Finding the Best Independent Insurance Broker

This is a post about independent insurance broker Lawrence Keller, CFP®, CLU, ChFC, RHU, LUTCF. He is a sponsor of Wealthy Mom MD. Lawrence Keller


Besides disability insurance, do you sell other insurances?

Yes, besides disability insurance, I also sell term life insurance.

Are there any particular insurances that you think us physicians should be aware of?

When purchasing term life insurance, as you discussed previously, carriers look many factors. These may include height, weight, blood pressure, pulse, personal medical history, and family history. Ideally, you want to apply to for your life insurance with a company in which you have the best chance of receiving the most favorable underwriting classification and, thus, the lowest premium rate.

For example, if one has an immediate family history of Coronary Artery Disease (in a parent prior to age 65), they should consider which company they apply to. For instance, a company may not care if the family member was diagnosed with CAD; instead, they focus on if the individual passed away as a result. If they are alive and the proposed insured meets all of the other criteria, they would typically still qualify for the best underwriting classification. The same is true for cancer. Some carriers will take this family history into consideration and others will not.

While I do not sell Property & Casualty Insurance, physicians, in most cases, should have more coverage here. Specifically, they should carry an Umbrella or “Excess Liability” policy – especially if they drive a car. This extends the liability limits of your automobile and/or homeowner's insurance policies. You would likely want to purchase all of these from the same insurance company. In doing so, you can have them integrated and coordinated with each other, as well as, qualify for discounts.

How do you differ from other brokers?

I'm an academic at heart and understand the nuances of each policy available in the marketplace. I also have access to discounts, in many cases, including unisex rates for females. However, unlike other brokers, I don't advertise this or use it as a way to bring me new clients. If I find myself in a situation where I know that the potential client needs a product or discount that is “exclusive” and I cannot provide it, I will refer them to the “endorsed” agent. I do this knowing that I will not be compensated.

You never have a second chance at a first impression. I have found that the “goodwill” that this provides has done more for me than any commissions that I could have earned selling a product that was not in the best interest of the potential client.

Do you have any advice on how to choose an independent insurance broker and what makes someone a good broker?

I think a “good broker” possesses certain qualities. A good broker:

  • has a deep understanding of the marketplace,
  • represents several companies,
  • provides illustrations of coverage from each of them,
  • and takes the time to thoroughly review the differences.

An independent insurance broker who does these things helps clients make a decision that best meets their individual needs, goals and budget.

Beware of agents that are “captive” and can only offer policies to you from one company or have a strong financial incentive in to do so. The client should never feel that they were “sold” something or pressured to make a buying decision. The client should feel that their broker was a resource throughout the process. They should feel that they had their best interest in mind and made the process as enjoyable and informative as it could be.

I would also look an independent insurance broker with credentials and/or certifications in the insurance and/or financial planning industry. This shows dedication to the industry and the desire to learn. More so, these brokers usually have a good understanding of the financial planning process, not just disability and life insurance policies.

Finally, you will not be paying more for purchasing your policy from an experienced insurance agent than you would from an inexperienced insurance agent.

What are the top 3 things you see that physicians don’t understand about disability insurance?

Understanding Premium Pricing

If policies are structured the same way and all agents are showing policies with the same discounts, the premium rate will be the same. This industry is heavily regulated and the premium rates and contractual language must be approved by each state. Therefore, if the plan parameters are the same, the only way that one agent can provide a lower price to the consumer is by having access to or knowing of a discount plan that another agent does not.

Association Plans v. Individual Policies

Association plans (not individual policies that include an association discount) are inferior compared to individual policies. Typically, the policy can be cancelled by the association or insurance company. Also, premium rates can increase every five years (generally when your age ends in a “0” or a “5”). Plus, the definition of total disability is not “Own-Occupation” and you don't receive a policy. You simply receive a certificate that evidences that you are part of a larger group.

Understanding LTD Plans

When it comes to group LTD plans and individual policies, there is no such thing as a “primary” or “secondary” company. If you meet the definition of total disability under both policies, you can potentially collect full benefits under both policies.

Additionally, with the exception of those eligible to purchase coverage under “New In Practice” limits, generally, if you are going to be eligible for group LTD coverage with a new employer, it must be taken into consideration when determining the amount of individual coverage available and deferring enrollment into a mandatory group LTD plan to potentially allow you to purchase a larger amount of individual coverage does not work. If you submit a copy of your employment contract in order to purchase coverage based upon your “new” salary and it mentions that you will be provided with Long-Term Disability insurance, the underwriter will ask about this and, again, it will be taken into consideration when determining the amount of individual coverage available for purchase.

Finally, it does not matter if the group plan's definition of total disability is “Own-Occupation” or not. Instead, the insurance company must assume that if you are disabled, you can potentially collect under the group LTD plan. After all, the insurance companies to not want to give you an incentive not to work. That would allow you to make more money not practicing than if you continued to practice medicine.

