Instructional Course 9, which we titled, A Bird in the Hand is Worth Two in the Bush, we're talking about personal finance topics. And my name is Ines Lin. I'm one of the outgoing co-chair of the Young Members Steering Committee. I want to acknowledge my panelists today, who are all members of either the Young Members Steering Committee or the Business of Hand Surgery Committee. We have Josh Atkinson from the Indiana University talking about preparing for retirement. Akash Chauhan from Kaiser, Colorado, discussing equity 101. Dr. David Veltrae, Dartmouth, discussing to use or not to use a financial advisor. David Zelser from Kaiser in San Francisco, the saving for your family in the next generation. Dr. Kal Shah is discussing about different kinds of insurance, life disability, and malpractice. And then I'm going to round out discussing strategies for charitable donations from a tax and cost perspective. So my thought was we have six talks. My thought was the first three, and then maybe a break for questions. And then we'll do the latter three. Obviously, no pressure that your question has to be only related to those three. You can certainly, at the end, we can open up to everyone. But I figured that can kind of give us the chance to use these chairs here. So without further ado, Dr. Atkinson. Thank you, Inez, and thanks, everybody, for attending this afternoon. I have no disclosures, but I do have a disclaimer. I am not a certified financial planner. I'm just a surgeon who learned a lot of these things the hard way, like many of us. So my talk is, when I'm 64, I'm not 64 yet, but I will be, hopefully, preparing for retirement now. So as Inez said, I'm in Indianapolis. I'm a plastic surgery trained hand surgeon. And as you'll find out, I've tried to grit this out myself and figure things out, which I kind of find interesting. So what's the goal for our retirement? It's to save enough for retirement, but what is that? It's kind of a nebulous concept. And it's going to vary for each of us, depending on what our goals are and where we started and if we have a significant other helping to contribute to these goals as well. So what are some of the barriers to saving enough? So many young hand surgeons have a limited knowledge of managing, growing, and protecting our personal wealth. And that makes a lot of sense, because you spend a decade or more training to be a hand surgeon and taking care of your family. And one of the other barriers is that you begin earning real money in your mid 30s Which sets you far beyond your peers behind your peers who started earning money potentially in their 20s So all those years of compounding interest you didn't have the benefit of that So you got you get gotten to the game a little late and then in addition to that often we have significant student loans I know some students are coming out now with $300,000 of medical school debt mortgage payments childcare expenses, etc. I'm sure you have your own list So these are all barriers to our financial success so I made up this list, but it's sort of a synthesis of various things that I learned along the way and you probably have your own version of this but for the most part the Principles are pretty similar. So first thing are you going to be the one to manage all of your investments? We'll get into that as well. And I know there's a talk later about that step two. How much do I save? Step three what retirement vehicles or accounts or are available to you? Step four. What do you invest in what we call asset allocation? Step five develop an investing policy Step six hammer away at your debt like it's threatening your life step seven asset protection So step one, do you want to manage your own investments for me? I find this stuff kind of interesting It's like a game that I get to play my wife hates finance So she has no interest in it and some of you might be like that Although if you're in this room, you probably have some interest in it So this is a good thing to figure out in the beginning and if you hate it It's better maybe to pay somebody to do it for you So for me this meant reading a fair bit initially and carving out some time Sunday morning is my thing I kind of disappeared to the office for 45 minutes and do our financial stuff Review our finances read some financial blogs get some books It's a pretty steep learning curve initially learning all the lingo, but you get a hold of it pretty quickly You're all obviously have the aptitude to do this your surgeons Step to determine how much you should save the usual recommendation is approximately 20% of your gross income Unfortunately, despite all of your altruism to treat patients. We don't get exempted from this math So some people will use this 50 30 20 rule and this is for net income So about half goes to living expenses house car food insurance utilities keeping the lights on 30% goes to savings and this can be some mixture of an emergency fund savings retirement accounts Taxable accounts and then 20% is your funny fun money fun money This is your discretionary money take out movies vacation your membership at orange theory hobbies credit card things like that So Sorry to be so blunt about this, but if this sounds impossible Consider that you might not have an earning problem, but a spending problem as surgeons given how much we make on average So case example obviously Some of us make much less than this and some of us make much more than this But we'll use this as a round number So let's say you make four hundred thousand dollars as a hand surgeon So you'll want to allocate about eighty thousand a year sixty seven hundred a month the savings And there will be some caveats to this based on your situation You could be a married single earner a single parent You could live in San Francisco or in the middle of nowhere, Indiana like me So the cost of living can be different other priorities you may have children one or many children You might be caring for an ill parent and that will impact your finances as well Another Way to estimate how much to save for retirement is to use what we thought they call the 4% rule Which is basically take your current annual spending multiply it by 25 And that gets you for example in this case. Let's say you spend 80,000 a year That means you'll need 2 million in retirement if you average it over about 30 years That's just based on historical stock returns stock market returns and again This will vary depending on your age at retirement if you your significant other spouse has a lot of savings Your spending habits, and if you have a rich uncle that passes away And you get a million dollars lump sum that will impact your needs at retirement But one thing to keep in mind is Your current financial status will be very different when you retire most likely you may not have a mortgage Hopefully you'll have your student loans paid off You may not have child care costs if they're older and have moved out So there's some things that you might have to take into account that you won't have those expenses when you retire So understand this step 3 understand what retirement vehicles and accounts are available to you So if you're an employed physician, it'll be very different than if you're self-employed What are some taxed advantage accounts taxable accounts pensions are pretty rare these days? So I don't talk about that much at all, so I don't have the benefit of a pension some some folks might So if you're employed these are really the top four 401k 403 B 457 B 401 a a 401k everybody I think has probably heard of this This is for employees of a for-profit health care organization and self-employed physicians And these numbers are as of next year 2023 so you can save 22,500 per year unless you're age 50 or older and you can save 30,000 and these grow tax deferred But any distributions in the future are taxed as income If you withdraw this money before age 59 and a half you have to pay taxes and a penalty of 10% 403 B is virtually identical as a 401 K But it's for government and non-profit hospital systems and a 457 B is for state and local government health care organizations for me I work at a Indian University, which is a basically the state Medical school so I get both a 403 B and a 457 B through my employer And then a 401 a which I don't have access to this is called a money purchase plan This is for non-profit employers who make contributions on behalf of physicians One important thing if you do nothing else contribute enough to get your match So always max out your accounts with an employee match This is up to three to five percent of your income up to a certain limits. This is free money So if you're self-employed You have access to a SEP IRA or a solo 401 K SEP is an abbreviation that means self-employed pension This is basically a traditional IRA But you can contribute way more to this than you could for a traditional IRA if you're self-employed So you can contribute either the lesser of 66,000 or 25% of your compensation and just like the other accounts these grow tax deferred but are taxable when distributed So low 401 K that's similar to a traditional 401 K But this is for a practice with one owner or a practice that employs the owner and a spouse So what are some tax advantaged accounts traditional IRA? So a traditional IRA, you can save 60, again, these are next year's numbers, 2023, 6,500 a year or 7,500 if you're 50 or older. You can deduct this pre-tax if you're not covered by a workplace retirement plan. So most employed physicians don't contribute to a traditional IRA. And in addition to that, typically most surgeons earn way more than the income limits for a traditional IRA. And we'll get to a way around that. So the account balances grow tax deferred and the withdrawals excluding the basis or the amount you've contributed is subject to ordinary income tax. A Roth IRA, this is great if you are in training because you often earn below the income limit that phases out the tax deduction for this. So the limits are the same as a traditional IRA but most physicians, like I said, earn income exceeding the AGI or the adjusted gross income limitations. I did a little bit of this as a resident, not as much as I should have, but it can be really nice if you are on a resident salary. So for those of you in practice, you likely won't have access to a Roth IRA because hopefully you're getting paid more than the limit. So you could do what's called a backdoor Roth IRA. And this is a strategy to bypass those limits. It's totally legal. First, you contribute to a traditional IRA and then you convert that money in the traditional IRA to a Roth IRA. And you can do this for yourself