Financial Planning

  • Financial Planning, Home Buying, Loans

    What is a Physician Mortgage Loan?

    Medical professionals, particularly those just starting their careers or with significant student loan debt, often find it challenging to qualify for a traditional mortgage. However, many lenders now offer a physician mortgage loan, which is specifically designed to meet the unique needs of doctors and other medical professionals.

    Physician mortgages offer lower down payment requirements, more flexible underwriting guidelines, and higher loan amount limits, making them an attractive option for many physicians. In this article, we’ll explore the details of physician mortgage loans, how they compare to traditional loans, who qualifies for them, and the pros and cons you should take into account when considering this type of mortgage.

    Key Points

    • A Physician Mortgage Loan can be a great option for medical professionals, especially those at the start of their career, with significant student loan debt, and future income growth.
    • Doctors, Dentists, and Veterinarians along with other medical professionals can qualify for a physician mortgage loan.
    • Physician mortgages don’t require 20% down payment to avoid PMI and have different underwriting requirements allowing borrowers with hefty student loan debt to qualify.

    Details of a Physician Mortgage

    A physician mortgage is a home loan specifically designed for doctors and other medical professionals. Unlike traditional mortgages, physician mortgages typically require little or no down payment, which is attractive for physicians who are just starting their careers and may not have a large amount of cash on hand for a down payment. Additionally, physician mortgages may offer more flexible underwriting guidelines, taking into account the significant student loan debt that many medical professionals carry.

    One of the most significant benefits of a physician mortgage is that it typically offers a fixed interest rate for the life of the loan. This means that borrowers don’t have to worry about fluctuations in interest rates over time, which can make budgeting and financial planning more comfortable and predictable. Additionally, physician mortgages often have fewer fees and closing costs than traditional mortgages, which can save borrowers a significant amount of money.

    Differences between a Physician Mortgage and a Conventional 30-Year Mortgage

    The primary difference between a physician mortgage and a conventional 30-year mortgage is the down payment requirement. While conventional mortgages typically require a down payment of 20% or more to avoid paying Private Mortgage Insurance (PMI), physician mortgages often require little or no down payment without a requirement for PMI.

    Avoiding PMI is an awesome benefit that can save borrowers hundreds of dollars a month. Banks see borrowers that can’t afford to put down 20% of the house purchase price as “riskier” and require PMI payments as an additional bit of insurance in case of default. Physician Mortgage Loans do away with PMI entirely, allowing you to purchase a house with as little as a $0 down payment.

    Another significant difference with physician mortgages is that they may have more flexible underwriting guidelines. One factor lenders consider is your debt to income ratio (DTI), how much your debt payments are as a percentage of your income. This includes car loans, credit card debt, other property loans, and your student loans. Most borrowers have a DTI limit around 40%, meaning that if your total debt payments with the new loan will be above 40% of your gross income you they won’t qualify you for the loan.

    This can be a huge hurdle for getting a conventional loan considering the significant student loan debt that many medical professionals carry. Lenders With a physician mortgage the lender may exclude student loans from your DTI ratio allowing you to qualify for a larger loan.

    Another feature of physician mortgage loans is they do not have the same limits as conventional loans. With a conforming conventional mortgage the most you can borrow is $726,200 or $1,089,300 in high-cost areas. Physician mortgage loans don’t have this same limit, potentially allowing you to borrow more money for your home purchase.

    Just because you can borrow more though doesn’t mean that you necessarily should, you should always take into account the effect on your cashflow when purchasing a home. Staying within or below your means can help you weather future financial emergencies, or take advantage of future opportunities that you might not be able to if you are spending as much as you earn each month.

    Differences between a Physician Mortgage and an Adjustable-Rate Mortgage

    An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate can change over time, based on market conditions. While ARMs can be attractive for some borrowers who want lower initial monthly payments – and they have seen a surge in popularity lately with the rise in interest rates – they can also be risky, as borrowers don’t know how much their monthly payments will be in the future.

    A typical adjustable-rate mortgage is a 5/1 ARM where the mortgage interest rate is set for the first five years of the loan and then changes every year thereafter based on changes in market rates. These can be a good option for a borrower that plans to refinance their mortgage at some point within the fixed portion of the loan, but no one can predict what rates will do in the future and you shouldn’t bank on being able to refinance at a lower rate.

    In contrast, physician mortgages offer a fixed interest rate for the life of the loan, providing borrowers with greater financial stability and predictability. Additionally, physician mortgages typically require little or no down payment without mandating the borrower pay PMI, while an ARM has similar requirements as a conventional mortgage when it comes to putting 20% down on the purchase upfront to avoid PMI.

    Who Qualifies for a Physician Mortgage?

    To qualify for a physician mortgage, borrowers typically need to be medical professionals, which includes doctors, dentists, veterinarians, and other medical professionals. Additionally, lenders will require proof of income, employment, and education, as well as a strong credit score.

    Should You Consider a Physician Mortgage?

    When considering a physician mortgage as an option, borrowers should consider several factors, including:

    1. Interest rates: While physician mortgages often offer a fixed interest rate for the life of the loan, they may have higher interest rates than traditional mortgages due to the lower down payment requirements and more flexible underwriting guidelines.
    1. Monthly payments: Because physician mortgages may offer a lower down payment and a higher interest rate, they may require higher monthly payments than a traditional mortgage. Borrowers should ensure that they can comfortably afford their monthly mortgage payments over the life of the loan.
    2. Closing costs: While physician mortgages may offer lower closing costs than traditional mortgages, borrowers should still factor in these costs when considering whether a physician mortgage is the right option for them.
    3. Future plans: Borrowers should consider their future plans when deciding whether to apply for a physician mortgage. For example, if they plan to move within a few years, a physician mortgage may not be the best option. Because of the low (up to $0) down payment required borrowers do not start out with much if any equity in their home and may not recoup their closing costs and other fees upon selling.
    4. Other responsibilities: As a young physician your primary focus will be on growing your career and being successful in your profession. Owning a home brings many additional responsibilities, expenses and distractions. Renting can be a good choice early on in your career, so it’s good to have a clear understanding of your goals when buying a home.

    Pros and Cons of a Physician Mortgage

    Pros:

    1. Lower down payment requirements: Physician mortgages typically require little or no down payment, which can be attractive for physicians who are just starting their careers and may not have a large amount of cash on hand for a down payment.
    2. More flexible underwriting guidelines: Physician mortgages may have more flexible underwriting guidelines, taking into account the significant student loan debt that many medical professionals carry.
    3. Larger loan limits: Physician mortgages don’t have the same limits as conventional conforming mortgages meaning that you could potentially borrow more than with a traditional mortgage.
    4. Fixed interest rates: Physician mortgages typically offer a fixed interest rate for the life of the loan, providing borrowers with greater financial stability and predictability.