Is there anything else you would like to tell us as an independent insurance broker?

The time to ask your questions is when you are researching the policies available. You don't want to find out that you purchased the wrong policy and then start doing your homework.

All too often, I see physicians in this situation that could have easily been avoided if they took the time to really understand what they were purchasing. Unfortunately, they don't have the ability to make changes based upon medical or financial issues that arise subsequent to the purchase of the policy or policies they no longer feel to be adequate.

I hope you enjoyed learning a bit more about Lawrence and independent insurance brokers!

Read More

A Physician Insurance Broker

Editor's note: Stephanie has recorded a podcast over at the Hippocratic Hustle Podcast and speaks about Disability Insurance. Incredibly informative!   

For those readers not familiar with your story, tell us how you went from being a practicing OBGYN to an insurance broker:

I was a practicing OB/GYN in a community hospital, and my patient was a lovely woman. But my patient was also well into labor, in extreme pain, and not acting like her everyday self. I had to enlist a team of four nurses to help me calm her down to ensure a safe delivery. When the baby’s heart rate fell, the situation became emergent. I reached in for the infant — and the panicked mom kicked me in my shoulder, twice. For seven months, I continued to work with a torn labrum, my pain increasing as my range of motion decreased. Despite diagnostic tests, physical exams and injections, my condition developed into adhesive capsulitis, or frozen shoulder. I had always prided myself on my physical and emotional strength and dexterity. Now, surgical equipment became too difficult to maneuver. Deliveries became too painful to bear. I had to stop practicing, and undergo surgery. To put it mildly, the procedure was not as successful as I’d hoped. The limited mobility I regained wasn’t enough for me to continue my profession as I knew it, and I soon came to realize my immediate future would not include operating or delivering babies. The career I’d worked so long and so hard on was slipping through my hands. I was devastated, heartbroken. I was also unprepared for the next hurdle. Unbeknownst to me, workman’s compensation and my hospital-provided physician disability insurance, the safety nets I’d taken for granted as a resident and attending, did not automatically go into effect to give me the stability I’d assumed they would. Insult added to injury when I, a mother of two and my family’s primary breadwinner, suddenly faced a terrifying new financial reality: My newfound disability meant my family could lose my income. Eventually, I had to go to court to fight for, and eventually receive, the benefits I knew were rightly mine. As I went through this struggle, I found myself answering more and more questions from colleagues who, like me, assumed they were protected by their hospital- or practice-provided disability insurance policies. My physician friends now saw that they, too, could become injured or ill, and they wanted to make sure what happened to me wouldn’t happen to them. I was happy to help other attendings and residents go through their policies’ fine print, ask the right questions, and direct them toward the coverage they needed. After all, healthcare providers are my people. Of course I’d help them out. That’s when a friend in the insurance business stepped up and suggested I turn this newfound expertise of mine into a new career. At first, I balked. I was a physician: I didn’t want to give that up.

But then, I realized that being a physician put me in a unique position: I knew medicine. I knew hospitals and medical practices. Now I know disability insurance for physicians and nurses, and could speak as a doctor to other doctors and healthcare providers to help them secure their careers.

My experiences, knowledge and background could serve to connect my peers with solid, reliable and affordable disability coverage, so they would never have to endure what I did. That’s where I am today. I’m still an OB/GYN. But I’m also a hands-on advocate for physicians. We take care of others. We absolutely must take care of ourselves. My mission? Empower and educate my friends in healthcare about disability insurance.

Do you miss practicing clinical medicine?

Absolutely! I still get upset on Fridays, which was my OR day. I miss celebrating the best days of people’s lives. I miss the relationships that I had with my patients. Helping girls and women understand their health and make educated decisions about their healthcare meant so much. I have kept up with my licensing and MOC to stay current in my knowledge, and still feel like I am a valuable knowledge source for women’s health.

Besides disability insurance, do you sell other insurances?

I do. I currently sell disability, life, and business overhead insurance. I believe that when I am helping physicians obtain disability insurance, making sure that their life insurance needs are also met, is very important. Many private practice owners are not even aware of business overhead insurance. What happens to your practice if you can not work? How are the lease, employees salaries, etc. going to get paid? Will you close the doors, hire a locums or replacement? Business overhead protects you for these circumstances.

How do you differ from other brokers?

My intimate knowledge of what it means to be a physician makes me different. I lived it. I am now living the life of a disabled physician. I am emotionally involved in this process. I understand from a medical perspective what the insurance carriers are looking for from an underwriting point of view. I can advocate for my clients in a way that most traditional agents/brokers are unable to do. I am coming from a unique place when I explain the different policy options. I care most about education. I want people to really understand the language, the nuances, and the differences between carriers. I am not happy unless I know that people are making truly educated decisions.