and your spouse. So this would be $6,500 times two every year. It has to be done very carefully. I won't get too far into the weeds with that. I would read a lot about it if you're doing your own finances. Otherwise, your financial advisor can probably do this very easily. The nice thing with the backdoor Roth IRA is that these balances grow tax deferred and withdrawals are free of income tax. Spousal IRA is similar to the previous account. So this is a traditional or a Roth for your non-earning spouse. So I do this for my wife. Non-earning spouse must meet those requirements, but they're not required to have an income. But your income must have, which shouldn't be an issue for a physician, but your income must cover the spousal contribution. And then a health savings account, it's not really a retirement account, but it's the only thing you have access to that's triple tax free. So you don't get taxed on the way in, you don't get taxed on the growth, you don't get taxed on the distributions, which is the only thing in life that's like that. But you must first be covered by a high deductible. As far as taxable accounts, these are otherwise called brokerage accounts. So these are your vanguards and Fidelity and other companies like that. You can really invest in anything in these accounts, but the most optimal investments, because these are not tax-protected accounts, are going to be the ones that generate the least amount of tax for you. So these would be low-cost index funds, passively managed accounts, tax-exempt bonds, and stocks of the U.S. and foreign companies. Step four. So now what? What do you invest in? That's called asset allocation. So the big buckets are stocks and bonds. And then if you don't have a significant interest in kind of going into the weeds of asset allocation, you can invest in a lifecycle fund, which I did coming out because I didn't know a whole lot. So I just said, I think I'm going to retire this year, I'm picking that year. So whatever it was, 2045 or something, a lifecycle fund. And it was a predetermined mixture of stocks, bonds, alternatives, cash, and real estate. And it auto-adjusts over time. So it's kind of hands-off. So it can be really nice if you want to do your own finances, but you don't really have time to mess with the asset allocation. These are some other ones as well. So alternatives, those are things like commodities, collectibles, venture capital, precious metals, currency. Real estate is actually considered an alternative investment as well. So those are REITs, or syndicates, where people pool their money to buy big properties. Or you can even own your own individual properties as well, rental properties and such. And then, of course, crypto, which everybody's probably familiar with, Bitcoin, Ethereum, and the like. Very volatile, but some people have that as part of their portfolio. So what percentage of my portfolio should be comprised of stocks? So the general rules, these are the traditional recommendations. Stocks should comprise 100 minus your age percent of your portfolio. So if you're 40, 60% should be in stocks. Now, some recommend being way more aggressive. And depending on your risk tolerance, you might want to be more aggressive. So you could do 120 minus your age percent. So if you're 40, you can have 80% of your portfolio in stocks. That's pretty aggressive. And then lastly, not lastly, but next would be develop an investing policy. This is basically codifying your plan. So write this down. What types of accounts am I investing in? What's the asset allocation in those accounts? How much do you contribute each year? If you have a significant other, you probably should agree on this. And my wife and I didn't initially agree on this. So it took some time to kind of come to a compromise. So it's really important that you agree. And this policy prevents you from selling low and buying high and other silly decisions. And then step six, continue to hammer away at your debt. So pay off to the extent that you can. Pay off your cars and other toys like a boat, things like that. Pay off your student loans. Some people recommend paying off your mortgage early. I know there's some advocates of like milking that as long as possible and leveraging the debt. And you might have other folks on the panel that recommend that. Regardless, you should prioritize high interest debt payoff. So if you have a credit card and you have a really high balance and it's at 25%, that's a hair on fire emergency. Pay that off as fast as possible. And then step seven, don't forget adequate asset protection. That's more detail and a totally different topic, but that I'm sure you can ask some of the other panel members about. So we won't get into that. Okay, next is Dr. Chauhan about saying, can you beat the market? But the talk I'm going to give today is kind of a broad topic that is very challenging and kind of some quick background about me. I just, like he had mentioned, really kind of very astutely, like I find the market to be like a game. It can be a fun game, but it can also be a very painful game. And my question is for who here trades and does their own investing, like do their own tax, like tax brokerage or anything like that? Does anyone else do like their own stuff? OK. And then just on your own completely, do you have like an advisor that helps you manage some of your stuff as well? OK. Yeah, so I mean, I think most people do use an advisor, especially surgeons. We have a lot of wealth that we've accumulated. And this is certainly not, this is more a talk on my experience and what I've learned. And it's not investing advice, but certainly all of us want to work towards financial independence and not have to be bogged down when we're 60, 65, and worry about our finances. So most people feel this way about timing the market. And even Benny Franklin back in the 1700s said, in this world, nothing can be certain except death and taxes. And of course, Warren Buffett, who's well-respected for his value type investing, said real fortunes are not made by people who have been right about timing stuff or getting the right business, but really just doing it the right way, which is investing over time and not timing the market. So what really is timing the market? Timing the market is literally buying and selling based on your own intuition, knowledge, emotions, about trying to maximize your profits and minimize your losses. And that can be done through trading, can be through other investments, real estate, any type of investment you are interested in. And so in my opinion, why would you really try to time the market? And the first reason is ego. I mean, people really think they can outsmart the market. So many active traders that think that they can get better gains than S&P 500 just following it naturally. And the data does not support this at all. I mean, there's very few people who, year after year, can actually beat the market. They don't. They actually get crushed. And so that leads into the second thing. We are a capitalistic society. So greed is what drives this. But there's nothing wrong with greed, because that's also what drives our country and makes us so successful. But you have to be careful with greed, because once you taste it and you get to that point where you think you can beat the market, you will also get crushed. Retail investing has become very, very easy to do. So that just means any of us can open a trading account, get on our phone, click and buy options, buy tons of shares. And really, you have to be careful, because it really has affected our economy very strongly in the last few years as it's become more and more popular. And I don't know how many people use apps to trade that do that here, but I certainly do. And you have to be careful, because it's kind of catchy. And it's something that really can have some very bad outcomes, especially for the younger population that we have in this country. And then there are those people that do know something that others don't, and that's insider knowledge. There is a legal way of doing this. But certainly, we are not privy to be in that world to know that kind of knowledge to time the market. So really, is it possible? And in all honesty, it's really not. No algorithm, no trader, no individual can perfectly time the market. But what you can do, and we're all smart people who have worked hard to be where we're at, is understand business cycles, understand stock market cycles, understand the macroeconomic changes. Right now is a very, very interesting time in our country. We have high inflation, high interest rates. The economy is going down. There's a lot of doom and gloom in the news. And so I think it's very important that, just like any surgery that we do, understand why and how our money flows to make sure that we protect it wisely. And also call your financial advisor and say, hey, I'm concerned about this, and not completely rely on them. Because I personally don't trust someone to manage all my money. I mean, I want to know how my money is being managed and is being managed wisely. So really, when we talk about equity 101, especially when it pertains to the stock market, it really is like psychology 101. Humans are irrational. They're emotional by nature. And if you are trading and doing these things, there's a lot of problems as far as people trading based on their FOMO, meaning fear of missing out, or this idea of you only live once. And especially with cryptocurrency, just some famous person says, I'm going to buy this. And people rush in to buy it, irrationally. And however, there is a good way to measure that. And that's through the VIX. I don't know how many people are familiar with that. But you'll see these articles come out, like Fear Gauge or the index that measures the emotional climate. And that's really the VIX. And what the VIX is is basically a ratio of how much selling is going on, so fear, in the market based on options of what are called puts. And I don't want to get too detailed, because these terminology can be very confusing. And then it's a ratio to how much is buying is going on. And so this is a measure that's measured every day. And there are certain even events that can happen. For example, when COVID hit and it peaked, I think it was March 16, there's this date that's known. And the VIX skyrocketed. And I'll show you a graph here that shows the market tanking that same day. And you can follow it. And then for some reason that day, it just tanked. And so this is a way to follow this loosely if you're interested in this stuff. And there's certain things that are out of control, like wars, especially in