Rosanne M. Boser, a certified public accountant and personal financial specialist at Mayo Clinic, joins our podcast to discuss various financial topics for ophthalmologists to consider at different stages in their careers.
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Welcome to the Mayo Clinic ophthalmology podcast brought to you by Mayo Clinic. I'm your host, Doctor Andrea Tooley and I'm Doctor Eric Botham. We're here to bring you the latest and greatest in ophthalmology medicine and more today, we are joined by Roseanne Boser, a certified public accountant and personal financial specialist to chat, personal finances for physicians from the expert. Roseanne Boser is a certified public accountant and per personal financial specialist. She has worked as a staff, personal financial advisor at the Mayo Clinic since 2001. Roseanne has over 20 years of experience and personally serves over 1200 voting and consulting staff here at the Mayo Clinic. Welcome, Roseanne. Thank you very much. I appreciate being asked to do this talk today. It's a wonderful topic for anyone. Yes. Thank you so much for joining us. Uh This is great to have a discussion about personal finances for physicians, specifically ophthalmologists. I think it's a great topic that's really often overlooked. So we're excited to have you here on the podcast. I agree. I've here at Mayo. We have wonderful resources to support us as physicians and we have many, many opportunities whether it's in personal finances or, or professional life. Certainly in billing we and, and the documentation and things that we all need for our, our, our professional lives. But I've been super excited as this podcast has gotten closer to talk about more on a personal side and you've run financial boot camps and pre retirement seminars for physicians. We would love to take this opportunity and this podcast and create sort of a mini boot camp and the in that spirit, let's just start by talking about when physicians residents graduate from their programs and first put on their career boots. What are the pieces as they come into your office and sit down and get financial advice to say I'm getting my first paycheck or I've gotten a number of them and I don't know what to do yet with this a little bit extra spending money. Um, how do you start conversations with new physicians in picking a financial advisor and picking a plan as they organize their financial futures? That's a great question and it's a great way to start. A lot of times people forget, you know, that they're so excited about the big paycheck that they really don't focus as much on the finance part of it in that they need to actually do have a plan or start at least in a small way with taking charge of their finances. So, of course, our office always reviews benefits. We make sure people are taking full advantage of all their benefits and mayo does have a phenomenal benefit package. But beyond that, things like, you know, are we making sure we're contributing to the 403, there's a match, do we wanna make sure that we aren't missing any money that, you know, is there for the taking that? Sadly, some people overlook or they feel like they can't afford because they're so used to the maybe the training salary that suddenly it's like, gosh, I have all this money and you know, that's something that we definitely want them to understand and fully appreciate what's available to them. Also, as far as do they need a financial advisor, our office is available free of charge. We're salaried just like everyone else. So we are not motivated to try to sell a particular product to staff, which is huge in the big picture. If you are looking for an outside advisor, you're gonna look at things like, what kind of experience do they have? Um, how old are they? You don't want somebody that's ready to retire when you're just starting out in your career? What kind of certificates do they have? Do they have, you know, education or were they a used car salesmen in their prior life? Um, ironically, I was at Ameriprise for a number of years. Actually, there were several used car salesmen in that mix of financial advisors. You learn a lot by the different things you see and experience. So, you know, that's very important in the big picture. And of course, when you're first starting out, do you actually need an advisor? You need someone to kind of give you some basic knowledge, but do you need to be paying from day one? You know, maybe you pay it someone just a fee for upfront, maybe an hourly fee. But I don't see a huge need for an assets under management fee that is going to be with you for the next 30 years and will really seriously de your own assets. That's all really good advice when you're starting out. I feel like one other kind of big topic that people are concerned about. At least I was when I was first starting after medical school and after residency is debt and debt management. And um, so talk a little bit to us about debt, good debt versus bad debt. And, um, how do you know how much debt you can take on and afford when you're really entering the real world starting these big purchases? Like buying a house, those kinds of things that's again, very good. Um, and something that sometimes we will warn people, at least I will and all, you know, sometimes banks will preapprove for pretty significant amounts that people can supposedly afford on a home and that sometimes I'll push back a little bit and I'll say yes, you could afford that. But if you want to also have money for some other