    Cons:

    1. Higher interest rates: Physician mortgages may have higher interest rates than traditional mortgages due to the lower down payment requirements and more flexible underwriting guidelines.
    2. Limits on residency types: Some lenders won’t allow you to take out a mortgage loan on a condo or on a second residence, such as a vacation house or rental property.
    3. Limited lender options: Physician mortgages may only be available through certain lenders, limiting borrowers’ options.

    Wrap Up

    Overall, physician mortgages can be an attractive option for medical professionals who are just starting their careers or have significant student loan debt. They offer lower down payment requirements, more flexible underwriting guidelines, fixed interest rates for the life of the loan, and lower closing costs. However, physician mortgages may have higher interest rates than traditional mortgages, and eligibility requirements that limit borrowers’ options. Ultimately, borrowers should carefully consider their financial goals and future plans when deciding whether a physician mortgage is the right option for them.

  • 403b, 457b, Financial Planning, Investing, Retirement Planning

    What are the different OSU Retirement Plans?

    When starting a new job, you often have many new things to learn and get used to: new commutes, new coworkers, different policies and procedures. Being successful in your new position requires you to get up to speed as quickly as you can. An item that’s often pushed off until later, but one that’s crucially important to achieving your long-term goals is understanding and maximizing your new retirement plan benefits.

    The governmental, non-profits, contractors, and large health systems that make up the majority of employers in the healthcare world offer a wide array of benefits and retirement plans. The variety and seeming complexity can be overwhelming to anyone, whether you are a med school grad starting your first residency or an experienced PA making a move to a different hospital.

    Ohio State University, in Columbus Ohio, provides a good example of this complexity. As a state university they employee faculty, university and hospital staff, as well as student employees. The subsequent variety of retirement plans offered can confuse even veteran healthcare workers with years of experience.

    This variety can be confusing at first, but in the end provides a great opportunity for employees to contribute and save a ton for retirement in multiple different accounts. After reading this post you should have a better idea of what’s available when it comes to choosing an OSU retirement plan.

    Key Points

    • As an OSU employee you can fully contribute to three separate retirement buckets (and in some cases even a fourth!).
    • For your “primary” retirement account employees choose between a pension version, for most staff this is OPERS the Ohio Public Employees Retirement System, or a defined contribution version the ARP the Alternative Retirement Plan, similar to a 403b.
    • All employees can also contribute to a 403(b) plan and/or a 457(b) plan.
    • Ohio State Employees don’t pay into Social Security. Your primary retirement account (OPERS, STRS, or the ARP) are meant to replace your social security benefit.

    OSU classifies three types of employees: Faculty, Staff, Student

    OSU places employees into three buckets: Faculty, Staff, and Student employees. Which bucket you fall into affects which OSU retirement plan you have access to. There are also scenarios where you could fall into multiple buckets. A surgeon at the OSU medical center would be classified as a staff employee, but if they were also teaching a course outside of their normal duties they could be classified as faculty as well.

    Staff Employee Retirement Plans

    Staff Employees will be automatically enrolled in the Ohio Public Employees Retirement System (OPERS) for their primary retirement plan, or they can instead opt out of participating in OPERS and choose the Alternative Retirement Plan (ARP) for their primary OSU retirement plan.

    Staff can also contribute to a 403b and/or 457b. OSU calls these their Supplemental Retirement Accounts (SRA).

    Some staff, where their salary exceeds the IRS and Ohio retirement system limits may even be able to contribute to the Retirement Continuation Plan (RCP)/415(m).

    Faculty Employee Retirement Plans

    Faculty Employees will be automatically enrolled in the State Teachers Retirement System (STRS) for their primary retirement plan, or they can instead opt out of participating in STRS and choose the Alternative Retirement Plan (ARP) for their primary OSU retirement plan.

    Faculty can also contribute to a 403b and/or 457b. OSU calls these their Supplemental Retirement Accounts (SRA).

    Some faculty, where their salary exceeds the IRS and Ohio retirement system limits may even be able to contribute to the Retirement Continuation Plan (RCP)/415(m).

    Student Employee Plans

    We will focus mainly on the retirement plans available to OSU Faculty and Staff in this post. Student Employees have access to similar OSU retirement plans and can choose to enroll or opt out of OPERS as well as contribute to the Supplemental Retirement Accounts.

    Ohio Public Employees Retirement System (OPERS) Plan

    • Available to Staff employees
    • Can be like a pension or a 401k/403b depending on your choice
    • Employees can opt out and choose the ARP instead

    Staff employees can choose to participate in the OPERS plan. The base version of this plan is a defined benefit plan where employees receive retirement benefits calculated using their salary and years of service.

    Employees can also participate in a member-directed version of OPERS and choose their own investments. In this version the employee assumes all of the risk and their retirement benefit is based on the growth in their investments.

    In either plan employees contribute 10% of their eligible compensation to the plan and OSU contributes 14% of their eligible compensation. In the member-directed version, not all of the 14% employer contributions ends up in the employee’s account. 7.5% goes to their OPERS account, 4% goes into their OPERS Retiree Medical Account (RMA), 2.24% goes into the OPERS Traditional Pension Plan to fund past liabilities (required by law), and 0.26% goes towards administrative expenses.

    There are also different limits on the amount that can be contributed to each of these accounts. The member-directed limit is pretty straightforward. The maximum that can be contributed each year is $66,000 combined from employer and employee contributions.

    For the OPERS pension plan, the limit on contributions is based on your salary and when you were hired. Employees hired prior to 1994 get contributions based on up to $490k in earnings, and if you were hired after 1994 you make contributions based on up to $330k of your earnings.

    State Teachers Retirement System (STRS)

    • Available to Faculty employees
    • Can be like a pension or a 401k/403b depending on your choice
    • Employees can opt out and choose the ARP instead

    The STRS retirement plan is very similar to the OPERS plan offering a defined benefit pension version and a defined contribution version, but unlike OPERS an employee can choose a combined plan that has pension and self-directed accounts.

    OSU and the employee both contribute 14% of their eligible salary to the STRS plan. In the member-directed STRS plan 11.09% of employee contributions go to your STRS account and 2.91% goes to the STRS plan to fund past liabilities (required by law).