Any advice on how to choose a broker? What makes someone a good broker?

I think that you have to trust your gut. You need to feel confident in your choice; feel comfortable asking questions and receiving feedback. I believe that a good broker will offer you options, and explain them in detail. He/she should compare apples to apples and apples to oranges. You should not feel like there is any bias in what you are being told.

What are 3 things you see that physicians don’t understand about disability insurance?

1. What they have and don’t have from their employers. It is important to review the master copy of the policy. Is their salary or complete income covered? How long is it own occupation? What is the definition of disability? 2. Whether or not their benefits are taxable or non-taxable. Most group benefits are paid for by employers, and are therefore taxable income. However, if the employee contributes to the plan, it is a tax free benefit. That affects how much benefit he/she can qualify for with a private DI policy. Private benefits are a tax free benefit. 3. The different definitions of total disability. There are multiple definitions:

  • The basic definition/modified own occupation – You are totally disabled if you can not perform  your job, AND you are not gainfully employed.
  • True own occupation/Regular occupation – You are totally disabled if you can not perform your job, REGARDLESS if you are gainfully employed in another occupation.
  • Transitional occupation – You are totally disabled if you can not perform your job, regardless if you are gainfully employed in another occupation, until your income is that of your pre-disability earnings.  There is a cap to how much you can earn.  In CA, there are certain occupational classes that can not get true own occ with certain carriers.  Several carriers will remove own occupation of they lower the benefit period, but will give the transitional definition.

You need to know what the definition is that you are purchasing!

What are 3 mistakes you see physicians make regarding disability insurance?

1. Waiting too long to purchase. I know how hard it is during training to conceive of paying for one more thing. However, it is the best time to purchase. You are the youngest you will ever be. You might qualify for a discounted rate that you will carry with you for the entirety of your career. You do not need to purchase the whole package- just get your foot in the door, and guarantee your future insurability. 2. Having colleagues write prescriptions. This is coming up a lot. There needs to be records; a paper trail. I understand professional courtesy, but the underwriters and companies do not see it that way. It is highly frowned upon, and is causing physicians to lose valuable insurance options. 3. Women not purchasing before they start family planning. The carriers will deny pregnancy coverage for all sorts of things. As an OBGYN, this is something I argue a lot! Miscarriages, infertility treatments, cesarean sections, etc .are all reasons for exclusion of pregnancy.

Anything else you would like to tell us?

Since entering this space, I have been able to help so many physicians (and non-physicians) obtain quality tailored policies. As trite as it may sound, I am really trying to clean up an industry that I believe has a long history of taking advantage of physicians. I hope you enjoyed learning a bit more about Stephanie!

Read More

A Financial Advisor For Doctors

Platinum Sponsor: Johanna Fox Turner of Fox & Company Wealth Management As part of the Platinum Sponsor package, sponsors get to showcase their stuff in a Q&A format. This way, you, the reader, can get to know them a little more. Johanna was a CPA for many years before she became an FA giving her a unique and complete skill set. She is our financial advisor. Fox & Co Wealth ManagementHow did you decide to become a Financial Advisor? I had been a CPA for about 25 years and got really tired of clients asking me to recommend an advisor. It’s embarrassing to recall, but I usually just said “Go see Edward Jones”. After awhile (about 25 years, I guess!) I got tired of seeing poor results and realized I had been doing our clients a disservice. So, at age 50, I passed the CFP exam, which I still believe was harder than the CPA exam. (Of course, I passed that at age 22!) I had no idea what I was getting into and had never heard of “fee-only” advisors or NAPFA. How did you decide to work with physicians? By answering questions on WCI and “accidentally” acquiring some really nice physician clients as a result. When the WCI forum started in January 2016, I knew it was a great opportunity because I enjoy giving advice (just ask my kids). I also didn’t know of any other FA’s who had the combination of Fee-Only CFP + CPA + experience and hardly anyone else was answering those questions on the forum. Plus, it’s a fun challenge to work with consistently “smart” people and I’ve really grown to love it. What are the areas or action items that you’ve noticed that most clients miss? 1) Focusing on the cost of a financial advisor over the benefits to be gained 2) Not taking advantage of all retirement account opportunities 3) Emphasizing short term investing instead of having a plan for the long term 4) Not getting a LWT (Last Will & Testament) in place when the first baby is born 5) Not paying attention to cash flow – saving is important, but it’s what you spend that makes the most difference. What’s your honest opinion – can folks really DIY? What are some caveats? Of course, you can DIY. Starting out DIY is great because it forces you to learn a lot. The problem is, you don’t know what you don’t know. Sticking with DIY if you are making a high income without ever getting a second opinion or having a financial checkup is scary. If you’re ready to DIY and starting to learn, you should read The One Page Financial Plan by Carl Richards. In fact, reading TOPFP will help you to choose a better financial advisor when you’re ready to. Tell us 3 things you wish your clients knew: 1) For every planning meeting we have one-on-one with you, we’re working 4 – 6 hours behind the scenes 2) I rate listening skills higher than being able to calculate future value or compound returns 3) I make a lot less money than you probably think I do! Anything else you’d like to tell us? I’m a sucker for giving free advice. Give me your bad luck story and I’ll try to get it fixed. I hope to see you all at the WCI conference next year! I hope you enjoyed learning a bit more about Johanna!]]>