things. Maybe we ratchet that back a little bit to really be more realistic about, you know, what's affordable, what the goals are sometimes, you know, we start out with one price home, we get debt under control and then maybe we move up to the dream home in five or 10 years. So not necessarily the dream home from day one. And as far as good debt versus bad debt to anyone that's worked with me for any length of time knows I talk about that a lot because good debt is maybe debt that we can subtract for tax purposes like mortgage interest, so we at least can have some tax break. Potentially, you know, tax laws have changed over the last few years and even mortgage interest depending on all of your deductions together may or may not be something that you take full advantage of because you may be able to do what's called a standard deduction instead of itemizing. But those are things that we look at um bad debt. I look at in like credit card debt, things that high interest, no great return on it. It's really to me building up a credit card balance is like overspending your take home pay. So over time, if your credit cards going up and up and up, obviously, we've got a red flag here through my years. I think the worst case I saw was someone coming with 15 different credit cards with balances and all of them and we had to do some major consolidation. I worked with one of the local banks and thank goodness now they have good debt. You know, they have their primary mortgage, they have a home equity loan. The credit cards are all gone. They pay them off each month, but a huge success story and things that I'll steer people away from getting rid of that bad debt. Also, there is something called a snowball theory where if you've got several different major debts and you know, you're probably overexposed, pay off one focus towards maybe the highest interest loan. And then when that one is gone, you take the money you were paying for that loan and you automatically apply that to the next loan next in the highest interest and gradually through snowball effect, get rid of those high interest, no deductible types of loans. So as far as what, what can you afford as far as a home, you know, banks have a rule of thumb where they'll say, look at your gross income, 28% of that gross income per month can be applied to what's called pity principal interest taxes and insurance. And that's kind of a basic rule of thumb. And then beyond that, they'll look secondarily if you have other debt and if you don't, they'll again apply that same. Ok, what's your gross monthly income? And then they'll say, well, if you don't have other debt, maybe you can go up to 35%. So we'll be comfortable with, you know, extending credit up to 35% of your gross. Those are some big rules of thumb. But again, even if some a bank said, yeah, you can afford 28% I might push back and say, uh let's look at maybe 25 24%. Give us a little wiggle room. Let's not let the house rule us. Let's make sure that we have room for other things. It's striking how even the discussion of good debt versus bad debt changes or even the definition of good debt. My sons are graduating from college and historically college loans um were very, you know, modest in their interest rates and you could just let them ride and pay them off slowly. It's fast and, and with the hope that our market rates or market um response on and growth of income would be a, a positive return. So you might be very patient with certain debt and let it sit there and pay it off slowly and use your money and other means. It certainly seems like with fluctuating um society and marketplace that some of those discussions must have to be frequently evaluated to say, you know what, now that loan is now considered, you know, AAA more of a draw against it or else the future of our investments might be more stagnant. Why don't we start weaning back on those or pushing more to, to pay off some of those buckets. It's, it's certainly one of those, those, um, discussions must change as you're counseling families and physicians, uh, regularly throughout the, the changing landscape economically and individual families. Mhm. Agreed. And as tax law changes, that's, that's the tricky part because it's always changing. We just had another tax law passed the end of last year, the Secure Act Two with 4000 more pages of tax legislation to weed through. What were the big takeaways then? Just share with us anything that we need to run home and say, hang on. I learned something else about that today. Well, interestingly, I mean, there are some other, some major things in there, of course, required minimum distribution age going from 72 to 73. That was a big one that will affect people. If you haven't turned 73 by 2035 potentially, then you go up to 75 for required minimum distribution on these are the tax deferred retirement accounts like the 403, Ira, um, leftover money and college savings plans potentially can be rolled over into children's Roth Ira s over a period of time. That's kind of cool. That's a new one. I, I was aware of that one and that's a big positive. Yeah. Yeah. Um, employer matching dollars potentially. If you're above certain income thresholds, they might let you put it directly into a Roth 403 instead of the preta 403, you'd have to pay tax on it if you're above income threshold of, if I recall, it was, um, I'm still remembering all the rules but it was like above 100 50,000. If you make more than that, if you're 50 or older and you've got the catch up provision