Graduation is just around the corner for many residents and fellows. Over the many years we’ve been helping doctors, we have identified 7 key points they should consider when transitioning to an attending position. These crucial points will protect their financial goals now and in the future. Today we will discuss these steps, and why they are so important.

Through the years, Katherine has seen certain mistakes repeated among physicians and dentists. To better understand and then correct these mistakes, Katherine joins Dr. Kristy McAteer, from Brown University, to discuss the biggest blunders she sees, and how to take actionable steps to correct them.

Contracts can be confusing with their legal jargon and dozens of pages. Often, our doctors know what to expect for income but are not so sure about how other benefits compare and which benefits they really need. One of the many services we provide our clients is a financial review of prospective employment contracts.

Special guest, Josh Lantz, CRPC®, Chief Investment Officer and Financial Advisor, joins Katherine Vessenes, JD, CFP® in today’s podcast about tax-efficient investing. With tax season upon us, you may be wondering what you could do differently to minimize taxes in retirement. Today’s episode is all about how we do this for our clients using 3 tax-efficient strategies. When it comes to investing, it’s not what you make, it’s what you keep. We want to help you plan, protect and prosper.

We have all heard of a Roth IRA account, but many of our clients have not heard of all of the benefits. You’ll remember in episode #5: The Tax Triangle, we mentioned Roth IRA accounts while talking about the “Tax-Free” bucket. Today, we’ll deep dive into Roth IRA accounts and list the top reasons to invest in one.

We love to celebrate our doctors every day. Throughout this last year, we have celebrated some awesome highs and seen some unimaginable lows alongside our clients and their families. We’ve come to think of many of our clients as family and find ourselves so privileged to work with them every day. For that reason, we wanted to take some time today to share why we started working with doctors and why we continue to assist them with achieving their financial goals.

Some of our clients have inherited an IRA from a parent or other family member, and many have more than one IRA. Because of this, there are some things that every doctor should know whether they have inherited one or are naming a beneficiary for their own. We find it important for both groups to know these 6 important specifics for inherited IRAs:

#1: Know the Limitations

• An inherited IRA cannot be rolled over into another IRA account and another IRA account cannot be rolledl into an inherited IRA. They must remain separate.

  • This also means that an inherited pre-tax IRA cannot be converted into a Roth IRA.

• You cannot contribute additional funds to an inherited IRA.

• Once money is distributed from an inherited IRA, you cannot undo it or replace the money in the account.

#2: Know the Options

• Transferring inherited IRAs from one custodian to another is allowed, as long as the account remains an inherited IRA. This can be helpful in the case:

  • You prefer/are more familiar with a certain custodian.

  • The original custodian does not have your desired investing options.

  • You have an advisor that uses a different custodian that you would like to manage the funds.

#3: Know the Taxes

• IRAs are not taxed when the account is changed from the deceased’s name to the beneficiary’s name.

• Distributions will likely be taxed at normal income tax rates at your tax level.

  • This can mean that you may enter a higher income tax bracket.

#4: Know the Expectations

• The rules here get broken down by beneficiary types and date of death of the original account owner

  • Eligible Beneficiary Designations

    • These are surviving spouses, minor children until age of majority, disabled individuals, chronically ill individuals, or individuals no more than 10 years younger than the deceased.

    • Any designated beneficiary who inherited before 2020

    • Funds can be removed over their lifetime

    • Annual RMDs required

  • Non-Eligible Beneficiary Designations

    • There are all other beneficiaries that are people and a few specific types of trusts (common examples are grandchildren and adult children)

      • Funds must be taken from the account within 10 years for deaths after 2019

      • No annual RMDs

    • Non-Designated Beneficiaries

      • Non-people beneficiaries (estate, charity, non-qualifying trust)

      • RMDs and the 10-year rule are based on the age of the original owner at death

      • We recommend you talk to your tax advisor to make sure all necessary distributions are accounted for

#5: Know the Advantages

• There is no early distribution penalty, if you pull this money out before you’re 59 ½ years old.

  • Most retirement accounts carry a 10% penalty for taking distributions before you reach 59 ½.

• Once the beneficiary has received the account, they are able to name a new beneficiary. This way, if the funds are not used, the account will easily pass on to whomever they choose.

#6: Know an Expert

• We know this is a lot of information for our doctors. The good news is we talk to doctors every single day about tax planning, whether it’s for this year, retirement, or their estate.

If you have any questions about inherited IRAs, please feel free to reach out to us or talk to your CPA. We’re very happy to talk about the options available to you and coordinate with your CPA on any of these matters. Remember that here at MD Financial, we have a passion for helping doctors create peace with their financial future.

If you found this helpful, please forward it to colleagues and remember to follow us on social media. We’re always accepting questions/topics for future episodes of our podcast, so write in or call with your suggestions. Finally, you can reach out to us directly for a second opinion on your financial health, by emailing us at [email protected].

