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.

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

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***

CERTIFIED MEDICAL PLANNER™ Designation: A.I. Allows Adult Learners Take Control

“Robo-Examiners” Let CMP™ Candidates Take Control

Dr. David Marcinko MBA CMP™
[Founding CEO and President]

Enter the CMPs

cmp

The concept of a self-taught and student motivated, but automated outcomes driven classroom may seem like a nightmare scenario for those who are not comfortable with computers. Now everyone can breathe a sigh of relief, because the Institute of Medical Business Advisors just launched an “automated” final examination review protocol that requires no programming skill whatsoever.

In fact, everything is designed to be very simple and easy to use. Once a student’s examination “blue-book” is received, computerized “robotic reviewers” correct student assignments and quarterly test answers. This automated examination model lets the robots correct tests and exams, while the students concentrate on guided self-learning.

READ: https://medicalexecutivepost.com/2020/07/09/robo-examiners-let-cmp-candidates-take-control/

MORE: https://medicalexecutivepost.com/2020/06/16/discover-the-best-medical-risk-management-and-insurance-planning-practices-of-leading-cmps/

Your thoughts and comments are appreciated.

THANK YOU

***

Hospitals and Health Care Organizations

MANAGEMENT STRATEGIES, OPERATIONAL TECHNIQUES, TOOLS, TEMPLATES AND CASE STUDIES

TEXTBOOK REVIEWS:

Hospitals and Health Care Organizations is a must-read for any physician and other health care provider to understand the multiple, and increasingly complex, interlocking components of the U.S. health care delivery system, whether they are employed by a hospital system, or manage their own private practices.

The operational principles, methods, and examples in this book provide a framework applicable on both the large organizational and smaller private practice levels and will result in better patient care. Physicians today know they need to better understand business principles and this book by Dr. David E. Marcinko and Professor Hope Rachel Hetico provides an excellent framework and foundation to learn important principles all doctors need to know.
―Richard Berning, MD, Pediatric Cardiology

… Dr. David Edward Marcinko and Professor Hope Rachel Hetico bring their vast health care experience along with additional national experts to provide a health care model-based framework to allow health care professionals to utilize the checklists and templates to evaluate their own systems, recognize where the weak links in the system are, and, by applying the well-illustrated principles, improve the efficiency of the system without sacrificing quality patient care. … The health care delivery system is not an assembly line, but with persistence and time following the guidelines offered in this book, quality patient care can be delivered efficiently and affordably while maintaining the financial viability of institutions and practices.
―James Winston Phillips, MD, MBA, JD, LLM

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

ORDER HERE: https://www.amazon.com/Hospitals-Health-Care-Organizations-Operational-ebook/dp/B0091ICH30/ref=sr_1_8?dchild=1&keywords=david+marcinko&qid=1626110965&sr=8-8

ASSESSMENT: Your comments and thoughts are appreciated.

INVITATIONS: https://medicalexecutivepost.com/dr-david-marcinkos-bookings/

CONTACT: Ann Miller RN MHA

MarcinkoAdvisors@msn.com

Ph: 770-448-0769

Second Opinions: https://medicalexecutivepost.com/schedule-a-consultation/

THANK YOU

***

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?

***

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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Medical FINANCIAL PLANNING “Holistic” STRATEGIES

BY AND FOR PHYSICIANS AND THEIR ADVISORS

INVITE DR. MARCINKO: https://medicalexecutivepost.com/dr-david-marcinkos-

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SPONSOR: http://www.CertifiedMedicalPlanner.org

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JULY FOURTH WEEKEND READING LIST 2021

Happy Independence Weekend Greetings to our Readers and Subscribers for 2021

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From the Medical Executive-Post

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

INVITE DR. MARCINKO: https://medicalexecutivepost.com/dr-david-marcinkos-

CONTACT: Ann Miller RN MH

[Executive Director]

MarcinkoAdvisors@msn.com

THANK YOU

***

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™

ORDER Textbook: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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ME-P Speaking Invitations

Dr. David E. Marcinko is at your Service

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Dr. David Edward Marcinko MBA CMP® enjoys personal coaching and public speaking and gives as many talks each year as possible, at a variety of medical society and financial services conferences around the country and world.

These have included lectures and visiting professorships at major academic centers, keynote lectures for hospitals, economic seminars and health systems, keynote lectures at city and statewide financial coalitions, and annual keynote lectures for a variety of internal yearly meetings.

His talks tend to be engaging, iconoclastic, and humorous. His most popular presentations include a diverse variety of topics and typically include those in all iMBA, Inc’s textbooks, handbooks, white-papers and most topics covered on this blog.

CONTACT: Ann Miller RN MHA

MarcinkoAdvisors@msn.com

Ph: 770-448-0769

Abbreviated Topic List: https://healthcarefinancials.files.wordpress.com/2009/02/imba-inc-firm-services.pdf

Second Opinions: https://medicalexecutivepost.com/schedule-a-consultation/

DIY Textbooks: https://medicalexecutivepost.com/2021/04/29/why-are-certified-medical-planner-textbooks-so-darn-popular/

THANK YOU

***

Financing LONG-TERM CARE Needs?

AGING AND RETIREMENT

Long-term care (LTC) may not be the first thing individuals or couples think about as they approach retirement, but the costs for those who needs it can disrupt and derail retirement security. A good plan for long-term care requires many decisions over an extended period of time, and well before retirement.

In this article, Milliman consultant Robert Eaton discusses the major considerations and options for financing LTC needs in retirement.

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ASSESSMENT: Your thoughts 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™

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

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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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THE ANATOMIC BASIS OF HUMAN PHYSIOLOGY AND BEHAVIOR?

BRAIN ANATOMY

By Dr. David Edward Marcinko MBA CMP©

SPONSOR: http://www.CertifiedMedicalPlanner.org

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I am not a neurologist, psychologist, or psychiatrist. But, it is well known that emotional and behavioral change involves the human nervous system. And, there are two parts of the nervous system that are especially significant for holistic financial advisor; the first is the limbic system and the second is the autonomic nervous system. 

According to Dr. C. George Boerre of Shippensburg University of Pennsylvania, this is known as the emotional nervous system.

1. The Limbic System

The limbic system is a set of structures that lies on both sides of the thalamus, just under the cerebrum.  It includes the hypothalamus, the hippocampus, the amygdala, and nearby areas.  It is primarily responsible for emotions, memories and recollection. 

Hypothalamus

The small hypothalamus is located just below the thalamus on both sides of the third ventricle (areas within the cerebrum filled with cerebrospinal fluid that connect to spinal fluid). It sits inside both tracts of the optic nerve, and just above the pituitary gland.

The hypothalamus is mainly concerned with homeostasis or the process of returning to some “set point.”  It works like a thermostat:  When the room gets too cold, the thermostat conveys that information to the furnace and turns it on.  As the room warms up and the temperature rises, it sends turns off the furnace.  The hypothalamus is responsible for regulating hunger, thirst, response to pain, levels of pleasure, sexual satisfaction, anger and aggressive behavior, and more.  It also regulates the functioning of the autonomic nervous system, which means it regulates functions like pulse, blood pressure, breathing, and arousal in response to emotional circumstances. In a recent discovery, the protein leptin is released by fat cells with over-eating.  The hypothalamus senses leptin levels in the bloodstream and responds by decreasing appetite.  So, it seems that some people might have a gene mutation which produces leptin, and can’t tell the hypothalamus that it is satiated.   The hypothalamus sends instructions to the rest of the body in two ways.  The first is to the autonomic nervous system.  This allows the hypothalamus to have ultimate control of things like blood pressure, heart rate, breathing, digestion, sweating, and all the sympathetic and parasympathetic functions.

The second way the hypothalamus controls things is via the pituitary gland.  It is neurally and chemically connected to the pituitary, which in turn pumps hormones called releasing factors into the bloodstream.  The pituitary is the so-called “master gland” as these hormones are vitally important in regulating growth and metabolism.

Hippocampus

The hippocampus consists of two “horns” that curve back from the amygdala.  It is important in converting things “in your mind” at the moment (short-term memory) into things that are remembered for the long run (long-term memory).  If the hippocampus is damaged, a patient cannot build new memories and lives in a strange world where everything they experience just fades away; even while older memories from the time before the damage are untouched!  Most patients who suffer from this kind of brain damage are eventually institutionalized.

Amygdala

The amygdalas are two almond-shaped masses of neurons on either side of the thalamus at the lower end of the hippocampus.  When it is stimulated electrically, animals respond with aggression.  And, if the amygdala is removed, animals get very tame and no longer respond to anger that would have caused rage before.  The animals also become indifferent to stimuli that would have otherwise have caused fear and sexual responses.

Related Anatomic Areas

Besides the hypothalamus, hippocampus, and amygdala, there are other areas in the structures near to the limbic system that are intimately connected to it:

  • The cingulate gyrus is the part of the cerebrum that lies closest to the limbic system, just above the corpus collosum.  It provides a pathway from the thalamus to the hippocampus, is responsible for focusing attention on emotionally significant events, and for associating memories to smells and to pain.
  • The ventral tegmental area of the brain stem (just below the thalamus) consists of dopamine pathways responsible for pleasure.  People with damage here tend to have difficulty getting pleasure in life, and often turn to alcohol, drugs, sweets, and gambling.
  • The basal ganglia (including the caudate nucleus, the putamen, the globus pallidus, and the substantia nigra) lie over to the sides of the limbic system, and are connected with the cortex above them.  They are responsible for repetitive behaviors, reward experiences, and focusing attention. 
  • The prefrontal cortex, which is the part of the frontal lobe which lies in front of the motor area, is also closely linked to the limbic system.  Besides apparently being involved in thinking about the future, making plans, and taking action, it also appears to be involved in the same dopamine pathways as the ventral tegmental area, and plays a part in pleasure and addiction.

https://wallpapercave.com/wp/wp3011600.jpg

2. The Autonomic Nervous System

The second part of the nervous system to have a particularly powerful part to play in our emotional life is the autonomic nervous system. 