    The total contribution limits ($66,000) and the eligible compensation limits ($490k if hired before 1994, $330k if hired after) are the same as the OPERS plan as well.

    Alternative Retirement Plan (ARP)

    • Available to both Faculty and Staff employees
    • No pension option – only a defined contribution plan like a 401k/403b

    If an employee doesn’t want to enroll in the OPERS or STRS plans they can set up an account with the Alternative Retirement Plan instead. The ARP only offers one plan type – a defined contribution plan similar to a 401k/403b.

    Contributions to this plan are very similar to what an employee would contribute to their OPERS or STRS plan. Employees contribute 14% of their pay and OSU contributes 10% for staff or 14% for faculty. A portion of your employee contribution goes to OPERS or STRS as a mitigating rate to mitigate any negative impact on the state retirement system. The total employee/employer contribution limit is $66,000.

    Additional Retirement Plans employees have access to

    Along with an employee’s primary OSU retirement plan – whether that is OPERS, STRS, or the ARP – OSU employees also have access to a few supplemental retirement accounts. This is great news for employees looking to sock away even more money for retirement accounts as these supplemental accounts exist in their own retirement buckets and you can contribute to all of them at the same time.

    Supplemental Retirement Accounts (SRA) – Traditional and Roth

    • 403b plan (Traditional and Roth versions)
    • 457b deferred compensation plan (Traditional and Roth Versions)
    • Allows an additional $45,000 in retirement contributions ($22,500 in each account), $60k for those over 50 years old due to catch-up contributions

    Along with one of the State pension plans and the ARP, employees are able to contribute to both a 403b plan and a 457b deferred compensation plan.

    A 403b, similar to a 401k is a defined contribution plan where you (the employee) make contributions and select your investments. There are no employer matching contributions for either of these plans because OSU is already contributing to your primary retirement plan.

    A 457b deferred compensation plan is another plan where you contribute your own money on a pre-tax or Roth basis and make your own investment decisions within the plan. Your contributions are technically income that you haven’t been paid yet and it’s held within a trust managed by your employer. If you want to learn more about 457b plans you can read this explainer article I wrote here.

    The great thing about these plans is that they exist as 2 distinct retirement buckets and you can make the maximum contribution ($22,500 in 2023, plus an additional $7,500 if you’re over 50) for both of them. So that’s an additional $45,000 in retirement contributions you can make in these accounts, not counting what you are already saving in your primary OSU retirement plan.

    Executive Retirement Plan – Retirement Continuation Plan (RCP)/415(m)

    • Only available to select employees
    • RCP and/or 415(m)
    • A way or employees with salary greater than retirement plan limits to save more

    The Executive Retirement Plan is only open to employees with salary and retirement savings needs higher than the retirement plan limits.

    Wrap up and which retirement plan is right for you

    As I said in the beginning of this post there are a lot of options to choose from when it comes to selecting your OSU retirement plan. But it really boils down to whether you’d rather have a pension and allow the state of Ohio to manage your investments for you, or if you’d like a plan where you have more control over your investments and assume more of the risk. And depending on how much you can contribute you can have both options – selecting OPERS for your primary retirement plan while also contributing to a 403b and/or a 457b plan.

    For employees that plan to work at OSU for their entire career, and for 30 years or more, choosing the OPERS plan likely makes the most sense. But for individuals know they will be transferring to another employer or just aren’t sure, then choosing the ARP might make more sense since they will be able to bring their retirement contributions with them and roll them over into another plan.

    No matter your situation, with all of the OSU retirement plan options, you are sure to find one that works for you.

  • 457b, Financial Planning, Investing, Retirement Planning

    What is a 457b Plan & How Should Physicians Use It?

    What is a 457b Plan & How Should Physicians Use It?

    A 457b deferred compensation plan is a tax advantaged retirement plan similar to a 401k or a 403b plan. Just like those accounts a 457b allows you to save for retirement with pre-tax or after-tax (Roth) contributions. Although similar to the more widely known 401k and 403b, a 457b plan has a few differences you need to be aware of before incorporating it into your financial plan.

    Key Points

    • 457b plans are similar to 401k/403b plans. They allow you to make pre-tax contributions and invest those in a tax-advantaged plan.
    • There are two main types of 457b plans: governmental and non-governmental plans. It’s important to understand the type of 457b plan you have because non-governmental plans have additional restrictions, and can be riskier than governmental plans.
    • A 457b plan is an additional retirement account bucket you can fill up alongside your 401k/403b, providing you the opportunity to save an additional $22,500 in a tax-advantaged retirement account.
    • 457b plans can allow penalty-free early withdrawals before reaching 59 ½. There are additional tax consequences to prepare for though, so have a plan for early withdrawals.

    How is the 457b plan different from the 401k/403b

    Most people are familiar with what a 401k and 403b plan are. They are very similar plans allowing you to contribute up to $22,500 (this is the limit for 2023, this amount can increase each year based on inflation) to a tax-advantaged plan for retirement savings. The 401k is offered to employees of for-profit companies and the 403b is offered by non-profit/governmental employers.

    Within these plans you can make pre-tax or after-tax contributions, your earnings grow tax-free, and you can make withdrawals without penalty after you reach the age of 59 ½.

    A 457b plan is typically offered by an employer as an additional retirement savings account in addition to a 401k/403b. Which is great because the contributions to your 401k/403b don’t count against your 457b contributions, and vice versa. With access to a 457b plan you could contribute an additional $22,500 each year to your tax-advantaged retirement accounts.

    The key difference with a 457b plan

    One main difference between a 457b plan and a 401k/403b plan is included in its full name: The 457b Deferred Compensation Plan. The money that you contribute to your 457b plan is considered deferred compensation and belongs to your employer until you withdraw it after leaving or retiring from your employer.

    Another difference is that money can be withdrawn from a 457b plan much earlier without penalty than with 401k/403b plans. If you leave a job, and are younger than 59 ½, you have the option to begin withdrawing the funds from your 457b plan without the 10% penalty that you would face when taking an early withdrawal from a 401k/403b plan.

    You need to be aware of the tax consequences of withdrawing from a 457b plan, because the withdrawals are treated as income (hence the name deferred compensation), and plans vary in their withdrawal options. Some funds force you to take everything in a lump sum which depending on the size of your 457b could cause quite the tax headache.

    What are the two types of 457b plan?

    457b plans are offered in two flavors and there are key differences between the two: governmental and non-governmental plans.