going on, that money will need to go into a Roth instead of a pre-tax. You know, all these quirky little things ways to get tax revenue from people and then also extra ketchup provisions if you're 60 year older. So there's one at 50 year older. Well, then it's like, well, let's double it now that you're 60 you really should be preparing for retirement. So let's let you save even more for retirement. Those are just some right off the top that come to mind. Roseanne. We talked a little bit about kind of those, those first big decisions you have to make about student loans, kind of either consolidating or paying those off. And then considering how much you wanna borrow for a home, um big big decisions and um big things you have to do right when you get out of training, when you're in those middle years of practicing, what are the best ways that you recommend for kind of tax favorable ways to save and what you should do in those kind of middle years? So, I still, I mean, the sooner you start saving for retirement, the better off you're going to be, you've got the compounding going on tax deferred. Basically the government saying we're gonna give you this interest free loan, not have to pay tax on it. So we've got the pre-tax 403, the pre tax if you're in a for profit group of 401k, um Mayo at offers the deferred compensation for 57 plan. There's also the depending on income, most likely most of our clientele are gonna be doing the back door or two step Roth Ira where you first put money into a traditional Ira because you cannot put it directly into a Roth Ira due to income limits. If a married couple, the the threshold is about 220,000. If it's a single person, it's about 100 20,000. If you make above that amount, you can't put it directly into a Roth Ira. So in a two step process, you put it first into the traditional and then a week later you convert it to the Roth. If you forget about it, let's say you make $500 in the interim, whatever you've made between the time you put it in, you convert, it is gonna be taxable in the year of conversion. So, but it is good um to keep it clean and actually have a little gap between the time you put it in and you convert, that keeps the IRS happy. OK? The only wrinkle with doing that backdoor. Roth Ira is, if you have some other pre-tax traditional Ira s from long ago when you didn't make a lot of money and you, you know, sheltered some money from taxes or you had a set ira from, uh, individual income earnings. The IRS says we need to look at everything together and if 95% of your Ira s would otherwise be taxable and you're only gonna convert one of those little increments to the Roth Ira. They say, no, we're gonna apply tax to 95% of, if it's a $5000 amount, you're converting, you're gonna pay tax at 95% of that 5000 trucks. Yeah. So they, they, you can't get around it totally. You can't cherry pick which thing you're converting. So that's kind of interesting. But again, big picture early to mid to late career all the time. I'm gonna be saying, yes, let's get your, um, ducks in a row. Let's, let's make sure we're taking care of our retirement. We can't borrow for retirement. So the sooner you start, the better off you're going to be and to do the compounding when you're younger, you're more, you're going to want to be a little bit more aggressive as you get towards mid career. You know, it's all about getting that money in there, keeping your fees and costs as low as possible and compounding growth. Those are the things that are the tickets to get you to retiring potentially early or financial freedom. And in the, in the light of that, you know, aspect of saving certainly come, brings into the, the, the added, um, focus of hoping if you have Children that you'd be able to raise or support them, saying things for college savings share with us a little. You already commented how, um, certain college savings can be rolled into a Roth. Now, which in the past, I think there was always a hesitation over. Do I put it in 529 or AAA something that's designated for education later? But if you didn't spend it for education because your son went to the military, you didn't know how that money would be used where now there's an option of going into a, putting that into a Roth for the child's retirement later. Correct me if I'm wrong on that. But share with us in light of the bigger journey of saving buckets for retirement. How do you also change the conversation over starting the priority in the process for saving to college? And what vehicles do you typically encourage people to consider? So the most common vehicle is gonna be the 5 29 5 29. There's nothing magical about the numbers. It's just the tax law tax code that created the plan with the 529 you contribute after tax money it grows, tax deferred comes out tax free under current tax law. As long as it's used for its intended purpose education. A couple of years ago, they did expand it. So you can actually use up to 10,000 a year for K through 12 education. As well as post secondary education, you can move the money between Children. So if one beneficiary says, ok, forget it. Mom and dad, I'm going to go to Europe and I'm not going to school, you can move it to, you know, their brother or sister. So at least to keep it in the family, you can move it to nieces, nephews, um, grandchildren down the line. So as long as it's a family connection, you can, you know, keep it in the line. But now with this last rule, the Secure Act Two that was just passed, they've actually taken it one step