The autonomic nervous system is composed of two parts, which function primarily in opposition to each other.  The first is the sympathetic nervous system, which starts in the spinal cord and travels to a variety of areas of the body.  Its function appears to be preparing the body for the kinds of vigorous activities associated with “fight or flight,” that is, with running from danger or with preparing for violence.  Activation of the sympathetic nervous system has the following effects:

  • dilates the pupils and opens the eyelids,
  • stimulates the sweat glands and dilates the blood vessels in large muscles,
  • constricts the blood vessels in the rest of the body,
  • increases the heart rate and opens up the bronchial tubes of the lungs, and
  • inhibits the secretions in the digestive system.

One of its most important effects is causing the adrenal glands (which sit on top of the kidneys) to release epinephrine (adrenalin) into the blood stream.  Epinephrine is a powerful hormone that causes various parts of the body to respond in much the same way as the sympathetic nervous system.  Being in the blood stream, it takes a bit longer to stop its effects, and may take some time to calm down again

The sympathetic nervous system also takes in information, mostly concerning pain from internal organs.  Because the nerves that carry information about organ pain often travel along the same paths that carry information about pain from more surface areas of the body, the information sometimes get confused.  This is called referred pain, and the best known example is the pain in the left shoulder and arm when having a heart attack.

The other part of the autonomic nervous system is called the parasympathetic nervoussystem.  It has its roots in the brainstem and in the spinal cord of the lower back.  Its function is to bring the body back from the emergency status that the sympathetic nervous system puts it into.

Some of the details of parasympathetic arousal include some of the following:.

  • pupil constriction and activation of the salivary glands,
  • stimulating the secretions of the stomach and activity of the intestines,
  • stimulating secretions in the lungs and constricting the bronchial tubes, and;
  • decreases heart rate.

The parasympathetic nervous system also has some sensory abilities:  It receives information about blood pressure, levels of carbon dioxide in the blood, etc.

There is actually another part of the autonomic nervous system that is not mentioned too often: the enteric nervous system.  It is a complex of nerves that regulate the activity of the stomach. 

For example, if you get sick to your stomach with a new financial advisory client – or feel nervous butterflies with your first patient encounter as a doctor- you can blame the enteric nervous system.

ASSESSMENT: Your thoughts are appreciated.

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

ORDER Textbook: https://www.amazon.com/Comprehensive-Financial-Planning-Strategies-Advisors/dp/1482240289/ref=sr_1_1?ie=UTF8&qid=1418580820&sr=8-1&keywords=david+marcinko

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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ABOUT THE Institute of Medical Business Advisors, Inc

About iMBA, Inc

By Staff Reporters

iMBA Inc., is a healthcare consulting and financial planning analytics firm specializing in medical practice management and physician alignment.

Our mission is to empower physician colleagues and healthcare organizations to drive clarity, improve performance, and create accountability.

Our team combines a cross-section of skill-sets including public and population health, financial operations, business intelligence, and data science.

And, our diverse background of experience includes advanced academic training, economic and financial research, global marketing, management consulting, and entrepreneurial spirit.

INSTITUTE WEB: www.MedicalBusinessAdvisors.com

***

SCHEDULE A MEDICAL PRACTICE & FINANCIAL PLANNING CONSULTATION TODAY!
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For Doctors – By Doctors – Confidential – Video Conference
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BUSINESS, FINANCE, INVESTING AND INSURANCE TEXTS FOR DOCTORS:
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HOSPITAL MANAGEMENT TEXTS FOR PHYSICIAN CXOs:
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2 – https://lnkd.in/e2ZmewQ

DICTIONARY OF TERMS FOR THE BUSINESS OF MEDICINE:
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DHIMC: https://lnkd.in/e9AmEhd
DHITS: https://lnkd.in/eWx3WjZ

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DR. DAVID EDWARD MARCINKO MBA CMP®

[Chief Executive Officer]

***

CONTACT: MarcinkoAdvisors@msn.com
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***

The SECURE Act?

Maybe Not!

By Rick Kahler CFP

The Grinch who stole Christmas is alive and well this year—in the US Congress. Our Representatives and Senators passed a bill that negatively affects the middle and working class by changing the rules of passing on an IRA. Now adult children who inherit IRAs will be required to drain them within 10 years and pay all the taxes on the distributions and future earnings.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act, which changes many of the rules of US retirement laws, was approved almost unanimously (417-3) by the House of Representatives and the Senate (81-11). South Dakota’s Representatives Dusty Johnson and Senators John Thune and Mike Rounds all voted for the bill. Despite its name, many of the new law’s provisions are anything but retirement “enhancements.”

I wrote about the SECURE Act in June, as did other financial journalists, but it hasn’t received widespread attention. Despite its heavy bipartisan support, it isn’t necessarily a retirement boost for middle and working class savers.

This revision of long-standing IRA rules is especially unfair to parents who banked on the reliability of those rules. Many of them did Roth conversions and paid the tax due on a traditional IRA, with the intention of leaving the portion of the IRA they did not use themselves as a tax-free gift that could grow over the years and support their children’s retirement.

The amount of taxes raised by forcing inheritors to liquidate IRAs early is estimated at $15.7 billion over 10 years. The main trade-offs for this tax grab were (drum roll) extending by 18 months the age at which an IRA owner must begin taking distributions, increasing incentives to employers who set up 401(k)s, and allowing people over age 70 ½ who are working to contribute to an IRA (mic drop).

New strategies will need to address how an inheritor distributes the IRA to minimize the tax hit. Taking all of an IRA in one year could result in an heir in the peak of their earning years paying 50% of it in taxes.

If you counted on passing on an IRA to your children, you need to reexamine your estate planning. It may be better to name a spouse as a beneficiary rather than children, as a spouse still can inherit the IRA without being forced to liquidate it over 10 years.

The strategy of letting IRA assets accumulate and spending down taxable accounts may change completely. You now may want to spend down IRA accounts, with any balance going to charities, and pass on the accumulated taxable assets to children who will get a step-up in basis (tax free).

If you have made the beneficiary of your IRAs a trust, often created at death in your will, that whole strategy needs reconsidering. “Some types of IRA trusts make no sense under the new law,” says Natalie Choate in a December 21, 2019, Wall Street Journal article, “Inheriting IRAs Just Got Complicated.”

The new law gives a great boost to favoring life insurance over IRAs as a tax-efficient way to move assets to heirs. It also paves the way for high fee and commission annuities to be sold to sponsors of 401(k) plans.

Why did Congress vote so overwhelmingly to penalize IRA inheritors and open up investors’ 401(k) plans to insurance products?

Perhaps many of them didn’t fully understand what they were voting on. Or perhaps the insurance lobby did their normal amazing job of selling the alleged benefits of insurance and annuities.

Assessment

In any case, don’t assume the SECURE Act is a gift that will enhance your retirement security.

Your thoughts are appreciated.

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On Retirement Gaps Since the Recession

The “Have and Have Nots”

[By staff reporters]

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When Will You Retire?

Where Will Your Money Come From?

By Rick Kahler CFP®

The list is fairly short: Social Security, a pension, working, your assets, children, or public assistance.

According to an April 22, 2019 Bloomberg article by Suzanne Woolley, entitled “America’s Elderly Are Twice as Likely to Work Now Than in 1985“, only twenty percent of those age 65 or older are working. The rest either can’t work physically, can’t find work, or don’t want to work. According to the ADA National Network, over 30 percent of people over 65 are disabled in some manner.

According to the Center on Budget and Policy Priorities, Social Security provides the majority of income for most elderly Americans. It provides at least 50% of income for about half of seniors and at least 90% of income for about one-fourth of seniors. The average Social Security retirement benefit isn’t as high as many people think. In June 2019 it was about $1,470 a month, or about $17,640 a year.

And, as per the Pension Rights Center, around 35% of Americans receive a pension or VA benefits. The greatest percentage of pensions are government. This would include retired state and federal workers like teachers, police, firefighters, military, and civil service workers. In 2017 the median state or local government pension benefit was $17,894 a year, the median federal pension was $28,868, and the median military pension was $21,441.

Working provides the highest source of retirement income for the 20 percent of those who are over 65 and are still working. According to SmartAsset.com, Americans aged 65 and older earn an average of $48,685 per year. However, in a NewRetirement.com article dated February 26, 2019, “Average Retirement Income 2019, How Do You Compare“, Kathleen Coxwell cites a figure from AARP that the median retirement income earned from employment is $25,000 a year.

About 3% of retirees receive public assistance.

This leaves around 20% of those over 65 who depend partially or fully for their retirement income on money they set aside during their working years. According to TheStreet.com, “What Is the Average Retirement Savings in 2019“, by Eric Reed, updated on Mar 3, 2019, the average retirement account for those age 65 to 74 totals $358,000. That amount will safely provide around $15,000 a year for most retirees’ lifetime. The median savings is $120,000, which will produce only about $5,000 a year. In order to retire at age 65 with an annual investment income of $30,000 to $40,000, someone would need a retirement nest egg of over $1 million.

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***

My conclusion from this data is that most Americans are woefully underprepared to live a comfortable lifestyle when they can no longer work. Between Social Security, pensions, and retirement savings, a retiree can expect a median income of $18,000 to a maximum of $52,000 a year. According to data I compiled from NewRetirement.com, the average median retirement income of those over age 65 is around $40,000.

What are some things you can do to increase your chances of enjoying a comfortable retirement income?

If you are under age 50, begin setting aside 15% to 25% of your income for retirement.