Read More

Chief Mom Officer Interviews Miss Bonnie MD and more

aunched a blog series where I interview other women physicians about their finances. This week, Chief Mom Officer interviews me as part of her “Six Figure Breadwinning Moms” series:

What’s the top three pieces of advice you’d have for someone just starting out in the workforce, struggling with their career, or just looking to improve how they handle their money?

  1. Live within your means. When your income increases, don’t increase your lifestyle in proportion. You lived on lesser income before, you can still do it.
  2. Learn the basics of personal finance and read at least one financial book a year. No one will care more about your money than you.
  3. The more money you have saved and invested wisely, the more choices you will have in life now and later.

Read the full interview here.

I also want to let you all know that Dr. Carrie Reynolds and I launched our bi-monthly podcast where we discuss all things finances. Dr. Carrie Reynolds @ Hippocratic Hustle (where she interviews female docs who are up to awesome things). You can find her podcast on iTunes. Our inaugural episode is here or search for “Hippocratic Hustle” on iTunes or you favorite podcast app. We discuss finance topics in a conversational way where we weave in our own experiences. We hope you enjoy it! We definitely are having recording them :).]]>

Read More

Brief update on our finances

Last month I spelled out how we are investing our money in 2017. I mentioned there were some moving parts – namely, M was unemployed and we knew, at the time, that I was (newly) pregnant. Now, M has a job (yay!) and looks like this pregnancy will stick, so now we can do some real projections for 2017. Our asset allocation will remain the same. This year our total “retirement” contributions will consist of:

  • $18,000 my 403(b)
  • $20,800 employer match + contribution into my 403(b). Currently 20% vested. 40% vested as of August 1, 2017 so actually $8,320
  • $18,000 my 457(b)
  • $5,500 my Roth IRA
  • $18,000 his 403(b). No matching at this time
  • $11,000 his Roth IRA (his first! For 2016 and 2017)
  • Other sources:
    • A very modest amount ~$1,000 into my solo-401(k). Yes this blog likely won't lose money this year 🙂
    • ~$5,000 his solo-401(k) – he has some 1099 income this year
Total: ~ $84,820 We are also socking away money for my planned maternity leave + new baby expenses. One of the main reasons we can put away so much is because our current housing costs are low (for NYC that is). It is definitely tempting to “upgrade” with baby on the way, but, after much thought, we have decided to re-assess sometime in 2018 after we have a better idea of what child care costs will be. We are now on a waiting list for an infant day care in the neighborhood for 3 days a week. My mom will come the other 2 days and be back-up if/when Eggy is sick. M will also be back-up. A nanny will cost at least $10,000 more a year. How are your finances going this year? Comment below.]]>

Read More

Introducing Eggy

M and I are pleased to announce that we are expecting a baby boy this fall. We have nicknamed him “Eggy” – it means baby in Korean. As you know, you cannot exactly plan when you become pregnant. Honestly, we were not sure if things would happen au naturel due to my age so IVF was a possibility. Luckily my current job includes 3 cycles of IVF as a benefit but it is still not 100% covered. I know many ladies who have spent a small fortune on getting pregnant. So here are a few things I have learned, financially, about trying to get pregnant and trying to plan for leave and childcare:

  1. Insurance coverage: Make sure you know what your insurance plan will cover and not cover and what deductible you'll need to meet, if any. Even if your insurance says “maternity is covered,” it may not cover all the tests. My costs: $40 (co-pay for the first visit only) is what my total out of pocket costs will be, including the delivery. This assumes I use an ob-gyn within my health system (I am) and that I deliver at one of their hospitals (I plan to).
  2. Maternity Leave: Think about how long you'll want to take for leave and what leave, if any, will be paid. This is a highly personal decision, but I have yet to meet someone who said they took too much time off. Unfortunately, paid maternity leave is not the norm in the U.S. If you have unpaid leave  at least you'll have approximately 9 months to save up for this. My leave: I get 6 weeks paid leave (at my base salary) or 8 weeks (c-section). I can also use unused vacation. I will have at least 2-3 weeks of unused vacation to get to at least 8 weeks paid. I am taking at least 3 months off. So that means at least 1 month unpaid, possibly more. Since I only really need ~60% of my take home base salary, this won't be a huge burden on us and we will have more than enough saved to cover this unpaid time.
  3. Maternity clothes: Unless you only wear stretchy pants and dresses, you'll need at least a few staples. I do wear scrubs a few times a week to work so I did not have to buy a whole new work wardrobe. Gap Maternity is pretty inexpensive and I was able to use a 20-40% off coupon when ordering online. It also helps that it'll be mostly warm weather during my pregnancy so I can keep wearing dresses.
  4. Baby stuff: I am totally cool with second-hand everything. And due to space limitations of an NYC apartment, we definitely do not want too much “stuff.” Between a baby shower, a very excited grandmother-to-be, M's sister's hand me downs – we should have most of the basics for almost free. I have even scored a free Mamaroo and Ergo carrier already. I won't be shopping at baby boutiques for clothes.
  5. Post-partum help: If you don't have family around you may want to look into outsourcing certain things (clean and cook, etc) so you can focus on mothering. Baby nurses and night nannies are common in NYC – definitely a luxury – but a savior when you're sleep-deprived. Post-partum doulas are also a great idea, especially for first time moms, to show you the ropes, help you ease into breastfeeding (most are breastfeeding certified counselors), and help you take care of you while you recover from delivery. The U.S. is a bit strange in that moms are expected to recover and go back to work ASAP. Too bad there aren't any post-partum spas here like Korea. My plans: M will take 2 weeks off to help. I'm planning on hiring a post-partum doula for a few sessions for the above reasons. After 2 weeks, I'll be with my mom for a few weeks – letting her carry out a Korean tradition of taking care of a new mom. Slightly modified as I'll be able to shower :).
  6. Childcare: This blog is geared towards female professionals, so most of us probably won't be stay at home moms. I'd be lying if I said I wasn't worried about the cost of childcare! The going rate in my neighborhood is ~ $17/hr for a nanny. At this time, I prefer having a nanny for the first 6-12 months after I return to work. The convenience of someone coming to us vs. one of us packing up the baby and walking to a daycare (at least a 10-15 min walk – won't be fun during winter). Also, babies and kids often get sick in daycare and although M's work is more flexible, we don't want to deal with that. Right now, we are planning to have a nanny for 40 hours a week over 4 days and my mom for 1 day a week and for backup. We are *gulp* preparing to spend at least $3,000 a month in childcare. Unfortunately, daycare isn't much cheaper and with the convenience and flexibility of a nanny, this was a no brainer for us. After 6 months or so, we will reassess.
  7. Saving for college: It's never too early to start saving for a little one's college. You may recall that I started a 529 last year in anticipation of starting a family. I get a small state tax break for funding one so it was a no brainer to get started.
What does all of the above mean for our finances overall? We have been working on downsizing our budget over the past several months. The main impact this will have on us is that I will need to put extra payments towards loans on hold. Thankfully, I refinanced most of my loans to a low fixed rate for a 5 year term and will likely pay them off in 5 years and not less. I'm ok with that. We'll still continue to max out our tax-advantaged retirement accounts and should still be on target with our financial plan. I found this book really helpful in creating my Eggy registry: Any other financial considerations for a mom-to-be? Comment below.]]>

Read More

How Female Physicians with Student Loans Can Get a Fair Shake

Dealing with student loans is difficult. Being a doctor with student loan debt can be particularly challenging. 76% of doctors graduate with debt, and the median is $192,000. This is a guest post by Travis Hornsby, creator of Student Loan Planner, where he offers one-on-one student loan advice. As female physicians with student loans, if you need help navigating them, contact him. I got into helping people understand their student loans thanks to my beautiful and brilliant fiancée Christine. She’s a urogynecologist, and like most physicians, she was more focused on learning and caring for her patients than understanding arcane federal student loan rules. Unfortunately, female physicians earn less than their male counterparts. To help tip the scales back in favor of people like Christine, here’s how to maximize student loan strategy as a female physician.

Tips for Female Physicians with Student Loans

First things first. Women doctors are more likely to be employees. That's a big advantage when it comes to student loans.  About three-quarters of all women in medicine work as employees instead of in private practices. That means women are more likely working at not for profit hospitals than men. That’s why female physicians need to know about Public Service Loan Forgiveness (PSLF) like the back of their hand. Under PSLF, A doctor must work for 10 years in a not for profit setting. Most hospitals qualify. You must receive your actual paycheck from a not for profit entity too. Occasionally I’ve seen some hospitals that pay their physicians out of a private sector entity. That would cause you to lose your PSLF eligibility. Make sure that doesn’t happen to you when you become an attending. Your residency counts towards this 10-year period until PSLF forgiveness. If you play your cards right, you could pay $300-$500 a month on your loans during this period, which all counts towards the 10 years required under PSLF. Virtually all physicians who manage their loans the optimal way will graduate residency with 3-7 years of credit towards the 10 years they need. What happens when you become an attending?