    Governmental 457b plans

    Governmental 457b plans are typically offered to employees of state and local governments. These are seen as a “less risky” version of the 457b plan since they are backed by the government rather than an individual business.

    While you are an employee the money in your 457b is held in a trust. After leaving your employer, funds in these plans can be rolled over into an IRA or 401k, avoiding the possible tax headaches that come with distributions from a non-governmental 457b plan.

    Non-Governmental 457b plans

    Non-Governmental 457b plans are offered by non-profit employers such as hospitals, not state and local governments. These plans are considered riskier because the plans rely on your employer’s solvency, not the government.

    With a non-governmental 457b plan, rather than making contributions out of your paycheck, contributions are made by your employer and it is technically money that you haven’t earned yet, hence the name deferred compensation. Rather than sitting in a trust as with a governmental plan, the 457b in this case still belongs to your employer, not you, until you transfer or withdraw the funds.

    This can be helpful and protect you in the case of a personal bankruptcy, as your 457b funds belong to your employer and are not subject to your creditors (+ for asset protection). But the funds are also subject to your employer’s creditors in a situation where your employer goes under. This is not as big of a risk when it comes to an established hospital or company but is still something to consider.

    Another potential downside for non-governmental 457b plans has to do with their distribution or rollover options. These plans can only rollover into another non-governmental 457b plan, and only in limited situations. That means that rolling over into a 401k or IRA is not an option.

    When you leave an employer funds must be distributed within 10 years. Most 457b plans allow you to make distributions over 5-10 years, but some make you take a lump-sum distribution upon leaving your employer. A lump-sum, or even 5 years of distributions could create quite the tax headache if not planned for properly.

    457b plan is a great early retirement tool

    The 457b plan can be a great supplemental retirement savings account, but can be especially impactful for individuals pursuing early retirement. Having a 457b in addition to a 401k/403b doubles your annual contribution limit for retirement accounts, $22,500 => $45,000 in pre-tax or Roth contributions each year.

    Because of their status as deferred compensation and the lack of an early withdrawal penalty, 457b plans can build a great bridge between your early retirement years and when you turn 59 ½ and can withdraw from your 401k/403b penalty free.

    Should I contribute to my 457b, 401k, or 403b first?

    When considering which retirement plans to contribute to, and which one you should focus on first, the 457b tends to come in as an afterthought when compared to your 401k/403b and IRA/Roth IRA accounts. This makes sense, as most people haven’t even heard of a 457b before finding out they have access to one.

    The first account to fund should be whichever one is providing you an employer match. If your employer 100% matches the first 5% you put into your 401k, do that first. It’s hard to beat a 100% return on your money. After that it usually makes sense to max out your contributions to your 401k/403b before making additional contributions to your 457b.

    All of the above recommendations may vary based on the available cash flow that you can contribute to these accounts, as well as the other tax-advantaged accounts that you have access to and want to fund to meet your goals: your HSA, 529 education account, IRA/Roth IRA, etc.

    You will want to compare your available plans for any differences in investment options, fees, or vesting schedule (how long you need to remain at your company until the money is yours with no strings attached) before making your final decision.

    Another difference with 457b plans is that you have a total contribution limit of $22,500 which any employer contributions also count against. Where employer contributions to your 401k/403b count against your total $66,000 contribution limit, and you can still contribute your full $22,500. It’s a minor difference, but still one to keep in mind.

    In either case, the great thing with the 457b is that it resides in its own bucket and doesn’t impact how much you can contribute to your 401k/403b. Allowing you to contribute an additional $22,500 to a tax-advantaged retirement account.

    401k and 403b Catch-Up Contributions vs 457b Catch-Up Contributions

    401k and 403b plans allow individuals who are 50 or older to make additional catch-up contributions of $7,500 per year. The contribution limit for a 457b plan is doubled for the three years prior to the plan-specified retirement age. Based on current contribution limits you could make $45,000 in annual contributions in the three years before you retire.

    Pros and Cons of 457b plans

    Pros

    • Provides another tax-advantaged retirement account bucket for you to contribute to
    • Ability to make early withdrawals without penalty after you leave your employer
    • Can roll funds in governmental 457b plans into another retirement account (401k/IRA)
    • Allows larger catch-up contributions in the 3 years before the plan specified retirement age

    Cons

    • Riskier option compared to a 401k/403b if you are contributing to a non-governmental plan
    • Can’t rollover a non-governmental plan into another retirement account (401k/IRA)
    • Some plans have limited withdrawal options, such as requiring a lump sum withdrawal that could cause a major tax headache
    • Can (sometimes) have less investment options available for you to choose from

    Wrap up

    A 457b plan is a great retirement savings tool to have access to, providing an additional bucket of tax-advantaged savings to contribute to outside of your 401k/403b. But before you start using your 457b you need to understand the type you have: governmental or non-governmental, along with other details to make sure it fits in your financial plan correctly.

    Using a 457b plan correctly can help you turbocharge your retirement savings, and provide an income bridge for those pursuing early retirement. It’s hard to overstate the additional flexibility that a governmental 457b plan provides. With the option to early withdraw funds penalty-free or roll them over into another 401k/IRA, they are one of the best accounts out there.

  • Financial Planning, Student Loans

    The Physician’s Guide to Student Loans, Public Service Loan Forgiveness and More

    What You Need to Know About Student Loans

    Student loans, federal student loan forgiveness, and Public Service Loan Forgiveness are all hot topics these days, especially if you have as many loans as the typical resident. The average med school graduate owes $250,990 in total student loan debt. Yikes! That amount of debt is daunting no matter how much you expect your eventual salary to be.

    It hurts even more when you consider most docs will make around $65k during their years of residency. Understanding the different types of student loans you have and the payment/forgiveness programs you qualify for is crucial to managing your debt and building a solid plan to deal with it.

    Types of Student Loans

    There are two main types of student loans, Federal and private. Federal loans are made by the federal government and private loans are made by private banks or lenders. Federal loans can be consolidated into private loans. Private loans cannot be changed into federal loans so if you have federal loans and are considering consolidating them into a private loan you must be sure because there are no take-backs after you do.

    Federal Loans

    Federal student loans are loans made by the federal government to both undergraduate and graduate borrowers. There a couple different types of student loans: subsidized, unsubsidized, Perkins loans, FFEL loans. The type of federal student loans that you have can depend on your financial need, if you will use the loans for undergraduate or graduate schooling, or if you are a parent getting a loan for your child.