further and said, ok, you got money left in that 529. We're expanding it from just education to actually, um, starting, I believe it's in 2024 you can move increments of that into a Roth Ira and I think they, that you can do it. You still have to follow annual Roth Ira funding, but at least it gives you the ability one more way to take advantage of that as far as the 520 nines, um you know, the structure to for tuition room and board and you can use it in any of the 50 states over 700 foreign schools. So it is or they are very lucrative. So, you know, you don't have to use the state that you live in. You can use whatever state you wish. So if you live in Minnesota, but you like Utah's plan, which is through vanguard, that's the one you, you're going to use, maybe low cost, great investment options, things like that. And in a pinch, if financially your family had a meaningful traumatic event that you needed to draw that money out of and not use it. My understanding is you can get at it. There's just some additional fees that would be taxed if you don't use it for education. That is correct. There is a, a penalty situation, you would pay 10% penalty on the, on the earnings, but you would be able to pull it out for, you know, other situations if so needed. Um, if a child dies or becomes disabled, those, those penalties obviously are waived. So, you know, that's, that's not the case there, other ways people save for college. There's always the, uh, Atma Ut Ma Unified Transfer to minors accounts. Those were, you know, before 520 nines ever came on the picture. Those were the ones that were used most frequently. It basically with those you could go to Fidelity or Vanguard or whatever investment firm you were using, you'd create an account. If the child was a minor, they couldn't be buying stocks on their own, but the parent would be the custodian child is the beneficiary and when the child becomes legal, again, 18 or 21 depending on what state of residence, then the money does become the child's. So, is that a custodial account? Yeah, they call that a custodial account. That is correct. Yeah. So again, Children, you know, under certain ages can't buy directly into the stock market, but through this custodial account, they can't. But with that, the gift has already occurred each year as the account grows in value. If there's dividends or capital gains, it's reported on the child's tax return, not the parents tax return. Although there is kitty tax laws which get more interesting and there's, there's loopholes there that um, it gets a little bit more challenging and that's why when 520 nines came along, people like the idea of making it a little bit more simplistic. So that was good. I, I think one nuance of that is my understanding, the 529 is still in the custodial care of the parent, meaning you could move it or change it or draw, take it out if you had to. It's still sort of your money, but invested in a college savings where the custodial account once you put it in there, it's really no longer yours. It's the child's and it just can't be touched until they become an adult. Is that a fair distinguishing? Exactly correct. And even if, because I've had some clients through the years that they have these old custodial accounts and they want to move them to a 529 to get, um, ongoing tax free growth on this account. But we couldn't put it into their regular 529. We had to set up a separate account owned by the atar custodial ownership because it had different tax rules. So, yes. And then, um, I think in that same vein you had asked about variable life insurance. Honestly, that's, it's, I don't see a lot of people using the variable life insurance for college savings. I know, you know, if you talk to an insurance agent un, unfortunately, it's a high commission product. So you are going to at least get a good sales spiel of why you should be doing this or why you should be doing it for retirement. But with the advent of the 520 nines and the Roth Ira S Roth accounts, um, the variable life insurance just isn't as exciting or appealing and you've got the extra fees associated with it and it's locked in with surrender charges. So I'm just not a big proponent of variable life insurance for funding college or retirement. Mm. This is also helpful to hear about, I'm just kind of entering this space and Eric, I know you're in the thick of it with kids in college and I have two little ones at home. So it's just starting to kind of cross our minds what we need to start saving for college. I know another big thing that uh I started hearing about in medical school and in residency was disability insurance. And then when I had kids started talking about life insurance and that's very important for ophthalmologists. Talk to us a little bit about how you advise physicians as far as insurance goes. Um life disability, employer versus self funded umbrella insurance. All those different types of uh areas where we need to focus. Yeah. Yeah and you know, insurance, you buy insurance to protect a risk, you know, and so the big picture is what is your risk? What are you trying to protect life insurance? Obviously you're gone but you're leaving survivors rule of thumb minimally, you should have 5 to 8 times your income in life insurance when you're young just starting out eight. I've seen some insurance agents pro you know, propose up to 12 times. It kind of depends on the situation but that seems to be a little overkill in my mind. Life insurance. Yeah, go goes to your survivors basically. I