If you are over 60, keep working as long as you can. If you retire early, your monthly Social Security benefit is lower for the rest of your life.

Consider ways to stretch your retirement income by downsizing, sharing housing, or relocating to an area of the US or even outside the country with a lower cost of living.

Research what you can reasonably expect from Social Security and other sources of retirement income. Base your retirement expectations on informed planning, not on vaguely optimistic expectations.

Assessment: Your thoughts are appreciated.

Conclusion

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***

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Are Under Spending Doctors Now Extinct?

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The Last Generation of Extreme Frugality … or Another Re-Start?

By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com

“Be frugal.” “Save for the future.” “Live on less than you make.”

That’s my usual financial advice, and it’s well worth repeating even though most medical professionals aren’t following it.

[Very] occasionally however, I find it necessary to work with clients to overcome a different problem—underspending.

A Problem?

Huh? How can underspending possibly be a problem? Isn’t it a virtue to save and accumulate?  Of course it is. Accumulating wealth typically requires people to live on much less than they earn. Being frugal is the common denominator of almost every first-generation wealth builder. But, don’t confuse living on less than you make with underspending.

To Every Season

Like almost everything, saving is but for a season. Once people retire and stop earning money from a medical practice, business or a job, a new era begins where it’s time to consume the fruits of their frugality. The problems start when the wise frugality of the earning years continues long past the time that it’s necessary. Frugality then can turn to under-consumption.

Be Thrifty – Not Frugal

What’s wrong with someone living on less than they could? Is it bad to continue to be thrifty? Of course not. The habit of frugality isn’t something people can turn off at a flip of a switch, and maybe that’s part of the problem. Wealth accumulators have lived with the money script of “Don’t consume your investments or savings” for so long, that when the time comes to begin living off of their investments it poses a significant challenge.

Extreme Frugality

The result can be under-spending is frugality taken to extremes. As I define underspending, it is spending significantly less than the amount you could conservatively spend annually and still have a 99% chance of never running out of money.

Under-spending is not the same as continuing to make frugal choices during retirement and economizing when possible. Typically, underspending results in people failing to get adequate medical care, eat a healthy diet, live in a well-maintained and comfortable home, or use help and support that would make life easier.

Example

Take Dr. Martin and his wife Eleanor, for example. They worked hard all their lives and managed to save $2,000,000. Today they are age 72. Based on a very conservative withdrawal rate of 3%, they could easily afford to take $60,000 from their portfolio each year. Instead, they withdraw $10,000. With the $30,000 they get from Social Security, they live on $40,000 a year.

What’s wrong with that?

What’s wrong is what they don’t spend money on. Both of them have neglected their health. They do get annual checkups from their family doctor, which are covered by Medicare. Yet, neither of them has seen a dentist for several years. Eleanor needs hearing aids but won’t get them because they “cost too much.” Even though Martin’s eyesight is beginning to fail and night driving is difficult, they insist on driving thousands of miles to visit their children because airline fares are “so outrageous.”

They sleep on a mattress that is 20 years old. Their house needs painted inside and out. Only two burners work on the kitchen stove, but they get by because it isn’t really a problem except at Thanksgiving when the family comes to visit.

The Cure

The cure to underspending is not running out and spending money frivolously or indulgently on things or experiences that don’t really add value to your life. Instead, it’s using what you have to make your life more comfortable and enjoyable.

Assessment

There is a season to plant for the future, with hard work, frugality, and saving. There is also a season of harvest. That’s the time to use what you have accumulated to support your health and well-being.

How many under-spending doctors are left? Do you know any? Is this the last generation of same? OR, the start of next gen 2.0 frugality.

Conclusion

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***

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***

Playing with the FIRE Movement

“What do you think of the FIRE movement?”

[By Rick Kahler CFP]

“What do you think of the FIRE movement?” a reporter asked me recently. I told her I was ambivalent about it.

The FIRE acronym in this context stands for “Financial Independence, Retire Early.” While a Harris poll done in late 2018 found most people over 45 had never heard of the FIRE movement, it apparently has caught fire among millennials.

The focus of FIRE adherents is lifestyle more than finances. Two books are the foundation of the FIRE movement: Your Money or Your Life, written in 1992 by Vicki Robin and Joe Dominguez, and Early Retirement Extreme, written in 2010 by Jacob Lund Fisker. The concept was popularized in 2011 by blogger Peter Adeney (Mr. Money Mustache), who lives in Longmont, CO. At the age of 30, Adeney and his wife retired with a retirement fund of $600,000 and a paid-for home.

According to the reporter who interviewed me, many advisors have strong opinions against the FIRE movement. This may seem odd. After all, financial independence and retiring early is often a goal of those seeking financial planning. That was certainly one of my goals when I was the age of today’s millennials.

I find very little to criticize about adopting a frugal lifestyle and saving as much as possible. For decades I have suggested living on half of what you make, with a goal of reaching financial freedom as soon as possible. Some FIRE proponents do save up to 50% of their income, which is five times more than their peers, according to a January 21, 2019, InvestmentNews article by Greg Iacurci, “Advisors throw cold water on FIRE Movement.”

What makes many financial planners uncomfortable is the definition of “early.” In my day, early was age 50, not 30. In terms of FIRE, Adeney promotes a lifestyle of aggressive frugality with the goal of retiring as soon as possible, using a 4% withdrawal rate as a guideline to determine the nest egg you need to accumulate.

***

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This raises two obvious issues that need clarification.

First, you need to earn enough to be able to live on 50 percent of your income. Relatively few young adults make that much. There is no magic income number, since the cost of living varies so much across the country.

One’s definition of frugality is also important. To some that may mean setting the thermostat at 68 all winter or driving a small fuel-efficient vehicle. For  others it may mean chopping your own wood to heat your living space only with a wood-burning stove or doing without a car altogether. As with many things, the wisdom is knowing when frugality crosses the line to dangerous deprivation.

Finally, the earlier you retires the longer your retirement nest egg must last. With a 4% withdrawal rate, someone retiring at age 70 has a much higher probability of seeing their investment portfolio last for their lifetime than someone retiring at age 30. Also, the rate of return on the portfolio is critical. The higher the rate of return the longer the funds will last. If there is any potential problem with the FIRE formula it’s probably this.

Since the average 30 year old may live another 60 years, and assuming a 4% return net of mutual fund and advisor fees, I would make a strong argument for a 2 percent withdrawal rate. Someone age 50 could reasonably withdraw 3%, while someone age 60 or above could probably be safe at 4%.

Assessment:

As with any conflagration, playing with FIRE irresponsibly can end up burning down the house. But used wisely, it can sustain life and make living much more rewarding.

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Consider Taxes Before Retiring Abroad

Physicians Considering Retirement in Another Country?

By Rick Kahler CFP®

One way for a retiring doctor to stretch a retirement nest egg is to relocate your retirement nest. Finding a place with a lower cost of living can include considering retirement in another country.

International Living

According to International Living, Panama is one of the best options for Americans looking for affordable living costs, good medical services, and an appealing climate. Costa Rica, Mexico, and Belize are also good possibilities.

Before you pack your sunhat and flip-flops and head for a low-cost retirement haven like Panama, however, take a look at all the factors affecting your retirement income and expenses. One of those is taxes.

Taxes

Moving out of the country does not mean your tax bill to the US government or your current state will decrease. Short of giving up your US passport, there is nothing you can do to escape paying US taxes on your income, even if you don’t live in the US. We are one of two countries worldwide—the other is Eritrea—that taxes our citizens based on both residence and citizenship.

You might assume, however, that moving out of the country would end your liability for state income taxes. That isn’t always the case. Some states still want to tax your income even though you don’t live there. According to Vincenzo Villamena in a December 2018 article for International Living magazine titled “How to Minimize Your State Tax Bill as an Expat,” it’s especially problematic if you end up returning to your old address in the state and start filing an income tax return. Eventually, he says, “the state will see the gap” and may require you to pay taxes on the missing years.

You have nothing to worry about if you live in one of the seven states with no income tax: South Dakota, Wyoming, Nevada, Washington, Texas, Florida, and Alaska. Tennessee and New Hampshire aren’t bad, either, as they don’t tax your earnings but they do tax your investment income. Most other states will let you off the hook if you submit evidence that your residence is in another country and you haven’t lived in the state for a while.

Then there are the states that won’t let go of their former residents easily. Those are California, Virginia, New Mexico, South Carolina, North Carolina, Massachusetts, and Maryland. Assuming that when you leave you will be coming back, they require that you continue to pay state tax on your income.

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Solutions?

The solution to this issue takes a little financial planning and some extra time. The best way to escape paying taxes to a state you no longer live in is to move to a state with no income tax first before relocating abroad. You must prove to your old state that you have left and have no intention of ever coming back.

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This means moving for real—cutting as many ties to your old state as possible and establishing as many as possible in your new state. You will want to sell your home, close bank accounts, cancel any mailing addresses, change healthcare providers and health insurance companies (including Medicare), be sure no dependents remain in the state, and register to vote and get a driver’s license in the new state. As a final good-bye you will want to notify the tax authorities that you are filing a final tax return for your last year that you lived in the state.

Assessment

In case you need a good state from which to launch your leap into expat status, consider South Dakota. Not only would my income tax-free home state let you go easily, it would welcome you back if you should decide to return to the US.

Your thoughts are appreciatedBook of Month

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

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***

Retirement Medical Costs Not So Scary?

When Seen Yearly

By Rick Kahler CFP®

Have you ever worried yourself into a frenzy over something, only to find out you were worrying about the wrong thing?

For example, researchers say that Baby Boomers are more worried about being financially devastated by unexpected health costs in retirement than they are about outliving their retirement savings.

But isn’t the cost of health care a legitimate worry?