    The names of the types of loans don’t always make intuitive sense so be sure to do your homework on exactly what types of loans you have and which repayment plans those loans qualify for.

    Direct Loans

    The two broad types of federal direct loans are direct subsidized student loans, and direct unsubsidized student loans.

    Direct Subsidized Loans

    Direct subsidized student loans are offered to undergraduate students on the basis of need based on the information that you entered into your FAFSA. Subsidized loans are exactly that, they are subsidized by the federal government on your behalf. How this works is that the government pays the interest on these loans while you are in school (attending at least half-time), for the first six months after leaving school, and during a period of deferment where payments are postponed due to financial hardship.

    Direct Unsubsidized Loans

    Direct unsubsidized student loans are the other main type of direct student loan offered by the federal government, and they are available to both undergraduate and grad students. As unsubsidized loans they accrue interest as soon as you receive them.

    To determine whether or not you have direct loans you should visit the StudentAid.gov site and create an account using your Federal Student Aid ID. Using the site you will be able to see a summary of your federal loans and their type.

    Stafford Loans

    The term Stafford Loan may refer to a subsidized or unsubsidized Federal Stafford Loan that was made under the Federal Family Education Loan (FFEL) Program. This program has not operated since 2010, however some people and schools still use the term “Stafford Loans” when referring to direct subsidized or direct unsubsidized loans.

    Perkins Loans

    A Perkins loan is another type of subsidized federal loan that is made available to students that have demonstrated exceptional financial needs. The reason this isn’t considered a “Direct Loan” is that it is a loan made from the school and the borrower makes payments back to the school.

    Parent PLUS or Grad PLUS Loans

    PLUS loans are unsubsidized federal student loans made to parents of undergraduate dependent students which are known as Parent PLUS loans, or when made directly to graduate or professional students known as Grad PLUS loans.

    Direct Consolidation Loan

    With federal student loans you have the option to consolidate them into a Direct Consolidation Loan. There are pros and cons for making this decision. Certain federal loans don’t qualify for some of the federal repayment plans like REPAY or PSLF, while consolidated loans do.

    You may also lose some benefits and protections for certain loans with consolidation. After consolidation you have one loan with one interest rate that is the weighted average of your individual loans. Because you only have one loan now you lose out on the opportunity to pay off your loans individually with methods like:

    • Snowball method, where you focus on paying off your loan with the smallest balance first. Once that loan is gone you use the extra cashflow to pay off your next smallest loan, and repeat until they are all gone.
    • Avalanche method, where you pay off your loan with the highest interest rate first since it is costing you the most. Then when that loan is paid off you move to the next highest interest rate debt and repeat until finished.

    Private Loans

    Private loans are made by private banks or lenders and the details can vary widely. They generally cost much more than a federal loan, and are used when a borrower can’t access federal loans. The payments, interest, and terms and conditions on these loans can vary widely based on the borrower and institution. Interest also accrues on private loans while the student is still in school.

    *A note on refinancing*

    It’s important to remember that while you can refinance your federal student loans into a new private loan, you can’t reverse the process and change private loans into federal loans. You need to be mindful of this as you approach any sort of loan refinancing decision. You may have a good reason to refinance – such as getting a lower interest rate, or a lower payment – but you also lose out on the protections and repayment options that are available with federal student loans.

    Repayment Programs

    With Federal Student Loans there are many different payment programs, like IBR or PAYE, that you can use to manage your payments and repay your loans. Most of these plans forgive the remaining balance on your loan after 20 or 25 years of making payments, but the amount that is forgiven is treated as taxable income and you need to prepare for it.

    You can use one of these payment programs at the same time you are pursuing loan forgiveness under the Public Service Loan Forgiveness (PSLF) program, which exists in its own little category that we will explain more further down this article.

    Standard Repayment Plan, Graduated Repayment Plan, Extended Repayment Plan

    With these plans, monthly payments are calculated to pay off your entire loan balance over a period of 10 to 30 years. Payments are fixed under the standard plan, and can increase over time under the graduated and extended plans. These plans differ from the following plans we will discuss in that your income isn’t taken into account when calculating your monthly payment, and the plan is designed to pay off the entire loan balance by the end of the plan, i.e. there is no loan forgiveness as a part of these plans.

    Income Driven Repayment Plans

    There are several different Income Driven Repayment Plans. The plans vary on: eligibility depending on when you received and what types of loans you have, payback period length, payment amounts, and more. Your loan payment while in one of these plans is based on a percentage of your discretionary income, meaning it could change as your income and tax filing status changes.

    Each of these plans has a set repayment period and your loan balance at the end of the repayment period is forgiven, but remember that forgiven amount is taxable as income so you need to be prepared for the tax bill that comes with it.

    Income Contingent Repayment – ICR

    Payments are the lessor of 20% of your discretionary income or your payment under a 12-year fixed payment plan. The repayment period is 25 years. The ICR payment plan is rarely used.

    Income Driven Repayment – IBR

    There is an “old” IBR and a “new” IBR. There are slight differences and you can’t qualify for the new IBR if you had any loans prior to July 1, 2014.

    OLD: Payments are the lessor of 15% of your discretionary income or the 10-year standard repayment plan payment, and the repayment period is 25 years. You must demonstrate a financial hardship to qualify.

    NEW: Payments are the lessor of 10% of your discretionary income or the 10-year standard repayment plan payment, and the repayment period is 20 years.

    Pay As You Earn – PAYE

    Payments are the lessor of 10% of your discretionary income or the 10-year standard repayment plan payment, and the repayment period is 20 years. You must demonstrate a financial hardship to qualify.

    Revised Pay As You Earn – REPAYE

    REPAYE is similar to PAYE but you may have higher payments than with PAYE. Payments are 10% of your discretionary income, even if it’s higher than the 10-year standard repayment plan payment. The repayment period is 20 years for undergraduate loans and 25 years for graduate or professional loans.

    NEW REPAYE

    An updated REPAYE plan was proposed as part of the federal student loan forgiveness announcement in 2022. This plan has not been finalized or approved yet, but we are including the highlights below and will update this post if things change.

    • Borrowers will use 225% of the federal poverty limit when calculating discretionary income, up from 150% used for current REPAYE.
    • Undergraduate student loan borrowers will calculate their payments as 5% of their discretionary income. Graduate loans will still use 10% of their discretionary income to calculate payments. Borrowers that have a mix of graduate and undergraduate loans will calculate payments based on a weighted average of their loans.
    • Married borrowers will be able to exclude their spouse’s income from their loan payment calculation by filing taxes Married Filing Separately (MFS).
    • A big change is that interest will no longer accrue in excess of a borrower’s calculated payment. This means that your loan balance will not continue to grow even if your calculated payment does not cover the entire monthly interest due on the loan. This means that borrowers seeking loan forgiveness will have a lower amount forgiven, and a lower tax bill due, at the end of the loan.