Russia. The climate there is very, very unstable and volatile. So you really have to pay attention to that, because that can change things immediately if something bad were to happen. And other things, elections, natural disasters, they can really fluctuate the emotion of the market. And so if you look at this, it's kind of a plot, I just made real quick, but it's S&P 500. So that's the light blue here, okay? And then the dark blue line is the VIX, okay? And if you just look and see where these huge peaks are, it corresponds perfectly to basically the S&P dropping precipitously. And at the end is kind of currently right now, the VIX is peaking or has peaked. And that's based on our current market conditions. So here's a great graph from the Visual Capitalist, which I love to read. They have great figures, they're very easy to read and follow, and they kind of give a good picture, especially for how the psychology of the market works. So most people actually are in this area here. It's this herd mentality, and they always buy high. And you may think you're a genius and you're buying at a level like, oh, I'm gonna make so much, but really, someone else has already beat you to that point. And so most people actually fall in this area because they follow the herd and they say, oh, people are buying, I'm gonna buy. This stock has gone up so much and it's time, things are positive. But that's not necessarily the right thing. And so I kind of broke down the timing of last year to kind of make this more applicable. But in November, December of last year is kind of where we got to this point where it already peaked and people were getting very confident that the market's gonna continue to go up. We've had a bull market for a long, long time and it's just gonna keep on going and going. And people were warning that like, no, this doesn't make any sense. The economy's overinflated and there's a lot of money that was printed due to COVID. And then the Fed got involved when inflation started. And in around March, they started our interest rate hikes. And then you can see that it's gonna start going down because interest rates are not a positive for the economy. And then as we started to kind of take on this inflation, doom and gloom, right now, I would say, we're kind of in this panic phase and what I call capitulation, which is a great term to kind of people that are accepting that we're in a bad situation, the market's gonna drop. We need to start thinking about rebalancing your portfolios or protecting your assets. And the good thing about the market historically is even if people say it's never gonna recover, it's gonna recover, it's gonna come back. You just have to be smart about buying in this area or investing in this area, because buying high and selling low is never a good thing for anybody. And I think the important thing is if you're a rational, disciplined investor, you understand all of this. And you understand that there's a pattern to the markets and you can follow it. And it's kind of interesting if you look historically over a long period of time, all the graphs almost look the same with certain events. The time cycles are different, but if you look at it and actually analyze it, it's like, oh yeah, this is almost like a sinusoidal wave I can follow and understand. And so really what we're waiting for if you're interested in buying or doing your own investing is waiting for this time where it's like, okay, things have calmed down, the economy has caught up, the interest rates have stopped being hiked by the Fed, and that's probably gonna come hopefully in some point next year. So the key point of this is that really out of all this, it's really time in the market, not the timing itself that really drives people's profits. And there's just a ton of data to support this. And here's a couple of figures I pulled out, but if you were someone that just held and never looked at your investments ever, the chances are that you're really gonna come out on top compared to the person who either panic buys or panic sells. With that being said, it's like, well, why am I here then talking about this? Because you also still need to be aware of the changes that can occur that can affect your investments and be smart about it. Some people just don't wanna get involved and just let it ride and be that way, but I'm someone who wants to know what's going on and see if I can kind of tweak my portfolio to make sure that I can maximize the current conditions to make a little bit more money. But overall, if you're someone that's not interested, you'll be fine because if you hold your investments, you'll be fine. Now, if you're like this guy and can predict the market in the past, whatever, 100 years, you'll have had made a $3 million percentage increase, which is impossible. But that's impossible. No one's gonna be able to do that. And so kind of he alludes to this as well is that you wanna diversify and protect your assets, not so much time them. And so there's different strategies. You can rebalance your portfolio. There's this number that's thrown around of having 60% of your portfolio in equity and 40% in bonds. And that's slowly been kind of disproven as far as depending on market conditions. Dollar cost averaging is a great way to just, if you've happened to buy high and wait it out, you can lower your dollar cost average, or people who just invest monthly can dollar cost average to kind of get a good, well-balanced price on their portfolio. Commodities, gold is certainly a good investment coming around now. It's been kind of peaking, and then now with interest rates going up and inflation, it will soon become probably a good investment. It is a hedge on inflation historically, but again, those concepts have been challenged recently. I recently bought Series I savings bonds this year actually prior to when they increased it to 9.6%, which is the highest it's been. It's a very safe fixed income asset that you can get that's protected and will not lose money. TIPS are another form of a inflation-protected security you can get through the Treasury. Dividend aristocrats are also great ways to get a fixed income, especially later stages of your career where you're really relying on income generated from your investments, and those are big companies that have a increasing or consistent dividend that's paid out. I especially like this one, Realty Income, which is a month I invest in it. It's a monthly dividend, and you can accumulate over time. It's a real estate investment trust that's been very good as far as that's concerned, and then certainly cash is always good to keep around, especially for an emergency fund, and if you're looking to kind of invest at a time when the market has bottomed out, that's a good thing to have on hand. And so one also, a couple more slides, but this is also very important. When you look at the stock market and it's going down, that's six to 12 months ahead of actually what's happening in the economy. There's always a delay. So right now, we're likely, we're hitting this bear market, and the recession hasn't started officially, even though most people believe that we are in a recession, and that's something to keep in mind. So even though you're in a recession, that doesn't mean that it's a bad idea to invest, because that is a delayed economic outcome from what is expected, and the market has already priced that in to the valuations that have occurred. So when you look at that data, and we're in a recession, people do get scared by that term, but that doesn't necessarily mean that it's a dangerous time to invest. That's a natural part of the business and economic cycle that we have. And another important thing is if you're interested in certain industries, you can rotate or rebalance your portfolio based on different sectors, and there's a lot of ETFs that do this. And if you wanna get technical, you can start doing that. You do not wanna invest in technology in a bull market or when the interest rates are going up, but when it bottoms out, that's a time to invest in like Square or Apple, and those kind of growth stocks that will grow, because they get really hammered by high interest rate environment. And then companies like Costco, McDonald's, Coca-Cola, that's where you wanna start building your portfolio now, because that's a safe place to invest in. And then because inflation is a big concern right now, inflation does play a significant part in timing. Inflation is not good for the market, but it's a necessary evil that we have to deal with based on how things have occurred over the last couple years and the bottom line is that inflation doesn't really help anyone. It raises interest rates, then you have less cash flow in the company, and it causes more expensive debt, especially for high growth companies, tech companies in particular, and that company is not gonna grow well. And then of course, because of the emotional component of this, company's projections suffer even though the product is the same. And of course, your returns then decrease. So in conclusion, really the biggest take home point is it's really timing the market, not timing the market, that allows you to be successful, to do well. There are a lot of smart people who've dedicated their whole life to this who fail at investing actively and trying to time the market. And so I would stay away from that. Rebalance your portfolio and understanding what's in your portfolio I think is very important. It's very important, especially in trying economic conditions like we have right now. And you really just wanna educate yourself and understand that your money is working for you because I have a lot of friends and family friends that just have let their money go and they have no idea what's happening and then they come back and are like, I only made like 2, 3% like last three years, which makes no sense, especially in high growth period that we just underwent with our bull market. And so you really need to know what your advisor, what, you know, whoever's managing your money is putting your money into. And also follow these trends since you understand and then that way you can protect yourself and you'll have to time things to catch up on investments that may have not been a great idea to begin with. All right, thank you guys. Thank you. Next is Dr. Valtteri talking about whether you should use or not use a financial advisor. All right, so this is a talk about whether or not you need a financial advisor. I know a lot of people may already have them, some people don't. This is a topic I became interested in just when I started practice a few years back. I did some