We all have heard the stories of people who lost their homes, savings, and retirement portfolios paying for exorbitant medical expenses due to an unforeseen health problem. Just recently Fidelity reported that the average couple will spend $280,000 on health care in retirement.

What is often overlooked is that medical expenses before retirement are inherently more volatile than those after retirement. Before retirement, the variation in medical insurance premiums plays a huge role in the cost of medical care. Those who suffer the greatest losses from unexpected catastrophic medical expenses are often those who are uninsured.

The PP-ACA

The Affordable Care Act was designed to make it unusual for those with health insurance to suffer a catastrophic loss from unforeseen medical expenses. Still, the cost of paying for adequate health care can be staggering if you don’t qualify for a subsidy. In South Dakota, the monthly cost of providing health care for a family of four runs between $1,800 and $3,000 a month, depending on whether you hit the maximum annual out-of-pocket threshold.

While that cost alone could be considered catastrophic for some, the difference is that the potential cost is known and can be budgeted for. This is where Health Savings Accounts (HSAs) can be so effective, allowing a couple to put aside $7,000 in tax-deductible savings to use toward funding family out-of-pocket expenses. Any unused funds can be carried forward indefinitely to fund future out-of-pocket costs.

In the same way that insurance helps mitigate catastrophic health costs before retirement, so does Medicare almost eliminate unexpected health care costs after retirement. While it is true the average couple will spend $280,000 on health care in retirement, “the reality is that health care costs in retirement aren’t needed as a ‘lump sum’ on the day of retirement,” notes financial researcher Michael Kitces. In an October 2018 article, “Getting Real About (Annual) Health Care Costs In Retirement,” he points out that the Medicare system actually makes retirement health care costs a remarkably stable annual cost that can be planned for.

Example:

For example, a 65-year old couple with an income of under $170,000 will pay $270 a month in Medicare part B premiums. A Medicare Supplement plan to cover costs not paid by Medicare can run another $300 a month. This puts the monthly out-of-pocket expenses at $570 per month. Let’s further assume an additional $135 a month for ancillary expenses like dental and vision, for a total of $705 per month, or $8460 per year.

If we assume both spouses live for 23 more years after age 65, and we factor for inflation, they will spend $280,000 in retirement for medical expenses.

When we view retirement medical costs as ongoing monthly expenses rather than lumping 23 years into one large number, they are not that scary. As Kitces notes, “Of course, individual health care costs may still vary… but it turns out they vary in rather predictable and plannable ways.”

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Assessment

With that bit of knowledge, Baby Boomers can now stop worrying about being financially devastated by catastrophic medical expenses. Those who still need something to worry about can focus instead on what really counts: sufficient retirement income. This means saving enough for retirement and managing their income after retirement so they will have enough money to provide for the rest of their lives.

Conclusion

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Two Different Personal IRA Investing Strategies?

Based on Tax Considerations?

 

 

 

 

 

By Dr. David Edward Marcinko MBA

LINK: https://medicalexecutivepost.com/schedule-a-consultation/

One personal investing strategy is to place more conservative investments (those with lower expected returns) in a tax-deferred traditional IRA, 401-k, 403-b or similar, and more aggressive (higher-earning) assets in a taxable brokerage account or Roth IRA.

WHY? Each account is thus working hard but in very different ways.

HOW? The conservative funds in the traditional IRA or retirement accounts would fill any needs for safety as they grow more slowly – and the higher tax rate won’t take out as big of a bite.

Meanwhile, the more aggressive funds in a taxable brokerage accounts would grow more quickly, but be taxed at a lower rate.

Assessment: Any thoughts?

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***

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Dr. Dave Marcinko at YOUR Service in 2021

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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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On Lost or Stolen Credit, ATM and Debit Cards

 Why I Dislike Debit Cards –  And You Should Too!

[By Dr. David Edward Marcinko MBA]

If your credit, ATM, or debit card is lost or stolen, federal law limits your liability for unauthorized charges. Your protection against unauthorized charges depends on the type of card — and when you report the loss.

***

https://www.consumer.ftc.gov/articles/0213-lost-or-stolen-credit-atm-and-debit-cards

***

MORE: Pros and Cons

https://clark.com/commoncents/debit-vs-credit-pros-cons-protections-money/

Assessment

Your thoughts are appreciated.

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Want to know when you’re going to die?

TODAY IS “ALL SOULS DAY”

[By staff reporters]

All Souls Day is a holy day set aside for honoring the dead. The day is primarily celebrated in the Catholic Church, but it is also celebrated in the Eastern Orthodox Church and a few other denominations of Christianity. The Anglican church is the largest protestant church to celebrate the holy day.

Most protestant denominations do not recognize the holiday and disagree with the theology behind it.

***

So – When are you going to die?

By MIT TECHNOLOGY REVIEW

Humans have been trying to find ways to calculate exactly how long they’ll live since time immemorial. We’re yet to find a reliable predictive formula, but that is starting to change.

The science: Certain chemical changes to cytosine – one of the four DNA bases or “letters” of genetic code—can help tell whether someone’s body is aging unusually fast or slowly. Steve Horvath, a biostatistician at UCLA, tested this “epigenetic clock” theory on 13,000 blood samples collected decades ago, from people whose subsequent date of death was known. The results found that the clock can be used to predict how long someone will live and how much of that life will be free of age-related disease.

Inheritance: Your genes dictate about 40% of the “ticking rate” of your mortality clock, while the rest comes down to lifestyle and luck, according to Horvath. There are things we can do to delay aging —including getting enough sleep.

Privacy: Insurance companies, hospitals and palliative care teams are already finding this sort of research useful, but there are a lot of issues around privacy yet to be untangled. Your likely life span is information we’d consider very personal, yet existing regulations and privacy policies don’t even consider the possibility of such information. Perhaps it’s time to start thinking about it.

***

“DANCE OF DEATH”

[Copyright 2018. iMBA Inc., all rights reserved. USA]

***

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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***

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Term Life Insurance Can Protect 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

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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

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Even More IRA Mistakes

Three More Critical Mistakes to Avoid

By Rick Kahler CFP®

Previously, I discussed two critical IRA mistakes, based on information I learned from Jeff Levine of Fully Vested Advice, Inc., at the 2018 spring conference of the National Association of Personal Financial Advisors. This week I will cover three more.

1. Failing to understand beneficiary options on inherited IRAs. You may well be among the millions of Americans, most of them spouses, who will inherit IRAs. Knowing the options you have can save you thousands of dollars in benefits and taxes.

Spouses have the right to remain as a beneficiary of the plan or roll it over into their own IRA. Which to choose depends upon the age of the person who has died, and the age and financial needs of the beneficiary. The “99% rule” says beneficiaries under age 59½ should retain the plan as an inherited IRA; those over 59½ should roll it over. The “1%” scenario is when the deceased spouse was over age 70½ and the beneficiary is more than 11 years younger. A rollover is best if the beneficiary doesn’t need any IRA distributions until after age 59½.

Another option for IRA owners is to name a trust as the beneficiary of the IRA. Levine suggests not doing this if you can accomplish your goals without it. But there are many cases when a trust will accomplish things that giving the IRA outright to a beneficiary won’t do. Estate planning attorney Ilene McCauley, from Scottsdale, AZ, says some of those instances are when you want to protect the IRA from a divorce of a beneficiary or guarantee that the proceeds go to your children when your spouse dies or remarries. McCauley recommends using a living trust as the IRA beneficiary rather than a testamentary trust established through a will.

2. Not understanding the RMD aggregation rules. These are widely misunderstood even by advisors. Levine asked the group of about 50 advisors this question: “If a 72-year-old client had two traditional IRAs, two 401ks, and two 403bs, how many RMD checks would need to be issued?” Only three advisors got the right answer—four. You can aggregate the RMDs from the two traditional IRA accounts and take the combined RMD out of just one account. You can do the same with the two 401k accounts. But with the 403b accounts you must take the RMD separately from each account. You can’t aggregate them or you face penalties and taxes.

3. Not doing periodic reviews of IRA beneficiaries. It’s important to review your IRA beneficiaries regularly. This is especially crucial when a beneficiary dies or you get remarried. For example, assume you want your employer’s retirement plan to go to your children upon your death. You remarry, but don’t have your new spouse sign a disclaimer waiving rights to your retirement plan. If you die after one year of marriage your new spouse, not your children, inherits the employer’s retirement plan funds.

The reverse is true with an IRA or a 403b. Let’s assume you listed your kids as the beneficiaries on either of these accounts. If you remarry and want the proceeds to go to your new spouse but you forget to sign a change of beneficiary form, there is no one-year rule as there is with an employer’s plan. Your kids , not your spouse, will inherit the account.

Assessment

The bottom line is that, to get the most benefit from a retirement plan, you need to do your homework and seek appropriate advice. The money you save by avoiding IRA mistakes can make a big difference in your security and standard of living in retirement. 

Conclusion

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Avoid Costly IRA Mistakes

Avoid These 2 Mistakes

By Rick Kahler CFP®

Investing through an IRA is a foundational method of retirement saving. Opening and contributing to an individual retirement account is not hard. That doesn’t mean IRAs are simple and easy to understand.

National Association of Personal Financial Advisors

I was reminded of this at the 2018 spring conference of the National Association of Personal Financial Advisors, where I attended a workshop by Jeff Levine of Fully Vested Advice, Inc., on “10 Critical IRA Mistakes.”

Top on his list of mistakes was failing to make charitable contributions out of your IRA when you are over 70½. These are called Qualified Charitable Distributions (QCDs). Here is why giving to charity directly from your IRA is a good idea.