    Public Service Loan Forgiveness

    PSLF isn’t exactly a payment program. You can enroll in REPAYE or IBR or any of the other payment programs while you are pursuing PSLF. But it is a very important program that you need to know about because it could save you hundreds of thousands of dollars if you qualify. If you work in the public sector or for a qualifying nonprofit you can have your entire loan balance forgiven after 10 years (120 qualifying payments).

    The requirement for PSLF include:

    • Must work “full time” for a qualifying entity – these include public health, nonprofits, public school teachers, etc.
    • Must have federal direct loans (if your loans aren’t direct you may be able to consolidate them into federal direct loans).
    • Must make 120 qualifying payments – note the language isn’t 10 years of payments, but 120 qualifying payments.

    If you are pursuing PSLF you should definitely enroll in an income-driven repayment plan to reduce your monthly payments as much as possible and increase the amount that will ultimately be forgiven.

    Summing Up

    There are many factors to take into account when considering student loans and your best strategy to deal with them. Refinancing, consolidation, seeking loan forgiveness, choosing a particular income-driven repayment. All of these decisions come with consequences that are helpful to understand so you can make the optimal decision for your situation.

    Making a plan to deal with as much student loan debt as the typical med school grad has can feel daunting. Not creating a good plan to manage it can lead to serious problems with your finances in the future.

    There is a lot of helpful information on the federal student aid website about repayment plans and consolidation faqs. If you feel overwhelmed talking to a financial advisor with experience dealing with student loans can be a big help.

  • Financial Planning, Insurance

    WHAT PHYSICIANS SHOULD KNOW ABOUT DISABILITY INSURANCE

    Why Disability Insurance is Important: Protecting Your Greatest Asset

    As a physician one of your greatest assets is your ability to earn a substantial income once you have completed your training and residency, and you should protect it with disability insurance. Most physicians will graduate with a healthy amount of student loan debt from years of schooling, likely totaling in the hundreds of thousands of dollars. And while this might be a daunting amount to have to pay back, the opportunity to earn a great income throughout your working career makes the investment worthwhile.

    If your ability to practice medicine in your chosen field and use the skills that you have gained during your years of school and training were to disappear, the ability to pay off your student loans, not to mention being able to achieve your goals and live a life that you enjoy would be drastically reduced. Insurance companies estimate that as many as one in seven doctors will be disabled at some point during their career. The importance of your future income and the high likelihood of needing to rely on disability insurance are the reasons why it is such an important topic for all physicians to understand.

    Short-Term vs Long-Term Disability Insurance

    There are different variations of disability insurance: short-term and long-term disability insurance policies. The benefit period – or how long you receive payments if you become disabled – can last up to two years for short-term policies. Long-term policies are designed to cover your working career, with most policies ending at the age of 65. For this article we will be focusing on the more important of the two, long-term disability insurance (LTD).

    The Benefits and Drawbacks of Employer-Provided/Sponsored Group Long-Term Disability Insurance

    Many employers offer a group long-term disability insurance to employees. This is a great first step in protecting your long-term earning potential, but relying solely on employer-provided coverage can come with some drawbacks.

    Some of the benefits of employer sponsored long-term disability insurance are:

    • Lower cost
    • Easier to qualify for (usually does not require medical screening)

    The list of potential drawbacks for employer-provided coverage is longer, but that doesn’t mean that employer-provided disability insurance is a bad thing it just means you have some extra homework to do when choosing an individual long-term disability insurance policy to make sure you are getting the correct coverage.

    Potential drawbacks are:

    • Any occupation definition of total disability
    • No portability if you leave your employer
    • Benefits are taxable (when employer paid)
    • Offsets with other benefits such as social security
    • Capped benefit amount

    An employer-provided group long-term disability policy is a great place to start when it comes to coverage, but you are almost certainly going to want to supplement that coverage with an individual policy that provides a full level of income replacement as well as the ability to maintain coverage if you switch employers in the future. Let’s look at an example of the benefits from a group policy and why you would want to supplement with an individual policy as well.

    Employer provided long-term disability coverage typically has a maximum monthly benefit cap along with only replacing a percentage of an employee’s. Also since this is usually a benefit provided by your employer on a pretax basis, the employee ends up paying income tax on the benefit they receive, so for example:

    Let’s say Doctor Doom earns $400,000 per year and is covered by a LTD plan that covers 60% of income up to a maximum of $15,000 per month. Under the plan they are insured as if they are making $300,000 (60% of $300,000 provides for $180,000 or $15,000 per month, the plans monthly benefit). Dr. Doom would also still owe income tax on the $180,000, lowering their benefit further.

    Important Contract Provisions and Riders

    There are different provisions and riders that are included in a disability insurance policy that may affect the cost and benefits that you are entitled to receive should you need to make a claim. The list below contains a few of the most important provisions and riders to understand when choosing a policy.

    Definition of Total Disability: Own-Occupation vs Any Occupation

    The definition of disability is an important distinction within the policy. Under an own-occupation definition, someone would be considered disabled if they could not perform the functions of their occupation, whereas with an any occupation definition as long as they could perform the functions of any occupation, they would not be considered disabled.

    A basic example would be if a surgeon who through illness or injury lost their fine motor control and could no longer perform surgery (their occupation), but could still work an office job, they would be considered disabled under an own-occupation definition but not an any occupation definition.

    Residual Disability

    This is a provision that allows a partial benefit to be paid if someone is not totally disabled but are in a situation where they cannot perform all the duties of their occupation or cannot work as many hours and suffer a reduction in income.

    Elimination Period

    This is the period of time before you are able to start taking benefits. You can think of this as being similar to the deductible in a health insurance plan. 90 days is a typical length for most long-term policies, but elimination periods of 0 days, 180 days, or longer can also be selected.

    Benefit Period

    The benefit period is the period of time that the policy will pay out disability benefits. This can range in time from two years all the way up to the insured’s lifetime. The most common benefit period is up to age 65

    Recovery and Transition Benefits

    Policies can offer a recovery or transition benefits to continue paying benefits to someone after the insured has fully recovered. For example, in the case of a solo-practitioner who has been disabled for a significant period of time and eventually recovers. They will likely have seen a number of their patients leave and find other physicians. Transition benefits could be used to supplement their income as they build back their patient base and income.