Listen on Apple Podcast or Google Podcast

CONTACT US

1-888-256-6855

[email protected]

Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 500 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at [email protected].

In this week’s episode of More Money Minutes for Doctors, we’re going to discuss four of the most common reasons doctors take on a side gig. If you feel the same way as the doctors we are about to discuss, you are not alone. A side gig might just be the financial solution you are looking for.

Do you know your current credit score? Do you know what you have done today, this week, or even this year that has affected that score? Many doctors don’t realize that their spending habits as residents and fellows can affect them when it comes time to buy their dream homes later on.

Today, we’ll cover seven tips to avoid a bad credit score and/or to help rebuild your score if you’ve already made some of these mistakes.

At MD Financial, we like to avoid any surprises when it comes to our clients’ financial futures. One thing doctors don’t often think about is their credit score. Credit scores are extremely important in the home buying process. A lower score could mean higher interest rates on a mortgage, leading to higher monthly payments and paying significantly more overall for your mortgage. Credit scores can also come into play if you are financing a big ticket item, like a car.

1. Know your score

   • Scores are on a scale between 300 and 850.

   • According to FICO [1], the score is broken up as such:

35% Payment History | 30% Amounts Debts Owed | 15% Length of Credit History |

10% New Credit | 10% Types of Credit Used

• Unfortunately, there are no breaks for being a physician or earning a higher salary.

• How do you know if your credit score is good?

  • The goal is to have your score well over 740. This will help get you the best interest rates for loans.

• Where can you find your credit score?

  • There are plenty of options out there to check your score for free.

  • It’s becoming more common that banks offer a free credit check once a year. If your bank does not, we suggest freecreditscore.com.

  • We recommend checking your score once a year to verify its accuracy, even if you do not foresee any loan or home purchases in your future.

  • Consider a credit monitoring service to track any major changes that may not be correct. These have the added benefit of alerting you if your identity has been stolen and someone is opening credit under your name.

• Can you check your score too much? If so will it reduce your score?

  • This is a common misconception. There are two types of inquiries- soft and hard inquiries.

    • Soft Inquiry: When you check your own score, this does not impact your score at all. Sometimes lenders will do a soft inquiry to get you a quote or pre-approval. 

    • Hard Inquiry: Most of the time lenders use hard inquiries to check your score. This will temporarily lower your credit score. Hard Inquiries  can be a problem if you are refinancing a loan and having numerous lenders check your credit at the same time.

  • Make sure to verify if a company is going to do a soft or hard inquiry before approving them to do so.

  2. Build Credit with a Credit Card

  • Positive payment history is key here.

  • Start with one credit card; multiple credit cards can damage your credit.

  • If you are unable to get a card, try department store cards or cards made for people with lower credit.

    • Expect high interest rates with the department store cards.

  • Pay off the cards each month to demonstrate positive payment and avoid the high rates. This is good advice for any card. Pay it off every month.

  • Set up an auto-payment if you find yourself struggling to remember to pay.

  3. Build Credit with a Secured Card

  • If you are having trouble getting a credit card, a secured or debit card can also help. Work with your bank if you are interested in getting a secured card.

  • Secured cards require a security deposit up front, so you are using the funds you have already deposited, similar to a debit card.

  • Make sure to know how much you have in your account while spending to avoid high overdraft fees.

  4. Avoid Bad Credit Behavior

  • Some examples of bad credit behavior are: Late/missing payments, maxing out cards, carrying high balances, etc.

  • We recommend never carrying a balance on credit cards, but we know that is not always possible. When you do, it’s advised to keep this under 30%* of your available credit. The lower the percentage, the better.

  • Your credit score will get docked if your debt to credit ratio is too high.

  5. Keep Good Credit Accounts Open

  • Credit scores look at the length of good credit accounts- the longer the better.

  • If you have a card with a good credit history, keep it open, even if you never use it.

  6. Watch the Number of Cards

  • While you want to keep good credit cards open, you do not want to have too many cards. The right number seems to be 4-5 per household, according to some experts.

  • Avoid switching cards often.

    • We know the 0% APR deals can be tempting, especially if you are carrying a high balance, but constantly applying for and opening new cards can be detrimental to your credit. Remember, credit scores look at the length of credit history you have.

  7. Reports Errors

  • Any errors you find on your credit report can be disputed by contacting the credit bureau that shows the error.

  • Each bureau has an online form for reporting and tracking these disputes.

  • The bureaus have 30 days from receiving your dispute to examine the claim.

  • You can find the dispute forms at each of their websites: Experian, Equifax, and TransUnion.

Credit scores can be hard to maintain for doctors going through training but may be essential in getting that home or car you’ve been dreaming about. Don’t let a low score surprise you when it comes time to finance a big ticket item. Start today by building, monitoring, and maintaining your credit score. Even if you aren’t in the market for these big purchases yet, you want to make sure you are prepared when the time comes.