research and I thought it was really interesting and I wanted to share kind of what I learned. So this is kind of a brief overview, but once again, I am not a financial advisor, I know we all talked about that. Kind of like doing it myself. And like I said, I want to share what I learned. So I became interested in this, actually, when I started practice a few years back. There was a local financial advisor in town. All the doctors used this guy. I actually got the son of the main guy, but he was my age. He started talking to me about golf and family, really schmoozing it up. Very nice guy. I have nothing against him, but it was clearly he was trying to befriend me. And I was looking for someone to manage my money. He had a nice website. He had this beautiful video on there made of clip art videos and things like that. It makes no sense. But he basically said, he sold it as he's going to focus on our money so I can focus on being a doctor and focus on my family as well. So after a couple of meetings with him, this is kind of what he sent. This is an actual screenshot of the PDF. Two choices, so a commission-based, I can pay him per service. I didn't like that idea because I don't know if he's trying to sell me things. I didn't really want something based on commission. And then the other one he calls him being the, quote, family CFO, which sounds great. Talks about tax planning, asset management. And then when it comes down to it, how much is it going to cost? So this is kind of what he quoted me. And then looking at, OK, how are you going to invest my money? He said, this is how I'm going to do it. On the left here, 50% growth, 50% growth in income. Again, this is just my experience is what he gave me. And then I kind of did a little bit of my own research. And these are the expense ratios for these funds, which adds another 0.7% on top of this. So with that information, I kind of did a little bit more research. And so I'll go back on what exactly is a financial advisor. They could be called lots of things, wealth managers, investment counselors. There's no actual legal definition. Most of these are, I don't know where my picture went, but most of them are certified financial planners, so CFPs. They do have to take a certification exam. They have to do a certain amount of work experience. And they loosely agree to a code of ethics, although they're not bound to it by any legal sense. What do they do? So as you might imagine, they help you with anything that involves your finances. So stocks or mutual funds, they can sell you insurance or connect you with people who do, help you with your retirement plans, any tax advice, financial coaching, or loan advice. But I will say, a good financial advisor, above all these things, is developing a comprehensive financial plan. So if there's one thing you want to make sure is not just someone who's going to hold onto your money and charge you a fee. It's going to be someone who allows you to do the financial plan. So like a previous speaker said, you get the portfolio. Do you want to do 60% growth stocks? Do you want to do 40% bonds? Do you want to do a little crypto on the side, just for fun? They will help you implement and maintain that. What don't they do? There's no hidden secret to investing. This might be obvious. I think it was kind of something I assumed. But I was like, what does a financial planner do? What's the secret that I'm missing? And as I kind of look more into it, there's not really a secret. These are things that anyone, if you have the time or interest, and I think if you're here in this room, you probably have at least the interest. There's no hidden secret to investing. You want low-cost mutual funds. Some of the resources I do, Boglehead's blogs, A White Coat Investor. I do my, I don't get up early on the weekend and do it, but I kind of do a little email blast every now and then to kind of read what's current and get some background on these things. And the other thing is a hidden secret to lowering taxes. Once you become a doctor, I knew for me, our taxes went way up. So what can I do to decrease that? There's a couple simple things, but they're kind of simple. It's not complicated. And a lot of things I think we could do on our own. How do financial advisors make money? So a couple different ways. Like I said before, commissions could be between 1% and 9% for various services. Certain products, like whole life insurance, could be 9% or even more. The AUMs, this is what my prospective financial advisor was going to charge me. That's just a flat fee. How much money they have under their management, they were going to charge me. And their standard rates is 0.5% to 2%. Some advisors pay flat fees or charge flat fees. And so this will be, again, a flat fee for the financial plan, maybe every meeting you do with them, or per year flat fee investment, which probably makes more sense once you get into the higher amounts of money you're saving. And then there's hourly fees too. And if you just need to check in every now and then, maybe every couple of years to make sure you are staying true to your initial plan, that might be a good option. So why do we use financial advisors? Why should you? We're busy, right? We've got a busy works life. We've got a busy family life. Last thing I want to do is spend more time on other things that I don't need to. Some people might need guidance or advice. That's why we're all here, kind of learn some things. We could all use that. If you have a very complicated financial situation, I'm a hospital-employed surgeon. It's about as simple as they go. If you have your own private practice, you're a percent owner or two or four. If you have other things, different family situations, that could be very complicated. You might need someone to help with that. You don't enjoy thinking about money, like most of us do. That's why we're here. But if you don't, that's a reason to get one. Our time is obviously very valuable. Or if you don't have a discipline to stick to in a financial plan, like we said before, you don't want to sell high and buy low. Yeah, you don't want to buy high and sell low. So yeah, so if you don't have the discipline to stick to a financial plan, if you're going to buy Bitcoin, sell it all and just put it all in crypto, it's probably a good idea to have someone controlling the trigger on that. What are you going to look for if you do decide to get a financial advisor? And I put those three things on the top, fiduciary, fiduciary, fiduciary. Is it fit your, what you need? Is it a good value? What do they offer? So you might, I still have many hundreds of thousands of dollars of student loans, so that's important to me. So if they know something about student loans, that's really helpful. Or if I'm doing all the legwork on that, then maybe it's not worth their time, worth my time with them. Their experience and the fit obviously is very important as well. So what's a fiduciary? So fiduciary is a person who's legally required to put the client's financial interests ahead of their own. Most people who call themselves financial advisors are not fiduciaries. The simply salesman disguise is a little harsh, but a lot of them are. They're trying to sell you things, but they don't always have your best interest in mind. So I think that's really important personally, something I would look for. And if your financial advisor isn't, you should talk to them and figure out why they're not. Reasons to be your own financial advisor. So I like saving money. I think I would save money me doing a lot of this stuff myself. I don't think I need a complicated financial plan. I think these are things that I can do on my own. If you enjoy learning about finance and investing, that's important. You don't want this to be a chore. You don't have time to find a good financial advisor because it's actually, in order to find a good financial advisor, you kind of got to know what to look for. Are they selling you a bunch of crypto? Are they doing all these weird things? And by the time you learn what the appropriate things to do are, you can probably do them yourself. If you're interested in retiring earlier, that's kind of loose. I think you probably could if you save a little bit of money with this, because every year you're going to pay this guy a fee, or lady. You don't want to have to worry about bias advice, especially if they're commission-based, or if they're not fiduciary, or if you don't, and you only want to learn the stuff that applies to you. Again, I... The truth is it's not an either or question. You can do part of it yourself, you can do it all yourself, you can use a financial planner for certain aspects of financial plan and to check in from time to time as well. So if you decide to get a financial planner, how do you find the right kind? So look for a fiduciary. And I would recommend finding a fee only or hourly financial advisor or planner. Nowadays a lot of the things that we're doing are online, you're not restricted by the guy who's in your town that all the doctors go to. So you can find someone else. You wanna look for what services and experience they have. But I think number one, make sure you're getting a good advice at a fair price. I think that's a really important thing to do. You don't wanna overpay for this kind of advice. I have a little picture there from White Coat Invest. you know, do it further on financial gain. So, back to my experience, I did a little calculation so that it is AUM fee, and then the average expense ratio. The first 500 grand I have, I'm paying this guy $10,000 a year, after a million, that's almost 20 grand a year. And if I'm ever lucky enough to have $5 million, if I'm still paying him this, that's $76,000, that's two of my kids' tuition. In my mind, I did not think it was worth doing that, so I decided to do it myself. So, I did not work with a local financial advisor. It doesn't mean I'm doing everything solo. I did actually pay a flat-fee student loan advisor. It was called Student Loan Planner, it was 500 bucks. Of course, then the government stopped all payment on federal loans, so I didn't have to do that. But it was really helpful to kind of go through it, and I got a whole spreadsheet and a conversation with them, which was really helpful. I independently researched and found insurance. I worked with a disability insurance guy I had from residency to increase that when I wasn't intending. I have a yearly financial summit, we jokingly call it, with my wife. That's our first slide from it that she made. But we just go over our family finances. She does kind of our budget, I do some of our investments, and