    Non-Cancellable and Guaranteed Renewable

    When a policy is both non-cancelable and guaranteed renewable it means that the insurer cannot change the policy terms or increase the premiums as long as the insured pays the scheduled premium. This offers the insured the greatest amount of protection. There are policies that are only guaranteed renewal (not non-cancellable) which allow the insurer to change premium rates in the future. This may provide the insured with savings on the initial premiums but leaves them open to rate increases in the future.

    Future Increase Option, Benefit Increase Rider, Benefit Purchase Rider, Benefit Update

    These options allow the insured to increase benefits or purchase more coverage in the future. Importantly the insured is able purchase additional benefits without undergoing additional medical underwriting. These are beneficial options for physicians early in their career as they can purchase increased benefits to keep up with their increases in salary without having to go through the medical underwriting process again.

    Catastrophic Coverage

    A catastrophic disability benefit rider allows you to receive an additional monthly benefit if you are unable to perform 2 or more functions of daily living (dressing, bathing yourself, etc), total and permanent loss of sight or hearing, or cognitive impairment. The reasoning behind this rider is that the additional benefits could be used to pay for someone to provide in-home care or medical expenses not covered under your traditional health insurance.

    Cost of Living Adjustments

    COLA is a rider that provides increased cost of living adjustments for claim payments to keep up with inflation. This is especially important the younger you are when purchasing your policy as inflation can take a toll on benefit payments over time.

    Long-Term Disability Insurance Cost

    Long-term disability insurance for physicians can be expensive. Premium costs tend to be in the range of 2-6% of income, and traditionally policies are much more expensive for women than men. This is primarily due to the higher risk of disability for women due to pregnancy and pregnancy related illnesses. According to the Journal of the American Society of Certified Life Underwriters a 35-year old woman is three times as likely as a man of the same age to become disabled for 90 days or more.

    Graded vs Level Premiums

    Graded premiums start out lower than level premiums and increase over time, whereas level premiums will remain the same for the life of the policy. If you are hell-bent on paying off your student loans, saving a ton and becoming financially independent early in your career then the graded premiums might make sense. But for most physicians, getting coverage early in their careers and choosing level premiums is the better bet.

    Premium Frequency

    Insurers offer a few different payment frequency options: annual, quarterly, monthly. With more frequent payments costing more than making one annual payment. This can usually be changed without affecting the policy so starting out with monthly payments early in your career and then switching to an annual payment once you can afford it is a good option.

    This article provides an overview on the basics of disability insurance and is by no means an exhaustive guide. When selecting a disability policy make sure to get multiple quotes and understand the specifics of your policy and what it covers. Your skills and your income, especially at the start of your career, are your most important asset. Make sure to protect it by including disability insurance in your financial plan.

  • Financial Planning

    SURVIVING THE HOLIDAY HANGOVER

    The calendar page has turned from December to January and another holiday season is in the rear-view mirror. If your holidays were anything like mine then you might be feeling a bit of a hangover from all of the overindulging of the last few weeks. It’s easy to get caught up while in the thick of the season and come out of December more stressed than when you went in. In my case this stems from a few different areas you might relate to: spending on gifts and other things, holiday travel, enjoying too many special treats at holiday get-togethers, and children gone feral after two weeks of too-much sugar and not enough routine.

    It’s easier than ever to spend more than you planned these days and that’s especially true during the Christmas shopping season. With every retailer touting their best prices of the year during black Friday, and again on cyber Monday, and yet again on the final weekend before Christmas (funny how that works), it just makes sense to pick up a few things for yourself while you’re at it. All of this can lead to a painful shock in January when you receive your credit card bill. This is another point for using cash for your purchases when you can, since it helps prevent adding on just “one more thing” that you probably didn’t need or budget for.

    There’s not much good to be said about traveling for the holidays. Icy roads, flight delays, and sleeping in a bed that’s a size or two smaller than what you’re used to at home (god bless those of you sleeping on an air mattress). But we endure it all to be with those we love this time of year. As we get older the guest beds become harder to endure and the prospect of not making the trip so we can sleep in our own house is that much more desirable. But for now, our boys are four and six years old and we feel fortunate that we are in a position where we can travel and they can spend the holidays playing with their cousins and being spoiled by their grandparents. I guess one silver lining is that after all of the time away, the first night back in your own bed is some of the best sleep you’ll have all year (absence does make the heart grow fonder after all).

    If your family is anything like mine, the holidays can seem like a competitive eating event staged over the course of two weeks. It’s hard not to overindulge when there are so many events and get-togethers where it seems the main purpose is to try to consume as many cakes, cookies, pies, and other sweet things as possible. The general consensus seems to be that any health eating habits can wait until everybody starts dieting with their new year’s resolutions. 

    Reading the preceding paragraphs might give you the impression that I’m a scrooge who doesn’t enjoy the holidays and only focuses on the downside of it all. But that’s part of what makes the January hangover so real. I have the memories of the time spent with family and giving and receiving gifts, but as the glow from those experiences fades we need to deal with the effects of our overindulgence, lack of sleep and higher than normal (or anticipated) bills coming due. So, what can we do about it?

    Well it’s no surprise that January is the biggest month for new gym signups and participation, and that Dry January is a new trend that people are jumping on as well. For most folks though, I recommend focusing on the basics rather than starting a new routine and hoping you’ll stick with it. If your budget feels stretched, and you feel stressed, use that as motivation to get back to basics and focus on a routine that works for you. One thing we’re doing in our household is preparing healthy meal plans for a week or more ahead of time to prevent falling back on going out for lunch or dinner.

    If you feel you have to try something bold to make a new start, like sign up for a new exercise class, try out a whole 30 or keto diet, or commit to a no-spend or dry January, then give yourself the best shot at sticking with it that you can by finding a way to hold yourself accountable. Some good ways to do this are to find a friend or partner that will participate with you so you can keep each other honest. If no one wants to join you, you can still ask a friend to hold you to your goal, or make a public announcement that you will donate money to a cause you dislike if you start to slack off. There’s a reason so many New Year’s resolutions never make it to February, but having an accountability partner or consequence can go a long way towards ensuring your success.

    Good luck to all of you. We made it through the holidays, we can make it through this too.

  • Financial Planning

    HOW CAN A FINANCIAL ADVISOR HELP

    Need a hand with your finances?