mean it's income tax free, hopefully estate tax free. Excuse me as well. So that's the life insurance. You're always gonna get more money, more insurance for your dollars. If you go a term insurance versus whole life or variable life insurance, you get a lot more protection for your money. I like to keep the investment separate from the life insurance. Um So again, I'm kind of going away from the variable and whole life towards term. And when you buy term, sometimes I will encourage people to do what's called Laing. So maybe let's say they're just starting out brand new baby. And you say, well, gosh, you know, we're gonna be vulnerable for the next 25 years. Maybe you do a 15 year what we call level term, same premium for the same 15 years for $1 million. And then you do another level term policy for 20 or 25 years. So at the end of the 1st 15 years, the first million falls off, but you still have another million for the next 10 years. So it really gets you from when the baby's first brand new until maybe through college. You know, those are the kinds of where's the family most vulnerable. How much do we need over what period of time? So that's kind of life insurance in a nutshell. Uh As far as disability, obviously, if you work at mayo, you've got phenomenal disability protection. It's one of the best I've seen. I've seen a lot of job offers people bring in, you know, all the time. Our population in general is highly marketed. So I do see a lot of offers that come through, but males is very, very good short term disability from day 100% of salary for the first six months. After six months, 84% of girls salary until 65. It is occupation specific, which is always how you want disability protection. Ok? If you're close to 65 and you become disabled, there is actually a longer period of time to let people recover from whatever they went out on disability. For, for example, I had somebody that had a stroke at 64.5, at 67.5, we finally retired him because he couldn't come back to work. But at least it gave him a window of time, guaranteed income, getting ready to for retirement, you know, so that was a phenomenally beneficial way to go for him as far as how disability is taxed. If the employer provides it, it is fully taxable. If you the employee by your own policy, it's not taxable. If you buy your own policy though, you don't, you aren't gonna be able to buy nearly as much. So, you know, be aware of that. And if you have some coverage through an employer and some on your own, typically the employer plan says we're gonna reduce your coverage by whatever your own plan pays. So you're not necessarily gonna be able to double up on what you can get. That's what I I for many of us that change locations in our careers. Uh I was encouraged early on to grab my own personal disability plan because as time has gone on, the benefits have changed and they're not quite as strong as they used to be. Um, certainly, especially when you get into own occupation and how that's defined, um, that when it kicks in. But I always thought, oh, I have my own and I have my, my, oh, my institutional plan and I'm double covered or I'm extra covered and really what it comes down to you read the fine print and it's, they're not duplicating anything you're paying for two policies and one will dominate and the other one might fill in but might be of no use at all. So really, uh it is advisable as you brought up to pay attention to that and you may end up starting a disability plan until you get your niche and then once you're in practice, you may end up deciding that you can then stop that such that you let your institutional policy take over. Yeah. Total, totally agree. And that's, that's what I will advise people, you know, basically make sure you like where you are that you intend to stay long term and then really take that step back and say, do I need this extra policy or am I paying $2000 a year for nothing? You know, that kind of thing? Yeah. Yeah. It's portability. If you own it yourself, it's portable. If it's through the employer, not so much if you have health issues, why would you be leaving an employer with good disability protection anyway. All right. So now the next area in in this issue of insurance is, this is one that I've not understood as well. And certainly the older I get, I get more scared about because I've gone from having young kids like Andrea who just stayed home and kept, kept track of their business. It was like herding cats. But now they're inviting people over for bonfires. They're playing basketball or screwing around on my driveway with ice. They're driving bigger pieces of equipment in ways that I might not appreciate. They're, you know, they're the things they throw at each other are much more damaging. So I've appreciated that if some potty walks on my property and hangs out with my kids and gets hurt, I'm liable. And so having umbrella policies, I feel like a growingly become more important, the older your kids grow, um, share with us how you advise individuals to set up and make sure they're covered by an umbrella policy. And to what level honestly, I, I tell people you always should have umbrella insurance. You know, because we live in a very lawsuit happy society. No matter what age you are, you can have a car accident, somebody can be seriously injured. Uh, as your kids get to that driving age particularly we wanna have a 5 million umbrella by that time. Maybe you can get by with 3 million up to that point in time. But umbrella insurance is extra liability