we talk about what we're gonna do in terms of our future investments, whether we're gonna do donations and things like that. So, I think it's really important to be with your partner, if you have one, and your family, to be all on the same page. And then I do enjoy personal, continual financial education with White Coat Investor and other websites, but I certainly would be open to a fee-based financial planner in the future. And thank you. Thank you. conglomerate REITs, does that let you establish the new basis REIT before you can come out? Complete an exam and you do some sort of required time, but it does not require them to be a fiduciary That's a separate legal Document that they sign saying and it's a marketing thing, right? So they they understand that people are savvy about some of these things. So it's a way that they mark Yeah, like the guy I talked to was a CFP. He was not a fiduciary. I asked him point blank, and he gave me some spiel about, oh, it doesn't really affect what I do, and blah, blah, blah. So whether or not it does, I mean, I'm sure he's an honest guy. I have nothing against him, but if I was to get one now, knowing what I know now, I would certainly get a fiduciary. Can you give a quick five-second answer on how often you're rebalancing your portfolio? I'm still in the growth phase of sort of adding, continually adding money to all of my accounts. So if I see a problem with my asset allocation, instead of moving money, I just contribute more to the deficient area. That will change, obviously, in 10, 15 years. I have no skin in the game with this particular website, but I believe it's called Personal Capital. Some of you may use that. You can dump all of your account information in there, and it will calculate all these things for you for free. They torture you with phone calls and emails to use their services, but the app is free. So it can be really nice because it can give you, you know, are you on track for retirement? It'll give you your asset allocation and your, whether or not your allocation's appropriate based on your age and your goals. So I haven't had to rebalance, per se. I did a little bit of tax loss harvesting earlier in the year, but for the most part, I just contribute to the area that's deficient to make up for that. That'll change. So like everyone else, my main disclaimer is that I'm just a hand surgeon, but I like reading about this stuff as well. So I'm going to talk about saving for college and also some estate planning basics. So saving for college. So if you are in a position to be saving for a child's future college education, then you probably have heard of a 529. This comes in two flavors. The less common situation is the prepaid college tuition. The limitation here is that you have to kind of predict, it's hard to predict where the child's really going to want to go, you know, 20 years down the road. The other kind of common scenario is the tax advantage saving plan, 529. Every state has one. Contributions are made after tax. It grows tax-free. And then withdrawals are completely tax-free if you use them for qualified educational expenses. There is an annual limit, but the IRS allows you to supercharge your 529 by putting up to five years' worth of contributions in at once. And so right now, that could be as much as $160,000 for two parents, if you have that kind of money and you want to do that. One of the nice things about 529s is they're very flexible, and you can transfer the funds between different kids. So if Johnny decides not to go to college or doesn't use all the money, that money can be used for another child, another family member, or even for yourself. So they have a lot of flexibility. You can choose any state, but if you live in a state that gives you a tax break for using their 529, that might make sense. In my case, I live in California. There's no tax break. So I signed my two kids up for Utah's 529, and every month, I just have an automatic transfer where money goes into each of their 529s, and I don't even have to think about it. And so it's on, like, autopilot, basically. So another way to save for children is a custodial account. So this is Uniform Gift or Transfers to Minors Act, UGMA or UTMA. So these are special custodial accounts where you, as the parent or the custodian, you manage the money, but the money or the account is owned by the child, but they don't have access to it until they're, like, 18. And so once they become 18 or 21, depending on the state, the funds are automatically under their control, and they can spend them for, really, any purpose that they want. So you don't have control over that. So when we're talking about how best to save for college specifically, 529 probably has some advantages over the custodial accounts. I want to touch a little bit on some special things about the Roth IRA and how you might be able to use it for college, right? So if you are over 59 1⁄2, you can withdraw your Roth IRA funds completely tax-free, spend them on college. So this might be a good benefit for somebody who's an older parent or for a grandparent paying for their grandchild's college tuition. If you're under 59 1⁄2, you can still withdraw the contributions tax-free. The earnings will be subject to a tax, though. The second point I want to make is about the stretch IRA. I don't know if anyone's heard of that. But it used to be that if you were inheriting somebody's IRA, okay, like, you're a child, you inherit your grandparent's IRA, you could, like, stretch it out over your entire lifetime, and it could be a really powerful saving tool, like passing wealth on to generations. In 2019, the SECURE Act basically ended it, so it's no longer a thing. So now what happens is that if you inherit an IRA, you have a 10-year window to withdraw all the funds or else. And there's some exceptions for that, but that's kind of a newish thing that wasn't there a few years ago. I'm going to switch gears a little bit and talk about estate planning basics. I like this excerpt from the Financial Residency website because it really kind of boils it down to what's important. Basically, an estate plan is not just for the super wealthy, okay, it's for all of us, and it's a set of legal documents that details what we want to happen to our assets when we die, right? So like the Benjamin Franklin quote, death and taxes. And so some quick definitions I think are really helpful, right? So a will is basically a document that you write out your instructions for what you want to happen to your assets, so you designate beneficiaries for all your stuff. You also can designate guardians for minors and pets. If you die without a will, they call that intestate, in which case the state decides what to do with all your stuff. So you may have heard about the unfortunate case of the actress Anne Heche. She died recently unexpectedly and without a will, and so now there's this big fight over who gets to control her estate because she did not have a will, right? Probate is a public court process whereby a judge, a probate judge, determines the authenticity of your will. So they don't take it at face value, they still have to like go through and authenticate it. So it can be a public lengthy and costly process, and so one of the goals of estate planning is to try to avoid probate. A trust, so a trust is a legal arrangement. A trustor gives a trustee the right to hold assets for a beneficiary. It's best conceptualized as like a box, and the trust is the box, and you just put your stuff into the box. A living trust is when you create this trust while you're alive, and then when you pass, your things are given out per the instructions of the trust. Sounds kind of like a will, but unlike a will that has to go through probate, the trust bypasses probate because it's kind of like legally vetted when you write it. So that's the advantage. A living will is also known as the health care directive or advance directive. We've heard of this. It's end of life care instructions. You can designate a medical power of attorney to make medical decisions if you're incapacitated. You can designate a durable power of attorney to kind of handle your bank accounts when you're incapacitated. There's a lot of trusts. There's like a dozen different kinds, and some of them are designed for very specific purposes, but to make it easy, I like to think about trust as being either revocable or irrevocable. So revocable means that the grantor, the owner, can modify or terminate the trust really any time. Therefore, they still have access to the assets, and it's part of their taxable estate, and those assets are not protected from creditors. In distinction, an irrevocable trust cannot be modified or terminated. The box is sealed. So those assets are removed from your taxable estate, and they're thereby protected from creditors and settlements and things like that. So we talked earlier about the custodial account for a child that is like theirs to blow on whatever they want when they turn 18, so they can go buy a fancy car, and you really can't do anything about it. In distinction, if you have that money in a trust, you can write into the language of the trust how that inherited money is going to be dispersed. So for example, you might base it on the age of the child or the adult now. You might base it on, like, reaching certain milestones like graduating medical school, right, or having a child, getting married, things like that, buying your first house. Estate taxes. If you listen to everyone else on this panel and you have a really great financial life, by the time you're at the end of your life, you might have a very significant estate, and estate just means your net worth when you die, right? So estate taxes are levied by the federal government. Some states will do them, too. But in reality, like in 2020, only .04% of estates paid any estate tax, so it's pretty unlikely you're going to be paying estate tax. Currently, in 2022, if you die this year, the exemption for a married couple is $24 million, although this changes every few years, so you can see that in a few years it might go back down to like $5 or $6 million, so you have to stay on top of that. Part of estate planning is figuring out strategies to avoid the estate tax, so you're just going to talk to your professional, you know, your advisor about that. One way is irrevocable trust, removing that money from your estate. Another way is giving it away, of course. So you know, in summary, right, what does an estate plan really look like? Probably for most people, it's going to include something like a revocable living trust, which essentially replaces the