Keep Your Payments Low to Maximize Forgiveness

Under current rules, you can use either PAYE or IBR to cap what you must pay on your student debt. That means if you owe $150,000 in med school loans but start out at $200,000 as an attending, you can keep your payments at no higher than the standard 10-year monthly amount you had to pay when you left med school. Using this cap to your advantage, you could conceivably train for several years to become a surgeon, then cap your payments on 10-year standard repayment plan. That would allow you to pay a fraction of what you originally borrowed for medical school. A lot of my clients make payments based on the Income Based Repayment plan (IBR). If that describes you, you’re probably paying too much on your student debt. You should look into switching to Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE). The reason? You get to pay 10% of your income instead of 15% as with IBR.

Make Sure Your Loans Qualify

Only Direct Federal student loans qualify for this forgiveness benefit. That covers most loans issued after 2010. If you happen to have loans from before this that are on the older FFEL loan program, you can consolidate them into a Direct loan. That consolidation makes them eligible for PSLF, but it also resets the repayment clock to zero. Make sure your loans don’t qualify for PSLF before submitting a consolidation request. Call your loan servicer and ask them what loans qualify for PSLF. They should be able to tell you.

How Would This Work in Real Life?

Here’s an Example. Meet Jane. She’s a pediatric cardiologist. Her total length of training between residency and fellowship is six years. During that period, she’ll start out at $55,000 and end up at $70,000 in salary. When she becomes an attending, she’ll start at $225,000 and get inflation level raises after that. Jane has $300,000 in student loans. She doesn’t know what to do with such a large burden, but she’s passionate about medicine. In a perfect world, here’s how she would manage her student loans.

Start paying on REPAYE as soon as possible

While in residency and fellowship, Jane can pay only a few hundred a month but receive interest subsidies of thousands of dollars a year. The reason is that REPAYE covers half of the leftover interest she doesn’t pay each month. Since she’s going for tax free loan forgiveness but also wants to keep the loan balance low just in case, REPAYE is probably a great option. A possible exception to that rule of thumb is if her spouse makes a lot more money than she does and then it’s worth talking to an expert.

File the PSLF Certification form

After her first payment on REPAYE during training, Jane can submit the PSLF employment certification form. She should receive a response in a couple months showing her progress towards loan forgiveness. Once she’s being tracked for the program, she should resubmit this free form every year at least to create a well-documented paper trail.

Minimize Taxable Income

Loan servicers calculate what Jane owes every month based on her taxable income. If she will receive forgiveness on her student loans then she wants to minimize what she pays wherever possible. The best way to do that is to save in pre-tax retirement accounts. She can use a pre-tax 403b plan to put away up to $18,000 per year, which will directly reduce what she has to pay towards her student loans.

Here’s What the Numbers Look Like

A few things might complicate this picture, particularly if Jane had a spouse who also earned an income. If a spouse has student debt then it doesn’t matter as much. However, if a spouse has no loans but a substantial income then it would be worthwhile to rerun these numbers using my calculator. So to review, Jane makes $55,000 at the beginning and $70,000 at the end of training. We’ll say she puts away $5,000 in her 403b during training and $18,000 as an attending. Her interest rate is 7%. Jane borrowed $300,000, and she’s going to be able to pay just over $100,000 on her student loans and save a lot of money for retirement along the way. Student loan interest is generally not tax deductible except for a small amount at low incomes. That means over that 10 years, Jane receives a benefit worth about $20,000 annually after tax for optimizing her student loans. On a before tax basis, that benefit is more like $30,000 in salary value. That’s a great benefit considering many people enjoy working at academic hospitals over private practices.

What if Jane Wanted to Start a Family?

One cool feature of the PSLF program is that payments made while on maternity leave count towards the 10 years of payments needed for forgiveness. If Jane worked at an academic hospital, she could take off up to three months per birth and if she makes payments on REPAYE, PAYE, or IBR, she gets credit towards tax free loan forgiveness. As I mentioned, if Jane had a spouse, then that could make things a bit more complex. Keep in mind you’re married for the entire year for tax purposes once you submit your marriage certificate. I’ve met many couples who have three to four years of credit towards PSLF while they’re planning their wedding. If Jane had fallen into this category, she could probably count on at least a year for the student loan servicers to incorporate her spouse’s income into the payment calculation. If she uses PAYE once she gets married if that’s in her life plan, she can cap the required payment at no more than what’s required under the 10-year Standard plan. That capping feature allows most physicians to qualify for substantial loan forgiveness even if they’re a high-income surgeon like my fiancée.