protection on top of your auto and your homeowners insurance, maybe if you have some boat insurance, motor home insurance, but it's an extra layer of protection that if you're sued for personal liability first, your base policy pays. But then the umbrella kicks in for the rest and it really protects your personal assets. I saw a situation uh several years ago, bad car accident. Uh the, the staff member passed. So it, it was um, very serious injuries, both vehicles and the driver of the other vehicle brought suit and, and it really was, became a umbrella situation that if we would not have had that umbrella situation coverage, the family, the survivors, spouse, Children would have lost all the life insurance. The accidental because it would have been all absorbed with the suit that was 3 million plus that was brought against the, the estate of the family. Wow. So it, we don't see it often but when we do, it can be a huge, huge difference in the family. Yeah, Roseanne. This is so good. I'm learning so much. I'm taking all the notes here, Fely writing everything down. Um, can we go back? I wanna touch on retirement but specifically early retirement and you mentioned financial freedom, financial independence. This is super trendy. Uh There's a, a lot of different podcasts to talk about this. There's even a, a Facebook group called Physicians Side Hustles and all these physicians talk about financial independence. Tell us what you, what you think about that, what it means what it takes to achieve financial freedom or early retirement. And if that's something we're interested, what do we need to be doing? Well, honestly, the, the earlier you want to achieve either early retirement or financial independence, that can be synonymous really is, you know, looking at what's the age, what are the goals, how aggressively you save? And if you said, well, I'm just maxing my 403 in my, maybe my 457 you know, that's really gonna maybe get you closer to an age 65 type comfortable retirement with a pension, assuming employer provides a pension. But if you said no, I want to be absolutely done by the time I'm 60 or 58. Well, then, first of all, do we look at adjusting expectations for income in retirement? And if you said no, that's not doable, then it's aggressively, you know, saving more. So if it's normally you're putting in 10 or 15% for retirement, maybe you're gonna ramp that up to 30% of your income is gonna go towards specifically earmarked for retirement. And it can be just in like brokerage accounts. We've got Prudential life insurance side fund. People like to put money in something like that. So it's really building up a nest egg of dollars that's available to you once you retire and for rule of thumb, let's say you said, gosh, you know, I want, um, whatever it is, uh, if you had in retirement, $3 million you could safely say, ok, of that 3 million, I can take 4% off. That. Never run out of principle. That's 100 20,000 a year. Well, besides that 3 million, you've saved, what if you have a pension that's gonna give you 10,000 in a month? Well, then we have another 120,000. If you, you know, wait till with social security, assuming it's there at full retirement age, roughly 67 we're looking at another at least 3000 a month. So there's all these pieces to a puzzle you're putting together to determine what is your minimum goal and assuming financial independence, probably no debt at the same time. So you're not worrying about paying off debt yet. Still educating kids, we've got that all taken care of. Then it makes sense to think seriously about it. And then if you are, you've reached financial independence and you're not yet ready to retire, let's say now you're breathing a sigh of relief, still enjoying what you're doing. Then it's just building and feathering the nest egg to make it even better. And maybe you're gonna help your kids who might never have a pension things like that. Is that kind of the normal safe withdrawal rate? About 4% rule of thumb used to be 4 to 6% analysts nowadays really use 4% as you know, they don't want to go much beyond that. I mean, I've seen some even say 3.5, but I'm comfortable with four. I mean, inflation has gone up 4% you know, even in a money market right now, you can earn 4% on a seven day moving average. So that should be pretty reasonable. Yeah, that's fantastic. I've learned so much from this discussion. I think this has been wonderful for people that even if you're fluid at some of this or not, these are, you've used key terms, key, you know, just language that we can take home, whether you're coming to your office or someone else's to just ask again about some of these concepts or, or vehicles for saving. I, I will tell you, I whether we, I just was thinking about the whole boot analogy, whether people are putting on their boots for the first time and wading into financial waters or taking them off in retirement and putting them up on the couch. I just thank you for how discussions like this help our physicians uh Wade through life well, and because certainly we can care for patients, but we're not always best caring for managing these financial parts. And I know Andrew and I have enjoyed this time greatly. Oh, you're so welcome again. Thank you for inviting me to and reach out anytime I'm happy to field. Any questions provide guidance any way I can. Thanks so much, Roseanne. You can find all episodes of the Mayo clinic, ophthalmology. Podcast on our website. Thank you for listening and we definitely look forward to sharing more.