For traditional IRAs, at age 70½ you must begin to withdraw required minimum distributions (RMDs) whether you want to or not. An RMD is taxable at ordinary income rates. Further, if you make a charitable donation and you are over age 65, you now must have over $13,300 of itemized deductions per person to get any portion of it deductible. By donating out of your IRA, you can reduce your RMD by an amount equal to your charitable gift. This makes your charitable gift 100% deductible and lowers your adjusted gross income, which can also help lower your Medicare premiums.

Here’s an example

Assume you are age 71, give $9,000 a year to charity, your property taxes on your home are $2,500, you are in the 22% tax bracket, and your RMD is $10,000. Without planning you will take your $10,000 RMD and pay $2,200 of income tax on it. Since you only have $11,500 in itemized deductions you will take the standard deduction of $13,300.

If instead you contribute $9,000 to charity out of your IRA, you reduce your taxable RMD from $10,000 to $1,000, slashing your tax liability on it from $2,200 to $220. The savings of $1,980 would cover most of your property tax.

If you make a QCD like this, it’s essential to inform your tax preparer. There is no required written evidence from your IRA custodian that your RMD needs to be offset by the amount of your gift. It’s your responsibility to tell your accountant so they report the correct reduced amount of the RMD on your tax return.

In Bankruptcy

Another significant source of mistakes is the complex asset protection rules for IRAs and retirement plans. Protection differs between bankruptcy and non-bankruptcy creditor actions.

In bankruptcy, all employer plans (ERISA), SEP and SIMPLE IRAs, and rollovers from retirement plans to IRAs are 100% protected from creditors. Amounts you personally contributed to traditional and Roth IRAs are protected up to a total of $1,283,025. However, inherited IRAs are not covered. You can see why it’s important to keep traditional, rollover and inherited IRAs in separate IRA accounts.

To make it even more complicated, different rules apply if creditors sue in non-bankruptcy proceedings. ERISA plans are 100% protected in all states. All IRAs are 100% protected in most states, except California, Georgia, Maine, Mississippi, Nebraska, South Dakota, and Wyoming, where they have limited to no protection.

Solo 401(k), SEP IRA, and SIMPLE IRA plans are fully protected from non-bankruptcy proceedings in about half of the states. The others, including South Dakota, have limited or no protection. If you live in one of these states and have a Solo 401(k), SEP, or SIMPLE, you want to roll it into an IRA as soon as circumstances allow.

Assessment

Mistakes like the two described here can be costly. To avoid them, especially if your circumstances are at all complex, it’s wise to get tax and IRA withdrawal advice from qualified financial advisors.

Conclusion

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More on Retirement Planning

ShouldaCoulda Woulda Retirement Planning

By Rick Kahler CFP®

My hunch is that most people would agree they “should” invest for the future. My second hunch is that many of them don’t know how to start and are afraid of making serious mistakes.

One of our resident planners, Sterling Gray, summed up that fear eloquently in a post on the KFG blog: “I noticed that my friends and colleagues . . . saw retirement planning as a dark, treacherous terrain that they could never safely travel alone. Unsure of where to turn for help, they often chose to ignore saving for retirement completely . . .”

Here are some pointers to help you take the first steps into the unfamiliar terrain of investing.

1. First and foremost, create a habit of living on less than you make. Spend frugally and invest as much as you possibly can. Ideally, while you are young, start with 20% of your paycheck, but at least start with something. The older you are, the greater the percentage you need to be saving.

2. Choose an investment method that will help reduce the taxes you pay on your contributions and the earnings they produce. This commonly means 401(k) retirement plans and IRAs—Roth IRAs for those in low income tax brackets and traditional IRAs for those in high tax brackets. You typically want to contribute a portion of every paycheck to your retirement plan.

3. Pick an investment. This is the part that scares many people away from investing, so let’s be specific.

3a. The best way for small investors to accumulate wealth is by owning stocks. But you don’t want to fall into the trap of picking individual stocks yourself, or worse yet, trying to buy low and sell high. That is called “playing the stock market,” and according to the research there is a high probability the only thing that will get played is you.

3b. The best way to own stocks is in a mutual fund that owns thousands of stocks of companies from around the globe. My favorite fund for people under age 40 is Vanguard Total World Stock (VT). It owns 7,781 stocks of companies located in 41 countries, including both developed and emerging markets. Over the last 48 years an investment in a globally diversified portfolio of stocks returned 8.9% annually, according to the MSCI World stock index. A $10,000 initial investment turned into about $600,000. If you are over 40, you may want to consider the Vanguard Global Wellington Fund Investor Shares (VGWLX. If you are over 60, the Vanguard Managed Payout Fund (VPGDX) is my favorite.

3c. If your 401(k) doesn’t offer these mutual funds, it probably will offer a number of Target Date Funds. Pick one that is closest to the year you will turn 70. If you are age 30 now, select the 2060 Target Date Fund.

4. This is the most important part of accumulating wealth, and it is absolutely the hardest part. Keep investing out of every paycheck, even when markets are falling or seem sure to fall. Even when the talking heads are sure the world is coming to an end and the financial press is screaming that you need to get out before you lose it all. Never suspend your monthly investment. Never sell out of your stock mutual fund and go to cash. Never sell out even 10% of your stock fund and go to cash. Keep breathing, focus on the long term, and stay the course.

Assessment

Like any trip into new territory, the path to financial independence starts with a single step. Take that first step, and you’re on your way to a successful journey.

Conclusion

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***

“Getting Old is Better than the Alternative”

More on Retirement Planning

By Rick Kahler CFP®

At the gym where I work out it’s not uncommon to hear us old guys complaining in the locker room about our aches and pains. When the complaining subsides, inevitably someone will remark, “Well, at least getting old is better than the alternative.”

If you are fortunate enough not to die prematurely, you are going to grow old one day. As youth begins to gradually fade and health limitations increase, the reality that you will not be able to earn a living forever will present itself. At some point in time your financial support will need to come from something other than your job or business.

It’s very easy to dismiss this when we are young, because we’ve never known anything but being young. We take our health, vigor, and capabilities for granted. Just like anything that is “normal,” only when it’s gone do we tend to really appreciate it.

Normalacy

I never gave any thought to opening a door, drinking a cup of coffee, or cutting up the food on my plate—until I tore my rotator cuff and my right arm was rendered useless. A few weeks of doing without it taught me a whole new appreciation for the value and ease a functioning right arm brings to my life.

Unfortunately, many of the capabilities we lose with aging do not return after a few weeks of healing. The harsh reality is that eventually most of us will not be able to take care of ourselves in the ways we are used to.

Retirement planning

So when you think about “retirement planning,” here is what that really means: When you can’t earn an income, how will you be provided for? Where is the money for rent and utilities going to come from? How are you going to get to doctor appointments and the store when you can’t drive anymore? Who will help you pay your bills when your eyesight or your mind aren’t as clear as they once were? Who is going to help you with meal preparation or remind you to take your medications?

If you have fully funded your retirement, you can feel secure that, no matter what care and assistance you may need, you will have the means to pay for it. If you haven’t saved adequately, you will need to rely on others to take care of you financially as well as physically.

The “others”

For many people, “others” mean first spouses, then children, and finally governmental or charitable organizations. These all have limitations.

Spouses. What happens if you don’t have a partner? Or when they can no longer care for you? Or when both of you need care?

Children. Unlike many other countries and cultures, “living with the kids” is not necessarily expected or accepted in the U.S. Most children are not equipped emotionally or especially financially to become caretakers for aging parents.

According to studies I’ve read, the cost of caring for a parent who has not provided for themselves ranges from $250,000 to $700,000 in lost wages, opportunities, and out-of-pocket expenses. People may have to quit jobs to care for a parent or hire care at a cost of up to $100,000 a year. Few in American can afford that.

Government and charities. Social Security provides only a minimal income. Medicaid pays for only basic care such as shared living space. Services like public transportation, subsidized elder housing, and reliable in-home services are not available everywhere, especially in rural areas.

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Assessment

This is not a pretty picture of retirement. Unfortunately, it is reality for millions of Americans. The consequences of neglecting to prepare financially for old age are all too real.

Conclusion

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On “Forced” Required Minimum Distributions

Mandatory RMDs

By Rick Kahler CFP®

Planning is important for all things financial, including retirement, which is inevitable no matter how far into the future it may seem. The financial decisions you make in your 20s through your 60s will greatly impact the quality of your lifestyle during retirement. Social Security and family won’t be enough to get you through 30 years of retirement. If you haven’t worked for a branch of government, you will rely heavily on income you’ve stashed in 401(k)s and IRAs.

Traditional IRAs

One of the big advantages of a traditional IRA or 401(k) is being able to save pre-tax dollars and let them grow tax deferred until you need them. Hopefully, when you take the distributions in retirement, you will be in a lower tax bracket than when you made the contribution. The downside is that traditional IRA funds become 100% taxable when you withdraw them.

Deferrals

Deferring distributions from your IRA only works until age 70½, when you’ll be forced to take money out whether you want to or not. This is called a Required Minimum Distribution, or RMD. If, at age 70½, you don’t need to withdraw funds to live on but are faced with an annual RMD, there are several things you can do to minimize your tax hit.

The easiest is don’t stop earning an income if you have a substantial 401(k). Employees are not required to take RMDs when they are still working, even part-time. This only applies to your employer’s 401(k). You will need to take RMDs from personal IRAs or 401(k)s and IRAs from previous employer plans.

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However, if you plan ahead you may be able to bypass this. If you have IRAs that are rollovers from previous 401(k)s, your employer may allow you to roll them into your current plan. By consolidating previous qualified employer plans into your current plan, you can defer taking an RMD until you quit working.

If you give to charities, you can give any portion or all of your RMD to a charity and not pay any taxes on the distribution. This can really save you a lot of money if you are currently giving to charities out of taxable accounts. When you turn 70½, simply redirect your charitable giving from taxable accounts to your IRA. You can give up to $100,000 annually without paying taxes on those distributions.