Plan for PSLF, but Prepare for an Alternative Plan Just in Case

If you’re in training right now, there’s no harm in tracking progress towards loan forgiveness on the PSLF program. If you decide to go private practice, you can refinance and get a lower interest rate with a private lender. If you decide to stay with a hospital, it will probably be a not for profit employer. You might as well set yourself up for this benefit as it’s worth tens of thousands if not hundreds of thousands of dollars. In case PSLF gets repealed, which is probably not going to happen for folks who already have loans, you’ll owe less by using an intentional strategy for loan repayment. Female physicians with student loans like my fiancée Christine deserve a fair shake. Hopefully, you’ll take advantage of free content on Miss Bonnie MD’s blog and my site Student Loan Planner to save every dollar you deserve. If you wanted help coming up with a loan repayment strategy, I’d love to help.]]>

Read More

YNAB saved my life

YNAB aka You Need a Budget. I bought this in Dec 2014 on some Christmas sale when it was still only available in the desktop version. Now it is a fancier web driven app.

Before using YNAB, I, like many, was a regular ol' excel spreadsheet gal. I made myself feel good by having all the budget categories add up nicely to my monthly paycheck. If you recall, I never saved any money and always ran out of money before the next paycheck.

My spending kind of went like this – do I have money in my checking account? Yes, I'll spend it. Meanwhile, I wasn't paying attention to the other categories I needed to set aside money for. I needed some serious help!

YNAB is not super easy to use right out of the box. I can almost promise you that you'll have some growing pains. The good news is that YNAB has a robust support center and tons of educational videos and webinars to teach you how to use their software optimally. When I switched from YNAB desktop to web version, they changed a few rules and I was emailing with their support team quite a bit.

My first few months with YNAB were interesting. I still went over budget, but each month got better and better. I slowly re-trained my spending habits. Remember that $20,000 credit card debt I used to have? Not only is it gone but I pay my cards IN FULL every month.

I can also confidently say today that I no longer go over budget and am saving quite a bit of money now (becoming an attending helped that part for sure). Learning how to use YNAB efficiently helped quite a bit as well.

Living within your budget revolves around clarity of the budget presentation and self-discipline. YNAB is a vital tool with which I feel I am able to keep disciplined and focused.

People ask all the time whether they should use YNAB vs. Mint. They are completely different programs. It really depends on what your needs are. If you are already great at spending within your means and budget (if you have one) – then Mint is a good option for you.

Mint gives you a snapshot of how you did. If you need serious help (like I did) and need to literally re-train yourself about budgeting and spending, then there is nothing better out there than YNAB.

YNAB is forward and proactive budgeting. You will know whether you can actually afford something in real time and not worry that your money will be taken away from other necessary categories. YNAB focuses on your cash flow. You can also add loans and investments for tracking purposes, but I don’t believe this function works too well. I’d recommend sticking to what YNAB was made for – cash flow. I use Personal Capital to get a more complete snapshot for all my accounts. We use eMoney with our FA as well.

I hope you're in a better place than I was when I first started YNAB. Even if you are I’d recommend checking it out. It is free for the first 34 days. Use this link to get 1 month free.

Read More

How we are investing our money this year

whole start-up planning phase, but we have decided what our asset allocation will be and what our accounts are.

You'll see how I invested my money last year here, but in summary:

  • 55% US stocks:
    • VIIIX: Vanguard Institutional Index Fund Institutional Plus Shares 0.02%
    • VIEIX: Vanguard Extended Market Index Fund Institutional Shares 0.12%
  • 20% International stocks:
    • VFWSX: Vanguard FTSE All-World ex-US Index Fund Institutional Shares 0.11%
  • 10% Small cap value:
    • VISVX: Vanguard Small-Cap Value Index Fund 0.2%
  • 8% REITs:
    • VGSIX: Vanguard REIT Index Fund Investor Shares 0.26%
  • 7% Bonds:
    • VBMPX:  Vanguard Total Bond Market Index Fund Institutional Plus Shares 0.05%

Now there is a “we”, and we have decided to follow our FP's advice to go 100% equities to maximize growth. We moved all of M's 4 accounts (mix of old work IRAs, 401(k)s into one solo-401(k) at TD Ameritrade. He had 1099 income in 2016 and the solo-K was opened in December 2016. TDA allows Roth 401(k) so we opted to make his 2016 contributions Roth (small amount though since his 1099 income wasn't substantial). He had a small amount contributed to his W2 job's 401(k) in 2016 but he became unemployed relatively early in the year. He also contributed to a Roth IRA for 2016 (his first time) as well this year, and he'll do 2017 in short order.