function of a will. You're going to designate guardians for minor children. You're going to have your advanced health care directive and appoint durable or appoint power of attorneys. If you have a business, right, if you have a stake in a business like a private practice, you might put that into your trust as well. So it's very personal, it's very specific, and therefore the details really matter with these things, so it's best to talk to a lawyer or a professional, not just me. But in general, if you're going to be working with an attorney, expect to pay like $2,000 to $5,000 to set up a estate plan for the first time, and you're going to want to update this when you have major life changes. So if you move to a new state, the rules change, so you have to kind of go back and revisit it. If there's a birth of a child or you get married, divorced, any of those major changes are times to revisit the trust. If you're wondering when's the best time to kind of think about starting estate planning, there's probably no great time. I mean, I think if you have your first child, that's probably a good, you know, impetus to start and do it. So my take-home points, number one, 529 is a good vehicle for saving for college. The Roth IRA is a very powerful and versatile savings tool. Think about estate planning. It's not just for the super wealthy. And don't forget, I'm not a lawyer, so please talk to someone who's a professional. Thank you. Okay, next is Dr. Shaw from Scripps in Southern California, talking about insurance. Thank you, everyone. I have the exciting topic of insurance to tell you all about. Thank you for saying this late. So I've tried to break it down and tried to make it just kind of some basic points about insurances and why it's necessary and how it might benefit you. No disclosures related, but again, I work as a surgeon. I'm not an insurance broker or anything like that. I just have an interest in finance and insurance and how to protect the assets we are lucky enough to accumulate through our careers. So first off, I wanted to start off by talking about life insurance. This is the simplest form of insurance, often known as term life insurance. And it's kind of morbid, but the only way it pays out is if you die. So it's called a death benefit, and that's all it provides. And usually, you're able to get a pretty large death benefit for a fairly low cost compared to other forms of insurance. And typically, personally, the way I think about it is if you are married or have a partner and they're working, you don't need it. But once you have kids, it might be a good idea to start thinking about term life insurance, just so if you pass, your spouse or your partner has some time to adjust to the new life and can help for the kid's college or whatever mortgages and things like that you have. The premiums for the term life insurance are often based on a variety of factors. They'll do a pretty thorough medical history. They'll dig through your medical charts. They have access to all your prescriptions, so you're not lying to them on the health history form. But the premiums are based on your height and weight, so your BMI. They're based on personal family history, personal medical history, family history, and especially any cardiac history or cancers. Generally, you want to purchase a policy with a level or a fixed premium, meaning they can't change the premium 10 years into the policy. Say you buy a 30-year policy that pays out a million dollars. You want to make sure it's a fixed premium, so your premium is set every month for the following 30 years, and they cannot change the premium after. Some tips on life insurance. You might want to consider laddering the life insurance policies. Our needs often change with time. You have more kids. You want to get more insurance. You get a bigger house after you follow all these tips. You might want to buy a yacht because of all the money you'll have saved, and our goals and budgets change over time. An example for laddering might be, okay, you have your first kid. You're in residency or you're in fellowship. You get a $1 million policy for 30 years, so now you have a million dollars I'll pay out for the next 30 years. Five years later, say you have a second kid. You get another $1 million policy, but for 20 years, and then, say, five years later, now you move into your big attending house on the water in San Diego. You get a third $1 million policy for 20 years. Effectively, what ends up happening is you have a $1 million policy from year 0 to 5, $2 million from year 6 to 10, and for years 10 to 25, you have $3 million of insurance, and then it starts tapering off every five years, so that way you're not paying for more insurance than you need, but at the same time, you have good protection as you go through different stages of life. And after year 30, when you're age 55, 60, you probably don't need insurance because by that point, you should have accumulated relatively enough wealth so that if you don't have an insurance policy, your family will still be okay. Whole life insurance. I won't talk a lot about this, but essentially what it is, it's an insurance product built in with an investment product. Not sure why it's done that way except for making a lot of commission for the guy who sells it to you and a lot of money for the company that sells it to you. Short of very unique estate planning situations where you have so much money you don't know what to do with, it's not usually a great vehicle for your money if you're really being sold on the investment portion of it. It's often described as a policy that's meant to be sold, not bought. A portion of the premium that you pay for this whole life insurance policy will go to the insurance part of it, a portion of it will go to investment, and a large portion of it that's hidden is in fees. So it's often better to buy term life insurance and invest the rest instead of giving the whole life insurance companies the premiums. Next up is malpractice insurance. There's two flavors. One is individual and one is group. The group one is often bought by the group you're employed with or you work with or your partnership that you're in. So you have no control over that, that's just a freebie you get for being part of the group. And the other one is individual and I'll talk about that in just a second. I'm sorry, I'm thinking about something else. Malpractice is usually bought by the group, so ignore everything I just said. It's usually something that the group buys. But there's different types of policies and you want to know which one your group has. There is one type of policy called a claims made policy. It's usually the most common one. It kicks in when an event happens, the policy is active, and the event is reported or a claim is made, someone sues you essentially, while the policy is active. That's a claims made policy. Then there is a more expensive version, and it's more expensive because it's usually better, it's called an occurrence policy. And the occurrence policy is a policy that covers events while the policy is active, but may be reported when the policy is no longer active. So say for example, you're in a group, you work for 30 years, you have a policy that's an occurrence policy, you retire after 30 years in practice and someone sues you a year after your retirement, so you're no longer in practice, but they're suing you for something that happened while you were in practice. And if you had an occurrence policy, that would cover you. It's usually more expensive because they have this tail period factored in that covers you after you no longer have that policy, but something happened while the policy was active. The coverage amounts are usually denoted as two numbers. The first number is how much the limit is for each incident. Someone sues you, they will pay up to a million dollars. And the second number often is the annual aggregate. So if you get sued three times for a million each, you're covered. Anything more than that, you're not. In the event you change carriers or change jobs, you want to look for tail coverage from the previous carrier. And usually they'll ask you for 1.5 or 2.5 times the annual premium you or your company was paying on your behalf to cover you for the tail period. So after you leave that practice, if someone makes a claim on something that happened while you were in that practice, while the policy was active, they would cover you. It's usually actually cheaper to buy nose coverage by the new carrier. And the new carrier will protect you for a claim that's made while you're at the other practice before you switched over to the new company. It's important to also understand who decides on when a claim that's coming in is settled or it goes to trial. You might not have a say in this. It might be dictated by the group. So I joined Scripps. Scripps has a policy with the doctor's company. That's the insurance company. And that company has the right to settle. So I had to sign. And I said, hey, what if I want to have a right? And they're like, sorry, if you want to join Scripps, you have to sign this. That's the only option available. So you might not know. But at least I know what happens. And they said, we've never had a doctor disagree with us in the past over the decision to go to trial or settle. So they usually work with you. But they have the final say. And so what I had signed was a consent to settle, meaning I give the doctor's company the right to settle if they choose to. And it's just part of the signing paperwork that you'll have to do. The other thing to ask is, what about the defense cost? Remember, I told you about the $1 million per incident, $3 million per year maximums. You want to know if the defense cost, the cost of the lawyers to defend you, is it coming from that $1 million or is it outside that policy, just so you know how much you have. Finally, disability insurance. This is what I got confused with earlier. There's two types of disability policy. There's a group plan. And there's a medical group plan or employer plan. And then there's individual plans. So there's three different types. The group plan or the associate plan, you might be familiar with these. These are the emails we get from AMA asking if you want to buy their insurance product or the American College of Surgeons, et cetera. These policies are not the best, but they're really cheap. The reason why they're not the best is they can be canceled at any time. Their company holds that right. They can increase the rate, the premium that you pay at any time. And they have a very restrictive definition of what's called what's disability. So