[1] https://www.myfico.com/credit-education/whats-in-your-credit-score

* Podcast says 75%, but we recommend much less.

If you found this helpful, please forward it to colleagues and remember to follow us on social media. We’re always accepting questions/topics for future episodes of our podcast, so write in or call with your suggestions. Finally, you can reach out to us directly for a second opinion on your financial health, by emailing us at [email protected].

Listen on Apple Podcast or Google Podcast

CONTACT US

1-888-256-6855

[email protected]

Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 500 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at [email protected].

Is buying a new home on your to-do list for this year? It can be an exciting and monumental task. So where do you begin? Today’s episode of “More Money Minutes for Doctors” will cover everything you need to know to get started, including: creating a budget, finding the right loan, and what actually adds value to a home.

First off, if you didn’t catch our previous episode on renting vs buying, you should go check that out. For a lot of doctors, renting is the right option for their situation. If you’ve already done the research and decided home buying is the right option for you, we have 4 steps to take before buying a home. Whether this is your first time buying or you are moving to a bigger home, you’ll want to follow these steps:

• Step 1: Know Your Budget

  • The general “rule of thumb” is 2-3x your annual income assuming you have no student debt.

    • This is a good practice to use to avoid being “house poor”: spending too much of your income on housing costs and therefore being unable to afford wants and needs.

  • We always recommend putting together a budget, before anything else. You can’t know what loans to secure or what homes to look at before this step is done.

  • Don’t forget expenses like:

    • Homeowner’s Association (HOAs)

    • Furniture & Decorating

    • Maintenance & Repairs

    • Household Help

    • Internet

    • Utilities

    • Taxes

    • Lawn Service

    • Real Estate Taxes

• Step 2: Find the Right Mortgage

  • Once you figure out how much mortgage you can afford, it’s time to find the right mortgage for you!

  • Due to the unique ratio of resident income to attending income, doctors can qualify for special mortgages or doctor loans. Many of these loans only require 5% down (some even require 0%) and these loans don’t require PMI.

    • What is PMI?

      • Private Mortgage Insurance - What lenders require if you are not able to put 20% down on a home purchase

  • Why do we think it’s better to put less down on a house?

    • Studies over the past 100+ years have shown that residential real estate only grew SLIGHTLY above inflation: 4%.

    • Whereas investing in the US stock market since the 1920’s has averaged 9-10% per year.

    • We also consider the liquidity aspect; if your money is tied up in your home and you need funds quickly, it’s a lot harder to turn a home into liquid assets compared to your retirement fund.

  • Fixed vs. variable rate loans

    • ARM (Adjustable Rate Mortgage)

      • These loans are usually a little cheaper in the beginning, then can increase over time.

    • 15-year or 30-year loans

      • With interest rates so incredibly low right now, we are seeing an influx of clients refinancing their homes.

      • If you can afford a 15-year loan, you will be getting out of debt that much quicker! We really applaud the clients who have been able to do this.

• Step 3: Find the Right House

  • Can you foresee being in the house for 5 years or more?

    • Is this a house that will allow your family to grow?

    • Are you considering having more children?

  • Consider what future improvements you might want/need

    • Certain improvements, like landscaping, typically don’t return on investment you make.

    • Improvements you may want:

      • Security system

      • Sprinkler system for the lawn

      • Kitchen remodel

      • Bathroom remodels

    • Consider talking to a local realtor, they can let you know which improvements will bring more value.

• Step 4: Stick to Your Budget

  • You don’t have to furnish every room right away.

  • Buy consigned/used furniture.

  • If you have extra money in your budget, should you put it toward your principal or invest in your retirement plan?

    • Most of the time, we do not advise clients to pre-pay. As I discussed earlier: statistically home values don’t increase as fast as stock market retirement plans.

Home buying can be scary, but if you take these steps in the beginning, you can feel secure financially as you move into this monumental life change. Let us know if you’d like to have our team put together a home purchase budget with you or if you’d like a recommendation for a mortgage officer.

If you found this helpful, please forward it to colleagues and remember to follow us on social media. We’re always accepting questions/topics for future episodes of our podcast, so write in or call with your suggestions. Finally, you can reach out to us directly for a second opinion on your financial health, by emailing us at [email protected].

Listen on Apple Podcast or Google Podcast

CONTACT US

1-888-256-6855

[email protected]

Katherine Vessenes, JD, CFP®, is the founder and CEO of MD Financial Advisors who serve 500 doctors from Hawaii to Cape Cod. An award-winning Financial Advisor, Attorney, Certified Financial Planner®, author and speaker, she is devoted to bringing ethical advice to physicians and dentists. She can be reached at [email protected].