I'm still doing what I did last year – contributing the full $18,000 each to the 403(b) and 457(b) and $5,500 to a Roth IRA (already funded for 2017). I also have the option to do the “Mega Backdoor Roth IRA” (to be covered in a future post), but have not gone there yet. We don't have a taxable account (yet). Our IPS with our FP has the following asset allocation:

  • 68% US stocks
    • 17% Large cap growth, 17% Large cap value
    • 17% Small cap growth, 17% Small cap value
  • 24% International stocks
    • 12% Large cap developed countries
    • 12% Diversified emerging markets
  • 8% US REITs

You'll see that it's not that different from my original, with the subtraction of bonds. There is no mid cap category since mid caps are a fuzzy category. In M's solo-401(k), the details are:

iShare Core S&P Small-Cap 17% IJR
Vanguard Dividend Appreciation ETF 17% VIG
Vanguard FTSE Developed Markets ETF 12% VEA
Vanguard FTSE Emerging Markets ETF 12% VWO
Vanguard High Dividend Yield ETF 17% VYM
Vanguard REIT ETF 8% VNQ
Vanguard Small-Cap Growth ETF 17% VBK

This account is managed by our FP. I still manage my work's 403(b) and 457(b) and I'm still managing my Roth IRA at Vanguard, but I may let them manage the Roth IRA at some point. I also plan to open up my own solo-401(k) this year. My allocation is a little bit different than what our IPS states but not too far off:

Vanguard Institutional Index Fund (large caps) 40% VIIIX
Vanguard Extended Market Index Fund (small & mid caps) 20% VIEIX
Vanguard FTSE All-World ex-US Index Fund 12% VFWSX
Lazard Emerging Markets 12% LZEMX
Vanguard Small-Cap Value Index Fund 8% VSIAX
Vanguard REIT Index Fund 8% VGSIX

The small cap and REIT funds are in my Roth IRA. The rest are in my 403(b) and 457(b). We will rebalance the accounts once a year. We have not fully decided how much we will put away for investments this year at this time. There are some moving parts right now making it challenging to project how much we will be able to put away outside of maxing out available tax-advantaged retirement pots.

What is your asset allocation for 2017?

Read More

Refinance with First Republic Bank for Better Rates

44 million borrowers owe over $1.5 trillion as of 2019. And we know medical school loans are especially high. So how do you take off some of the pressure? Look for better interest rates! If you live near First Republic Bank, you can use them to refinance for a better student loan rate. Here's how I took advantage of what First Republic Bank offers and how you can do the same, plus snag $200!

How to Refinance with First Republic Bank

First things first. Check your location. Do you live in one of the cities marked above?
  • New York City
  • Greenwich, CT
  • Portland, OR
  • Palm Beach, FL
  • Various cities in Northern and Southern Calfornia
If you live in one of the locations from the map above AND you have high-interest student loans, keep reading. You may be eligible for the lowest rates in student loan refinancing. First Republic Bank offers fixed-rate student loan refinancing in 5, 7, 10, and 15-year terms. I snagged 2.25% in early 2017. These are currently the lowest rates you will find for student loan refinancing. Last year, they offered 1.95% for the 5-year term! Plus, as my readers, you can snag a $200 bonus once you're approved.

OK, so what's the catch?

You must:
  • Live near a physical branch.
  • Meet their salary requirements and may need a certain % of your debt liquid in your main checking account.
  • Open a checking account with them and use it as your main checking. That means your main source of income must be direct deposited there.
  • Maintain a minimum balance of $3,500 a month and you must auto-debit the loan payment from this account.
  • Pass a credit check.
Also, remember that this becomes a private loan and will not be forgiven at death or total disability like federal loans. Of course, this is not a concern. Or it shouldn't be. I mean, are you really planning on dying before your loans are paid off? If this truly worries you, make sure you have enough term life insurance to cover this. I do.

More Considerations When You Refinance with First Republic Bank

  • The minimum loan is $40,000 and the maximum is $300,000.
  • Their checking account refunds ATM fees!
  • They will refund you up to 2% of paid interest if you pay back the loan in 2 years!
  • If you get approved for this loan but move away from a physical branch, this does not affect the loan as long as you keep your primary checking account with them.

How Do I Get Started?

This is an amazing deal if you meet their requirements. If you're ready to take the plunge, contact Kerry Berchtold at kberchtold at firstrepublic dot com or 339-235-0419. Don’t forget to mention Miss Bonnie MD to get your $200 once you’re approved!

Final Thoughts on Refinancing with First Republic Bank

In March 2017, First Republic Bank approved my refinance! I chose the 5-year term at 2.25% fixed for $88,000 of my loans. My strategy was to”force” myself into a 5-year repayment, since I do my best financially when things are automated. If you're ready to tackle your student loans and you want to refinance to lower your interest rates, reach out to First Republic Bank today.]]>

Read More

Get started on your journey to wealth by getting my FREE book- Defining Wealth for Women.