typically it's not worth the money, but they are pretty cheap. The second is the medical group. So when you join a group, they often have a group disability plan. You have absolutely no say in what it is. You just know what it is and just know what the amounts are. The policy does end the second you leave the group. It does not follow you. They may have restrictive definitions of what they consider disability. It's not under your control. So if you are a hand surgeon, all of a sudden you can't operate anymore because of an injury, but you can still see patients in a non-operative capacity, they might not consider that as disability and you wouldn't get anything paid for that. An employer typically will cover the premiums or it may be deducted from your paycheck in a pre-tax capacity, meaning you don't pay any taxes on that premium. Unfortunately, what that means is if, say, the disability policy kicks in, because it was paid using pre-tax money, the benefit that you get on a monthly basis, you'll have to pay taxes on it. So your monthly benefit will go down significantly based on the tax bracket you're in. And typically, like I alluded to earlier, it's not own occupation, meaning they won't consider a disability a disability if you're employed in any capacity. Legal policy is usually what we all should have as surgeons. The best options and deals come from independent insurance agents. There are a lot of different companies that only sell insurance through their agents. And for better or worse, the downside is that agent does not have the ability to sell you any other insurance. And there might be other insurance products that are out there that might fit your needs better. But if you talk to the guy from company X or a gal from company X, they won't give you any other options. So the best thing to do is talk to an independent insurance agent that can give you all the options available and help you choose the right one. Six important issues that I'll talk about when considering the disability policy, which is, like I said, probably the most important insurance policy we have to get and you should consider getting if you don't already have one. And we can talk about some strategies on how to get a disability policy. Here are the six things. I'll just go through each one of them. First is you want to make sure the policy is non-cancellable and guaranteed renewable. It's pretty self-explanatory. The insurance company cannot cancel your policy for any reason once it's signed. The other part is they're obligated to renew it for you every year at the rates that were set when you signed it. And they have to say, hey, this disability policy will be given to Dr. So-and-so at this rate, and they have to honor that rate. They can't change the rate at any time. They have to have a very good, strong, true own occupation definition. Usually I'll say something to the effect of if the client is unable to perform the material and substantial duties of your occupation, the policy would kick in. Based upon the duties you're performing immediately prior to your disability. And usually to figure out what that means is by looking at CPT codes has been one way. The company might say, okay, give me all the CPT codes of surgeries you've done in the past one year. And say you're still operating but not doing your practices change substantially, and you no longer can do a lot of CPT codes, you can use that as a reference to say whether or not the policy will apply or kick in. If you become totally disabled from your own occupation and choose to work in another profession, you will still receive the benefits regardless of the income you generate. Say you become a radiologist because you can no longer work as a hand surgeon, and say you have an awesome job as a radiologist, you're making more than you were as a hand surgeon, the policy will still kick in because of the true occupation or own occupation definition. These six are some of the, you know, big names in individual disability world. They all have really good policies. They all have nuances that an independent agent might be able to explain. One thing to consider is if the insurance company offers a partial disability or a mental health disorder benefit, usually it's a rider. A rider in their insurance world is slightly extra money you have to pay for a certain benefit. So some companies will have a partial disability claim rider, meaning if you can't perform certain procedures, say you have this tremor all of a sudden and you can't do micro or replans anymore, you can't do flaps anymore, because of a medical condition, that you can make a partial disability claim. And they would make sure that you haven't billed for any micro-related CPT codes, and you did in the last year. And if it pans out, then you start getting the partial disability benefit. The mental health disability is usually limited to one or two years, based on the company you have. And just a side note, dementia is considered a medical condition, not a mental health condition. So if you get dementia, your policy would kick in and would stay active, the benefit would stay there until the policy runs out. Recovery benefit is an extra, another rider you can get. And what that is, is say you have an injury or some form of disability, and as you go back to work, you might not make as much money as you did, or you might not be as productive as you were. So they would cover that difference as part of your recovery. And it's a temporary benefit, usually for a certain period of time that's defined in the policy, but they will help you during the inadequate income you're pulling in, compared to what you were prior. And the amount that they would consider recovery is usually based on the percent of the earnings you lost, and you have to prove that to them. This is one, the cost of living adjustment, or COLA. I would highly recommend getting that, because the way inflation works and it goes, what your policy pays out today may not be worth as much 25 years from now when you might have to take advantage of that policy. So this COLA rider keeps the benefit up with inflation. So when you do cash in, when you do qualify to make, get the benefit from your policy, the money you get would be adjusted for inflation. The future increase option, another really good option to make sure you have in your policy. It's the right to increase your monthly benefit regardless of your health. They can't do a health check or something like that again. As you get older, you might get more medical conditions. You don't want to be, you want to make sure that they can't use your new health condition as a reason not to give you this option. And they have to give you the monthly benefit increase at a fixed premium. That's defined when you start. And the increase is based on your annual income. So as your annual income goes up, and if you have more than one policy, they take that into consideration. But if your annual income goes up, your monthly benefits can go up as well. Some companies include it for free, and others make you purchases. And usually if you're paying for it, you're paying for that extra rider, you can exercise it at any time. You can exercise it in five years, ten years, et cetera. Usually if a company gives it to you for free, which is something I found out from my personal policy, the hard way, you need to check in with the company. If your income goes up, as mine did when I went from fellowship to practice, and I did not exercise at least 15% of the increase that was available to me, I lost that extra benefit. So you kind of want to make sure your agent tells you what type you have, and, you know, hey, when should I check in, every three years or whatever, and just put it in your calendar as a recurring event. Usually max one company will allow is 15 to 20,000 benefit per month. That number, you can get a second policy, but the second policy does not have the same maximum. They look at it as a cumulative benefit. So the strategy to get disability insurance is, you know, say you are a resident or a fellow, cash flow is tight, or you're a new attending, you have a lot of expenses, a lot of student loans, you may want to lock in the best rate, so it's still good to get a policy when you're a resident attending, a new attending, or a fellow, when you're younger and presumably in better health, and especially if you're training in a low premium state. So there are some states, like California and New York, where the monthly premiums are the highest in the country. There are some states, like Rhode Island, where I was for my residency, where the premiums are a lot lower. It's better to get the policy when you're in Rhode Island, because the premiums are based on my Rhode Island residency status, and the future premiums as I increase my monthly benefit, it will stay on the Rhode Island numbers. So it's important to get the benefit or the policy when you're younger. And it's often better to get two policies. And you might, you know, as a resident, I think it's $5,000, you can get a $5,000 policy, it might be good to break it up into $1,000, $4,000, two policies from two different companies, because you get two increase options. So you can go past company one's maximum benefit that's allowed, $15,000 or $20,000, you can, once you max that out, you can use the second company's maximum, which may not be $15,000 or $20,000 anymore, because you already have one policy. It might be $8,000, but, you know, more than what you would get with just one policy. And our income as hand surgeons will typically allow us to exercise and get the benefit that's more than one company's max of $15,000 or $20,000. So in summary, you know, we've worked hard. It's important to protect our investment. Every individual is different, so your insurance needs might be different than mine. And not everything in life is in our control, so don't leave it to luck. Be prepared by getting appropriate insurance products. White Coat Investor is something that Dave mentioned. It's a great resource for those of you who don't know it. There is a, you know, beginner's section, educate yourself on what some of these basic personal finance and insurance concepts are. A lot of good videos, a lot of vetted recommendations, like for financial advisors and insurance agents. I got mine through that website. Larry is an awesome guy. He's independent. And he shared some of the slides I used, so I want to give him some credit for helping me out. Thanks. I acknowledge that it's 6-15, so if you have to leave, my feelings won't get hurt. But I am going to talk the last bit about kind of a different thing. You know, I've