Another strategy we use commonly with clients is converting traditional IRA funds to Roth IRAs. Money in a Roth is not subject to RMDs. Of course, the downside is that you must pay taxes on the funds converted from your traditional IRA to a Roth.

For a conversion to make financial sense, two important factors must apply. You generally want to do a Roth conversion when your current tax bracket is lower than you anticipate it will be in the future. The most obvious scenario here is when you delay Social Security until age 70 and you are currently in a 10% or 15% tax bracket. It’s highly possible that Social Security and RMDs all kicking in at the same time may put you into the 25% tax bracket. Moving as much money at the 15% bracket prior to age 70 can make a lot of sense. It’s also important that the money to pay the taxes needs to come from a taxable account.

Assessment

As with all financial strategies that are crammed into a 600-word article, there are variations and nuances I am not able to go into. If you think one of these strategies may apply to you, don’t try it on your own. First get advice from a competent tax advisor or financial professional.

Conclusion

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On Retirement Planning Risks

How Much Risk?

By Rick Kahler CFP®

If I asked you how much risk you are taking with the investments in your retirement plan, what would you say? My guess is nine out of ten people couldn’t answer that question in a meaningful way. Answers like “A lot,” “Just right,” or “not much,” may as well be “I have no clue.”

Risk tolerance

We typically think of risk levels in terms of “risk tolerance.” This is the appropriate portfolio risk that a person would be most comfortable taking with their investments. While investment advisors are required to assess your risk tolerance and you can measure it yourself on various internet sites, determining what risk you are comfortable with is more of an art than a science. It depends on the investment return you need to produce an acceptable retirement income and the asset allocation that will give you that return, and it is a delicate balance between emotions and financial reality.

When markets are rising, everyone is comfortable with their risk tolerance. I have known retirees who had their entire retirement portfolio in a handful of small company growth stocks—a powder keg of investment risk by any definition of risk.

Yet they were entirely comfortable with that risk, because the stocks they were in “always went up.” Anyone with a stock that “always goes up” either hasn’t held the stock during a bear market or only looks at their brokerage statements once every five years.

Uncomfortable!

To find out what comfort really means when it comes to risk tolerance, it helps to define “uncomfortable.” While risk tolerance tests will ask you how far must your portfolio drop before you freak out and sell, the best way to find this out is when markets are in a free fall.

If you stay in the markets long enough to see them turn around and rise again, your risk tolerance was probably comfortable. If you sell out, it’s a pretty good indication your risk tolerance was not as great as you or your advisor thought. Unfortunately, selling out at a market bottom is a very costly way to find out the risk you had in your portfolio was “uncomfortable.”

A decade 

If you have been investing for over 10 years, finding your risk tolerance may be simple.

1. Think back to 2008-2009. Did you stay in the markets or get out?
2. Look at old statements and find out what percentage of your investments was in equities (owning things) and what percentage was in fixed income investments (loaning money through CD’s, money markets, and bonds).
3. Express this as a fraction with your equity percentage first and your bond percentage last. If you were 66% in equities and 34% in fixed income your asset allocation was 66/34.
4. If you stayed in the markets, your allocation was probably “comfortable.” If you got out, it was certainly “uncomfortable.”

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If your allocation was 70/30 and you stayed in the market, maintaining that allocation should serve you well. Maybe you could even increase the equity portion to 75/25 or 80/20 and still be comfortable.

Conversely, if your allocation was 70/30 and you sold out or reduced the percentage you held in equities, your allocation clearly offered an uncomfortably high level of risk. You will need to reduce the equities in your portfolio. This is especially true if you got back into your old allocation, or something even riskier, to “make up time.” You may well be taking too much risk and setting yourself up for failure all over again. You will need to reassess

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.

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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™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

Bitcoins for Retirement?

 In a Balanced Portfolio?

By Rick Kahler CFP®

A reader recently sent me the following email: “As you know, there are ‘market experts’ pitching bitcoins as an ‘investment’. Has a Huge YTD gain. I’d bet a lot of your readers would like to know if a bitcoin position has a place in a balanced financial portfolio.”

I always appreciate hearing from readers, especially when they challenge me with topics I would normally not have considered. Bitcoins are not something to which I’ve paid serious attention.

How they Work

First, let me explain that a Bitcoin is a type of digital currency which is traded person to person. It is not backed by a government or considered legal tender. While Bitcoin is one of the earliest and most widely known digital currency systems, it is not the only one that is available. These are sometimes called “altcoin,” “virtual currency,” or crypto-currency.”

Unlike government-created currencies where a central bank controls the creation of the currency, Bitcoins are uncontrolled or tracked by any government. This allows people to send or receive money across borders freely, with none of the restrictions, tracking, or caps that are normally placed on transactions by governments.

A digital money system has an inherent problem common to all money systems. How do you keep the currency, especially one that is entirely digital, from being counterfeited? What stops someone from creating Bitcoins or selling the same Bitcoin multiple times?

The solution is a type of open source, public ledger that tracks every Bitcoin transaction from the beginning of Bitcoin time. It makes it virtually impossible to cheat. The creation of new Bitcoins is controlled via a process called mining. Only a limited number of new Bitcoins are allowed into the system annually, similar to how the precious metal supply gradually expands annually based on the mining of new metal.

The market in trading Bitcoins is probably as “free” as a currency market can get. The price of Bitcoins is based on supply and demand. Since Bitcoin was only created in 2009, it has less than a decade of performance to evaluate, but throughout its short history the price has fluctuated wildly. For example, it reached $31 in July of 2011, then dropped back to $2 by that December. In November of 2013 it hit a high of $1,242. The following month, the price dropped to $600, rebounded, crashed, and eventually stabilized to a range of $650 to $800.

The reader who asked me about Bitcoin was certainly right about its impressive 2017 year-to-date performance. On January 1, 2017, a Bitcoin sold for $496.90. As of August 19 it closed at $4,109.10, nearly a ten-fold increase in just eight months.

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Operating History

An article on Investopedia offers a good overview of Bitcoin‘s operation and history.

It also describes some of the risks to evaluate before considering it as an investment. These include the relative novelty and lack of track record of digital currency, the possibilities for hacking and fraud, the uncertainties of future regulation, and the competition of other developing virtual currency systems. It also points out that Bitcoin transactions are similar to dealing with cash. They are “permanent and irreversible,” with “no third party or a payment processor, as in the case of a debit or credit card – hence, no source of protection or appeal if there is a problem.”

Assessment

While I like the libertarian freedom of the idea of a currency uncontrolled by government intervention, I don’t consider owning such a currency an investment. I do consider buying or selling digital currencies like Bitcoin a speculation. Like other speculative investments, these do not belong in any retirement portfolio. 

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

OUR OTHER PRINT BOOKS AND RELATED INFORMATION SOURCES:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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On the Department of Labor “Fiduciary Rule”

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Rick Kahler MS CFP

By Rick Kahler MSFS CFP®

Both fee-only financial planning firms and companies that sell financial products are beginning to see some unintended consequences from the recent Department of Labor fiduciary rule.

The rule requires that all financial advisors who deal with an investor’s retirement accounts, including those who sell products, be held to a fiduciary standard. In the past, only RIA’s who are regulated by the SEC were held to such a standard.

The DoL intended the rule to discourage financial salespeople from placing high fee and commission products in retirement accounts. For fee-only advisers, one unintended consequence is an increase in documentation and paperwork, which increases the cost of doing business.

Another unintended consequence that could actually end up hurting consumers may be on the issue of churning.

Churning

Churning describes a broker excessively and needlessly making a lot of trades in a client’s account to generate extra commissions. FINRA, the agency that oversees the sale of financial products, has long discouraged churning, though often the practice only comes to light when a consumer files a complaint.

Still, regulators’ success in discouraging churning has given rise to fee-based brokerage and wrap accounts. These accounts do not compensate brokers on the number and frequency of transactions, but on an ongoing management or advisory fee. It can be a flat fee or one that is determined by a percentage of the assets in the account. This mode of compensation takes away a broker’s incentive to churn accounts. That has to be a good thing, right? Well, not necessarily, if you are a regulator.

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Now, according to financial planner and writer Michael Kitces, the regulators are concerned they have been “too successful” in motivating brokers to charge management fees. Kitces notes the new DoL fiduciary rule will continue to spur a massive shift towards various forms of fee-based brokerage and advisory accounts, giving rise to an emerging new problem: reverse churning.

Reverse Churning

He says reverse churning “is where an advisor charges an ongoing investment management fee … but fails to provide any substantive ongoing investment services.” The broker places a consumer in an investment, collects the annual fee, and never touches the account again. Regulators are worried that brokers have gone from too much activity (churning) to not enough (reverse churning).

With the rise in popularity of passive investing, there is growing interest in the use of ETFs, index funds, and other passive investment vehicles. Passive investing is often framed as a “leave it and forget it” strategy that needs little attention. A lot of research validates that a passive investment strategy is usually superior to an active strategy with more buying and selling of securities.

Kitces notes that while the regulatory concern about reverse churning is appropriate, it “raises troubling concerns when paired with the growing popularity of using index funds, ETFs, and passive investment approaches. How is an advisor supposed to justify an ongoing advisory fee when the right thing for the client to do might really be to do nothing? And what if the bulk of the advisor’s AUM fee is actually for other non-investment (i.e., financial planning) services, paired together with an otherwise passive investment portfolio?”

Assessment

Regulators will probably need to address the difference between reverse churning and implementing a prudent passive investment strategy. That won’t happen before there is a lot of confusion that demands clarification. In the meanwhile, fee-only advisors who embrace a passive investment strategy will have to add another layer of busywork by documenting what they actively do for clients on an ongoing basis. Clearly, this will be easier for fiduciary advisors who also provide financial planning than for those who only provide investment advice. 