    Starting out your initial financial decisions are relatively simple. Try to save more than you spend, set aside a sensible amount for emergencies, and invest the rest for longer term goals. As you grow and advance in your career the decisions tend to become more complicated. As you near retirement the decisions become even more important, and delaying major decisions can have huge consequences down the road.

    Balancing saving for education and family vacations, choosing between different health and life insurance plans, and managing tax and estate planning issues are just a few of the issues to tackle.

    A qualified financial advisor can provide support and guidance as your financial situation becomes more complicated. Building a financial plan, providing answers to challenging financial questions and helping you implement the action steps in your plan are three key ways that a financial advisor can help. 

    Building Your Financial Plan

    One of the top benefits of working with a financial planner is creating a written financial plan. Most of us have a general sense of our goals and what we are doing to achieve them, but taking the time to clearly define and write down what we want and how we will achieve is an extremely worthwhile exercise, but it can be a challenging task to do on your own. 

    Building a financial plan involves analyzing your financial situation (job, savings, investing, debts) and your goals (family, home, travel, retirement) to create a to-do list to make your goals a reality. The process of creating a written plan helps reduce the anxiety that comes from having a hazy picture of your finances and wondering if you are on track or not. Creating an accurate map of your current situation is the best way to identify the next step on your financial journey.

    Answering Challenging Financial Questions

    An advisor can provide answers to the questions that often paralyze us into indecision: 

    • Am I saving enough for retirement?
    • Can I afford college tuition for my kids?
    • Should I pay off my mortgage early?
    • Am I on the right track?
    • Can I afford to start a family?
    • How do I manage my student loans while still investing?
    • How much insurance do I need? 

    If you have any of these questions or concerns you could benefit from meeting with a qualified financial advisor. During the process of creating a financial plan an advisor can provide guidance and answers to these questions as well as other important life decisions.

    Implement the Plan and Adjusting Along the Way

    Creating a written financial plan is a great first step that can help you gain a clear understanding of your current situation and the actions you need to take. Just as important, is following through and accomplishing the tasks identified in the plan, as well as making adjustments when things change.

    Having regular check-ins with a financial advisor can ensure you remain on track towards your goals. Providing ongoing guidance when new situations pop up such as the birth of another child, an unexpected career move or any of the other things that life might throw your way. An advisor can help you make the necessary adjustments so that these changes don’t derail your plan.

    Would you benefit from having professional advice when it comes to planning and achieving your financial goals? A financial advisor can guide you along the path to grow and protect your assets, and secure your future.

  • Financial Planning

    4 QUESTIONS TO ASK YOUR FINANCIAL ADVISOR

    Making the choice to hire a financial advisor is a big decision, but after deciding to work with a financial advisor, finding someone that you trust and are comfortable working with can seem like an even bigger challenge. Most people start the process by asking friends or co-workers if they work with or know someone who is an advisor, or searching google for “name of their town + financial advisor” and seeing what pops up.

    After you’ve put together a list of a few advisors to look into, how do you actually evaluate who to work with? I suppose you could always go by their photos on the website; are you more comfortable with jeans and a sportcoat guy or is it pantsuit/suit & tie all the way?

    Rather than evaluating them on how close their office is to your house, or if you have the same choice in fashion designers, I’ve come up with a few questions that you should consider asking them instead. By starting with the questions below you’ll learn more about their business and what types of clients they work with, helping you to make a more informed choice.

    Are you a fiduciary?

    A fiduciary is someone who is legally bound to make decisions and recommendations that are in the best interest of their client regardless of the impact on the advisor. I believe this is the best and most honest way for a financial planner or advisor to work with clients. When your advisor is a fiduciary it reduces the chances of a potential conflict of interest between you and your advisor.

    You can feel confident that you are receiving the best advice for your situation, rather than being sold investments or financial advice that may result in higher sales commissions for your advisor.

    How do you get paid?

    This may seem like a surprising question to ask since you are the client and expect you will pay for your advisor’s services. Aside from the question of how you pay your advisor, whether that’s in the form of an upfront fee, a monthly retainer, hourly, for assets under management (AUM); you may not be the only one that pays them.

    Your advisor could also be paid a commission by Mutual Fund companies in exchange for selling their specific funds to clients. In this case the client, you, are still paying the planner, but indirectly through the price of the investment or insurance products.

    A fee-only advisor on the other hand is exactly what it sounds like, an advisor that is paid only in direct fees by you the client. With a fee-only, fiduciary advisor you can be sure to understand how much you are paying and what services you are paying for.

    Are you stuck in the 20th century?

    Maybe a more polite way to ask this question of an advisor is with a set of questions: How do you usually communicate with clients and what technology do you use for managing your client’s information? Do all client conversations take place in the office? Do you use electronic signature software or do all documents require a physical signature, which can mean more time spent visiting the office, printing, signing, and faxing documents. How long does it take you to respond to emails or texts? Do you text?

    Some of these questions might be more important to you than others, maybe you are unavailable during normal business hours so email and text are the best ways for you to communicate. Or you travel a ton for business and will need to use skype for meetings most of the time.

    We all lead busy lives these days and you need an advisor that is comfortable communicating with you in the way that works best for you. Whether that’s with in-person meetings, over email, on a skype or phone call, or texting, you should find an advisor capable of having conversations with you where you are most comfortable.

    What does your typical client look like?

    One of the keys to a successful client-advisor relationship is for the advisor to have an understanding of the client’s specific situation, goals, needs, and the options to achieve them. You will have a more successful relationship working with an advisor that specializes in clients with a similar profile to yours. As an example, an advisor who specializes in working with doctors will be better suited to continue working with doctors as she builds up expertise about the specific challenges and opportunities facing doctors and the potential solutions and recommendations available.

    A good way to find out if a potential advisor is a good fit for you to work with for you, is to ask about the types of clients they currently help. Do they work mainly with small business owners and entrepreneurs, do they work with folks in their 50s and 60s making their final preparations for retirement, or do they work with young families and individuals helping with investment decisions and college debt/savings strategies? All three of these groups require financial advice, but the financial plans for each group would tend to look quite different. Regardless of which group you belong to, you want to make sure your advisor is specialized and knowledgeable in the areas that affect you.

    Making your selection

    Asking potential advisors these four questions will help you to find an advisor that has the qualities and expertise that you are looking for. And almost as important, by having a plan in place for how to evaluate potential advisors, you’ll feel more in control of the process and feel confident that you are selecting someone who will be a good fit to work with for years to come.