facility.  Most of the care options are very expensive.  It’s possible that these years might be more expensive than your pre-retirement expenses.  This is especially true if both spouses need some sort of assisted care. This period usually starts when the retiree is their 80’s; however they can sometimes start in the mid to late 70’s.

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Planning Issues – Early Career

If early retirement is a major objective, start thinking about activities that will fill up your time during retirement.  Maintaining your health is more critical, since your health habits at this time will often dictate how healthy you will be in retirement.

Planning Issues – Mid Career

If early retirement is a major objective, start thinking about activities that will fill up your time during retirement.  Maintaining your health is more critical, since your health habits at this time will often dictate how healthy you will be in retirement

Planning Issues – Late Career 

Three to five years before you retire, start making the transition from work to retirement. 

  • Try out different hobbies;
  • Find activities that will give you a purpose in retirement;
  • Establish friendships outside of the office or hospital;
  • Discuss retirement plans with your spouse.
  • If you plan to relocate to a new place, it is important to rent a place in that area and stay for few months and see if you like it. Making a drastic change like relocating and then finding you don’t like the new town or state might be very costly mistake. The key is to gradually make the transition.

YOUR COMMENTS ARE APPRECIATED.

Thank You

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