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

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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How Fees Impact Your Retirement Savings [video]

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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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Backward Market Business Research

Experimenting in Business

By Dan Ariely PhD

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 Part of the CAH Startup Lab Experimenting in Business Series

By Rachael Meleney and Aline Holzwarth

Missteps in business are costly—they drain time, energy, and money.

Of course, business leaders never start a project with the intention to fail—whether it’s implementing a new program, launching a new technology, or trying a new marketing campaign.

Yet, new…

Beginning at the End — Dan Ariely

Product DetailsProduct Details

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Seniors – Arranging to Entrust Financial Affairs

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Rick Kahler MS CFPBy Rick Kahler CFP®

For seniors, arranging to entrust financial affairs to someone else is an important part of preparing for old age. Once you have chosen a surrogate and dealt with some of the details; one question remains.

How will the transition occur?

Here are some suggestions, based on the work of Carolyn McClanahan MD CFP®.

Simplify

A good first step is to simplify your finances. For example, consolidate checking, savings, and retirement accounts. Reduce check-writing by using credit cards wherever possible and paying off the balances every month. Reduce credit cards to three: one to use in public, one only for automatic bill paying, and one for other online purchases. Not only does this simplify record-keeping, but it minimizes the disruption when one is stolen. (Believe me, it happens. It’s happened to me several times.) As McClanahan points out,

“The easier it is, the longer independence can be maintained.”

Inform

Your surrogate needs to know about all your assets. Not only does this include common liquid assets like bank accounts and securities held in taxable and retirement accounts, it also means more obscure liquid assets. Some examples include variable and fixed annuities, structured notes, collectibles, mineral rights, and cash value life insurance.

Provide access

It’s helpful to have the person who will take control of your finances begin by periodically monitoring your accounts. This will require them to have access to your financial records. If your affairs are relatively simple and your surrogate is local, you can authorize them to access your accounts and receive statements. Another good way to share information, especially if your surrogate lives at a distance, is through a secure online access site where you can share relevant and up-to-date information. Almost every financial planner offers a “client portal,” and so do popular sites like Dropbox and Sharefile.

Observe

McClanahan recommends that your surrogate start with just observing the monthly financial activities. This can mean receiving duplicates of the bills or periodically logging into investment sites. Alerts could be set on various accounts if spending exceeds a certain limit. There are several money management sites, like quicken.com and mint.com, that can also give a surrogate online access to monthly statements and spending alerts.

Participate

The activity of the surrogate can eventually be increased to attending annual meetings with your insurance agent, investment adviser, attorney, and accountant. If you have a financial advisor, it would be helpful to bring your surrogate into your quarterly or annual updates. This way the surrogate can begin to build a relationship with the advisor, which will greatly smooth the transition to the surrogate working conjointly with the advisor in making all your investment decisions.

The surrogate can gradually begin to assist with the monthly bill paying. Eventually, this would culminate in the person taking over all financial decision-making and responsibilities like purchases, bill paying, taxes, and investment decisions.

Monitor the surrogate

Having a system of checks and balances by appointing someone to monitor the surrogate may help you be more comfortable allowing a surrogate to take over your finances. The monitor might be another family member. It might also be your attorney, accountant, or financial planner, whose fiduciary responsibility would be to you.

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Assessment

Planning for the transition of our financial caretaking is one more aspect of preparing for old age that we are reluctant to even think about. Yet without it, we must eventually accept options imposed on us by family or the court. This planning is crucial in order to take care of yourself and your finances in the ways you choose. 

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:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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The Retail Retirement Wars

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The Retail Retirement Wars

Although no one is paying much attention to it just yet, there is a battle brewing in financial services to create a next-generation retirement vehicle.

And because the winner stands to inherit the power to redirect $14 trillion dollars of mutual fund assets and disrupt long-standing retirement asset monopolies, this battle is likely to go down as the largest industry duel in the history of commerce – dwarfing the cola and software wars by trillions.

Read the two articles below on order to gain a firm understanding of who will prevail and what it will mean for both conventional financial services as well as FinTech.

Part 1:

The Battle to Launch a Next-Generation Retirement Product & Control $14 Trillion in Investment Direction

Click Here to Read Article

Part 2:

DOL Fiduciary Rule or Not – Why Brokerages will be Distancing Themselves from the Retail Retirement Market

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:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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On the “Care-Taking” of Your Financial Affairs

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Rick Kahler MS CFP

By Rick Kahler MS CFP®

One area that few seniors prepare for is arranging for someone else to handle their financial affairs when they can no longer fully care for themselves.

This is easy to put off, for three primary reasons.

First, there are a lot of difficult emotions involved with the thought of losing our cognitive ability and the inherent freedom to financially care for ourselves. This is something we have done for ourselves all our lives, so it’s very hard to imagine not being able to do so.

Second, for many of us the loss of cognitive ability is slow and almost unrecognizable. There isn’t an urgency that suggests we need to do anything soon. Often by the time we do realize we need help, it’s too late for us to arrange for it.

Finally, while we’re in good health we tend not to consider the possibility of a sudden catastrophic health event. Yet such a crisis can leave us without a plan and no way in which to have any say in what happens.

National Association of Personal Financial Advisors

Fortunately, if you are reading this you have time to prepare. The following information is based on the work of Carolyn McClanahan, MD CFP®, particularly a presentation given to the National Association of Personal Financial Advisors in May of 2016.

She suggests the major questions to answer are:

  1. Who will be in charge?
  2. Are the right documents in place?
  3. How will you monitor your decline?
  4. Do you have a written investment policy?
  5. How will the transition occur?

Who will be in charge?

Choosing a trusted third party to take over bill paying, investment management, and financial caretaking is essential. Options include a spouse, a child or other relative, a friend, a professional bookkeeper, or a financial planner. For couples, the odds are that both partners won’t lose their ability to handle financial affairs at the same time. If one spouse handles most of the money matters, it’s important that the noninvolved spouse becomes involved in the bill paying routine and understands the basics of the couple’s finances. If you are the caretaking or surviving spouse, or if you are single, designating a financial caretaker is crucial.

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Are the right documents in place?

The most important document is your power of attorney that names the person or organization who will be in charge of your finances. If the bulk of your net worth is in retirement accounts, annuities, and jointly owned, another option is to create a living trust, place everything you own individually in it, and identify the successor trustee who is in charge when you can no longer make decisions.

How will you monitor your decline?

It’s important to have some written agreement in place—even if for no one but yourself—that lists the triggering events which will indicate to you the time has come to transfer the control to someone else. It’s up to you to determine what these triggers are and to self-assess every few years.

Do you have a written investment policy?

And is it current? This is a good time to review your investment policy, making sure it’s been updated to reflect your changing cash flow needs and asset allocation. You might also evaluate your ownership of any complicated and illiquid assets like real estate or closely held business interests. It may be wise to simplify and liquidate them while you’re still capable of managing them, before it’s time to pass responsibility to a surrogate.

Assessment

Once you’ve answered these four questions, it’s time to consider the last step that will be addressed in a future ME-P: how the transition should take place?

Five Reasons Families Fight Over Estates

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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On Pre-Retirement Planning

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By Charles Schwab

A 12-Month Playbook

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More:

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

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

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Money and Millennials?

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By TD Waterhouse

Savings Goals

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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:

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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™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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On Retirement Abroad

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On the new impetus to leave the USA

Rick Kahler MS CFP

By Rick Kahler MSFS CFP®

The recent presidential election was the most contentious and polarizing in modern history.

In the past it hasn’t been unusual to hear people say, “If _________ is elected I am leaving the country,” but I’ve rarely seen anyone actually act on that threat. I have a hunch that since this election more people than ever will seriously consider the option of leaving the US.

In fact, according to InternationalLiving.com, there was a 160% surge in searches for terms like “move overseas” and “expats overseas” the day after the election. Canada’s immigration website reportedly crashed on election night.

This new impetus to leave the US aside, the trend to retire overseas was already underway. The Social Security Administration already sends over 660,000 checks to US citizens living outside our borders. Retirees are looking to foreign locales for lower cost of living, especially more affordable health care, and warmer weather.

International Living

If living abroad appeals to you, the editors at International Living recommend five retirement havens that you may want to seriously consider.

Mexico is a great place to live when it comes to stretching your dollar, as the exchange rate today is 20.07 pesos to $1. Combine that with already low costs for real estate, food, restaurants, entertainment, and transportation, and a retired couple has the spending power to live very well on around $1,800 a month. Many expats choose to live in Mexico’s Colonial Highlands. Three popular towns in the region are San Miguel de Allende, Querétaro, and Guanajuato.

Costa Rica offers a choice of climates from beaches to rainforests to cool mountains. It also provides a low cost of living, excellent healthcare, modern telecommunications, arts, and fine dining. More than 50,000 expats already live here in a variety of established expat communities.

Panama offers a comfortable lifestyle, in part because the nation is much more modern and developed than most visitors expect. In Panama City, all of the amenities of a world-class city are readily available. Yet expats can still find haircuts or taxi rides for only a couple of dollars, and dinner and a bottle of wine for two at one of the finest restaurants in Panama City is only about $40.

Belize offers some big advantages—affordable living, economic stability, a strong retiree program, and a wonderful climate if you like the tropics. Fans of fishing, sailing, swimming, and snorkeling will appreciate its beautiful beaches and coastline. Moreover, it is an English-speaking country. For expats who are ready to move abroad but are daunted by the idea of learning a new language, Belize could be the ideal place.