been in practice for about 11 years now, so I'm a little bit more settled in my finances. And so we've been thinking a lot more about charitable donations. Obviously, we all get the ASSH, AFSH e-mails asking for donations, and there are some things that we've learned and are continuing to learn that I thought might be worth sharing with people who are interested. So there are some tax implications of charitable donations, and so I'm going to go through, I think direct donations and donor advised funds are kind of the ones that are probably most relevant to us as hand surgeons. The charitable trust, private foundations, and QCDs are something that you're going to need help with the lawyer and attorney, so, I mean attorney and financial planner, so those are going to be quite more, a little bit less covered. So we get these all the time. You click on the link to make a donation, and it takes you to this, and you enter, you know, your credit card or however you want to pay, and why do we, and what's the benefit of doing that? So when we donate cash, obviously the advantage is that it's easy and accessible, and you can be very flexible. You can give someone a dollar and, you know, count it, keep it in your record books. And the benefit is that there's a tax deduction. You do have to make sure that it's a qualified nonprofit, so an organization with a 501c3 status. You do have to keep your receipts depending on whether you're claiming a standardized or itemized, a standard or itemized deduction, and it needs to be within that calendar year. I'm going to take a little detour. I don't know, is everyone familiar with the concept of standard and itemized deductions? So your standard deduction is, you know, a fixed amount that reduces your taxable adjusted gross income. These are the numbers for 2022. There was a substantial increase with the Taxes and Jobs Act in 2017, so they're pretty high for maybe someone who's starting out. The advantage is you don't need to itemize your deductions, but you do have to remember it's not just charity. It's charitable donations. It includes your out-of-pocket medical expenses, state and local taxes, mortgage interest. So all those things add up. But the advantage is there's no record keeping in receipts. If those relevant deductions are greater than that standard amount, then you may want to consider itemizing, and that requires filling out a Schedule A that is attached to your form, your 1040. And like I said, it's those things listed here, and charitable donations is the one at the end. The interesting thing is when you donate to charity and you're donating cash with some of the recent bills that have been taxed or passed, you can actually deduct up to 60 to 100% of your AGI from your, that can count as your deduction. But the important thing is that you have to keep records. If it's less than $250 of donations, then you don't. But if it's anything that, greater than that, then you need to keep a receipt. And if anything over 500, there's actually some additional forms that you have to fill out. Obviously, the cons of donating cash is that oftentimes then you're signed up on some kind of mailing list, and you'll get more and more requests to donate. There is record keeping. And for, as were, you know, you're investing in the stock market, you're developing equity, there is a cost of liquidating assets. You're paying capital gains tax on selling your stocks. There may be realtor fees if you're selling real estate to donate. You can also donate ordinary property. So I think of this as kind of like our goodwill donations. And then that is kind of fair market value of what you donate, assuming it's in good condition, within ordinary property or your short-term capital assets that you've had for less than a year. One thing that we have been doing a lot in our household is donating appreciated long-term property. So this is stocks that you have bought that you have for more than a year. So if you have one year, one day in your name, that counts as long-term, appreciated long-term property. And the major advantage of doing that is that you can deduct the full share value on the date of donation on your itemized deduction list. You do need to keep the cost basis information. We've learned for record keeping, but it's the total amount of the stock value and not just the appreciated value, and not just like the minus the cost basis. The annoying parts are there is a lower AGI limit with your equity. There is paperwork that I'm going to go over in the next couple slides. And there is a little bit of lag time for execution, usually a couple days. So this is what we go through Vanguard. That's where a lot of our accounts are through. And so, and this is what you would hit if you were donating through Vanguard. And then on the bottom right is the AFSH stock donation page that we've used to donate in the past. You do need to have some charity information, including their DTC number, institution name, charity name, and account number. And then you need to know what stocks you're donating. So you need your stock code, name, number of shares, estimated value. And you have to, and that goes into your account, your brokerage account, and that also goes into, that goes to the organization that you're donating to. This is a slide that I took from a Schwab website that kind of shows the tax benefit of doing this as opposed to donating cash. So assuming that you have stocks and you want to donate that value in cash, that would be the first column, option one. And you can see how much you're going to save from taxes from, you know, deducting it on your tax account, but you have to pay the capital gains tax. Whereas the column on the right is option two, where you just take that stock and you donate it directly to charity, so there's no capital gains tax. So that middle row, you save that $22,000 of kind of hypothetical capital gains tax, and so that you net 37 as opposed to 14 in tax savings. The other thing that I think another way to manage charitable donations in a tax advantage way is using a donor advised fund. So this is basically a charitable given account that is basically for growing investments and assets for the purpose of charitable donation. So this contributions to a donor advised fund are tax deductible for the year that you're contributing. The assets grow tax free, so very similar to a Roth IRA or a 529, and then advantage of it is you can donate one year and then it just sits there and you don't have to donate, you don't have to donate to charity until later. But the problem is, is once you put it in that account, it all has to go to charity, no take backs. Other advantages are it can be anonymous, so it's a nice easy site, one place for all your record keeping, and we don't have it, I've been debating back and forth for years on this, but it sounds like it's pretty nice. So you basically, if it's a known organization, you just find it on the thing, click on it, say how much you want to give, and that's done. There is some limitations, depending on the institution, there are some minimums. So the Vanguard Charitable Fund, the minimum is $500 for each donation. Fidelity is nice because it's only $50. And there are some administrative fees, although the argument is that they're pretty comparable to your low cost mutual funds. One other major advantage for the donor advised fund is this bunching strategy, and so the idea is if you have some variable income, or you're someone who kind of sits between should I take a standard deduction versus itemized deduction from year to year, what you can do is basically put a bunch of money in your donor advised fund that will then push you up into the advantages of having an itemized deduction, and then the subsequent years, you have money sitting in that donor advised fund that you can continue to kind of meet your annual desires of donating to charity, but you've already had the tax benefit, and you can just use the standard deduction method for your taxes those following years. And so this is a slide from the Vanguard website, and it's showing how you can do that. So basically kind of concentrating your tax benefit of an itemized deduction in one year, and then kind of simplify to standard deduction for the following years. The last few slides are gonna be kind of, again, just very basic. There is the option of a charitable trust, which basically allows you to split the interest, so you have income in principle going to different places or people. There are various terms, unit trust and annuity. This is all in your handout, so I'm not gonna go through it for sake of time. And then which, whether the charity gets the income or the charity gets the principle at the end is lead versus remainder. You need an attorney for this. It sounds like really this is kind of when you're thinking about selling your practice or business, and you have a huge windfall of cash, and you kind of want to tuck it away somewhere with some financial benefits either to the people in your family and also a charitable organization. The other option is a private family foundation. So these are private organizations. It requires like some legal documents to set up, and you have to abide by IRS regulations. Unlike the donor advised fund, there's no administrative fees, but they do need to be managed, so either by yourself or someone in the family or you hire a manager. You can pay board members with this, so it's like if you want families to kind of get some kind of pay through it, it's nice. But there are some rules about how much you disperse every year, and the grants are publicly viewable, and there are some limitations on how much you can do relative to AGI. The last option for someone who's really approaching, this is probably not related if you're just starting out in practice, but if you are, if you have an IRA that's accumulated quite a bit of wealth, and you're approaching your RMDs or your required minimum distributions, you can actually take a portion of that, up to 100,000 if you're over 70 and a half years of age, and actually directly donate that to charity, and that goes tax free, and that's called a qualified charitable distribution. So that's kind of charity, charitable donations in a nutshell. Any questions for me or anyone else here? Well, thank you very much. I know there are a lot of ICLs, so we greatly appreciate y'all coming and for you sticking to the very end. Thank you.

personal finance

retirement planning

equity investing

financial advisor

charitable donations

saving for retirement

fiduciary

financial plan

budgeting

investments

college savings plans

estate planning