In considering retirement destinations, Peru probably isn’t the first county to come to mind. We associate it mostly with llamas, mountains, and the amazing Machu Picchu. But after a recent visit, InternationalLiving.com editor Jason Holland described it as “one of the world’s best kept secrets.” He wrote: “Food is cheap—and very tasty. Rents are affordable even for those on super-low budgets—$200 to $400 gets you a nice place in a great neighborhood. The climate is comfortable…the people friendly…there are modern services…and the vibrant mix of music, festivals, indigenous culture, and colonial history is evident everywhere you turn.”

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Assessment

Before you decide to move outside of the US, do thorough research. Find out about tax laws and residency requirements in both the US and your possible destinations. Live in your chosen country for a several-month trial period. Most importantly, consider carefully the emotional and practical ramifications of moving away from family and your familiar surroundings. Retiring abroad may be the right choice for you, but it is not a decision to make lightly.

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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The Stock Market Doesn’t Care About Clinton or Trump

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By

Yep! 

We have only a month to go before voters settle on either Hillary Clinton or Donald Trump.

Guess what?

The stock market doesn’t care a whit.

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stock-exchange

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The Stock Market Doesn’t Care About Clinton or Trump | Rebalance-IRA.com

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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Determining Your 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

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:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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More on Childhood Obesity Trends

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By http://www.MCOL.com

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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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Retirement Investing with Vanguard Founder John Bogle [video]

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Campaigning for Safer Retirement Investing with Vanguard Founder John Bogle

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When it comes to making retirement investing safer, Rebalance IRA strives to be on the right side of history. Our latest efforts saw Managing Director Scott Puritz joining legendary investing innovator John Bogle, and other industry leaders, in a landmark pro-consumer initiative.

Watch Rebalance IRA Join John Bogle In The ‘Campaign for Investors’

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:

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Fixing Social Security

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Brian J. Knabe MD

By Brian J. Knabe; MD CMP© CFP®

http://www.SavantCapital.com

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http://www.CertifiedMedicalPlanner.org

These days, as Congress debates the debt ceiling issue in our current political atmosphere, Social Security is suddenly front page news again.

Social Security

The first thing to understand is that there IS a solvency problem with Social Security.

Alice Munnell, Director for the Center for Retirement Research at Boston College University points out that, according to the Congressional Budget Office, the Office of Management and the Budget and the Government Accountability Office, the benefits promised to future retirees exceed the scheduled taxes that are projected to be taken in.

In fact, last year, Social Security began paying out more in benefits than it received in payroll taxes–years earlier than projected, due to the 2008 Great Recession.

The second thing to understand is that Social Security is not going away; too many people today and in the future depend on it for a crucial part of their retirement income.  Munnell notes that Social Security accounts for 87% of non-earned income for the poorest third of households over age 65, 70% for the middle third and 37% for the highest third.

The Question

So the question becomes: how can Congress bring Social Security back into revenue balance.

To help illustrate some of the trade-offs, the American Academy of Actuaries web site includes a game that allows all of us to fix Social Security–you can make your own adjustments here: http://www.actuary.org/content/try-your-hand-social-security-reform and discover a variety of ways to balance the books, some more painful than others.

Options:

You could, for example, move up by one year the day when people have to wait until age 67 to claim maximum benefits, and after that index the retirement age to maintain today’s ratio between expected retirement years and work years.  This, alone, would solve 20% of the funding problem, and some would argue that it should have been done years ago.

As an alternative, you could reduce the annual cost of living adjustments in Social Security payments by half a percentage point.  This would reduce the projected deficiency by 40%.  Of course, it would also erode the purchasing power of elderly people who count on Social Security for a significant part of their income.

We could reduce benefits by 5% for future retirees, which would solve 31% of the problem.

Or we could reduce the benefit formula for the top half of earners, who theoretically are less dependent on Social Security in retirement.  That would solve 43% of the projected Social Security deficit.  It would also mean that people who are able to fund a comfortable retirement will get much less out of the system than they put into it.

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On the other side of the ledger, we could incrementally increase the revenues going into the Social Security system.  For instance, if we raised the payroll tax rate from the current 6.2% to 6.7% for employees and employers, 48% of the shortfall would go away.  As an alternative, we could tax Social Security benefits like we do IRA and pension benefits, which would make up 14% of the projected shortfall.

Sans Fiscal Health 

As you can see, none of these proposals, by itself, will bring Social Security back to fiscal health.  If you’re looking for an out-of-the-box solution to add to the mix, consider an article in the Christian Science Monitor, where former U.S. Secretary of Labor Robert Reich notes that a big (and largely undiscussed) problem with Social Security is the shifting balance of workers paying into the system to retirees collecting from it.

Forty years ago, he says, there were five workers for every retiree; today, there are three.  In 20 years, perhaps less, the ratio will be 2:1–that is, every two workers in America will have to pay whatever is required to support one retiree’s Social Security benefits.

How would you fix this problem? 

Reich proposes that we allow more immigrants into the U.S.–that immigration reform and entitlement reform are linked. As the deficit debate goes forward, you’ll hear a lot more about how to “fix” Social Security.

Assessment

Consider this a cheat sheet on the options that various parties will eventually put on the table.

Sources: Alice Munnell:  http://blogs.smartmoney.com/encore/2011/07/11/saving-social-security-raising-taxes-vs-cutting-benefits/?mod=wsj_share_twitter

Robert Reich: http://www.csmonitor.com/Business/Robert-Reich/2010/0411/Immigration-Could-it-solve-Social-Security-Medicare-woes

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 various engagements.

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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™  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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Retiree Health Insurance Trends

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By http://www.MCOL.com

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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:

Risk Management, Liability Insurance, and Asset Protection Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™8Comprehensive Financial Planning Strategies for Doctors and Advisors: Best Practices from Leading Consultants and Certified Medical Planners™

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Managing Your 401(k)

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MANAGING YOUR 401(k)

By Dan Timotic CFA

More than 73 million Americans actively participate in employer-sponsored defined-contribution plans such as 401(k), 403(b), and 457 plans.

If you are among this group, you’ve taken a big step on the road to retirement, but as with all investing, it’s important to understand your plan and what it can do for you.

Here are a few ways to make the most of this workplace benefit.

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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:

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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Proposed IRA Changes in the Obama Federal Budget

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Reviewing Potential IRA Changes 

Rick Kahler MS CFP

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

The President has fired the first warning shot indicating that politicians are eying the tax advantages of the Roth IRA. For years I’ve strongly encouraged maximum funding of Roth IRAs & 401(k)s.

Physician-Clients have sometimes expressed concern that politicians would someday retroactively change the rules and strip the plans of their tax advantages. I’ve seen that concern as a possibility (for example, in 2008 Argentina confiscated the assets in IRAs and 401(k)s and replaced them with less than desirable Argentinian Government Bonds), but not much of a probability. 

With the introduction of the President’s 2016 budget, the probability of losing some Roth IRA tax benefits has increased.  

Each February the President submits a budget to Congress which is about far more than spending requests. It also contains scores of proposed changes to existing tax laws. One such proposal in the current budget would eliminate two tax advantages of the Roth IRA.  

The first change would require required minimum distributions (RMDs) for Roth IRAs as well as traditional IRAs.  

Currently, one of the benefits of a Roth IRA is not having to take RMDs. At age 70 1/2, owners of traditional IRAs are required withdraw a certain percentage annually, often around 4%. They must pay the tax due and, if they don’t need the funds for living expenses, must invest the remainder in a taxable account. The RMD denies them the option of leaving the money in the tax-deferred environment of the IRA and further compounding.  

Under the President’s proposal, owners of Roth IRAs will need to start withdrawing funds annually at age 70 1/2. While there won’t be any taxes due because contributions to Roths are post-tax, it will remove the funds from the tax-free environment, decreasing future returns by up to 40%. That’s a big deal. 

The second proposed change would eliminate tax-deferred inheritance of IRAs (sometimes called “stretch IRAs) for anyone except spouses. All other inherited IRAs would need to be dissolved and the funds distributed and taxed within five years after death. This will really impact Baby Boomers counting on their parents’ IRAs to assist them with their own retirement needs. 

Other budget proposals would also end Roth conversions to any after-tax IRAs, limiting them to IRAs where the contributions were before taxes. This would prohibit taxpayers with earnings above the traditional and Roth IRA threshold from making non-deductible contributions to a traditional IRA and then doing a Roth conversion. 

The final proposal would limit new IRA contributions for total retirement savings totaling over $3.4 million. This includes the aggregate total of IRAs, 401(k)s, and any other pension plan balances. Once the total reaches $3.4 million at the end of the tax year, no new contributions are possible. 

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Capping IRA Growth?

To many Americans, especially the youth, this looks like a cap they will never see in their lifetime. Yet consider what $3.4 million will be worth in purchasing power 40 years from now, when today’s 30-year-olds will have to start RMDs. If inflation maintains its historical average of 3%, in 40 years $3.4 million will have the purchasing power of just over $1 million today. If someone wants to be assured they will never run out of money in retirement, $1 million only provides $30,000 a year of retirement income.

Capping IRA growth is another big deal.

Assessment 

These are a few of the tax changes proposed by the President’s budget. The chances for any to become law in 2016 are remote, given that Congress is currently controlled by Republicans. However, the proposals do signal the current thinking of lawmakers. In considering their retirement planning, taxpayers would be advised to pay attention to such signals.

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:

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The “Perfect” Holiday Gift for your Favorite Doctor – YES REALLY!

http://www.CertifiedMedicalPlanner.org

Now, is the perfect time of year to consider one, or all, of these texts as the perfect holiday gift for your favorite doctor, or allied health care professional.

Also, may be used as a client-prospecting tool for Financial Advisors, Wealth and Practice Managers, and CPAs, etc.

Smile, learn and prosper with iMBA in 2016.

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Last Generation Holiday Gift for MDs

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