In this interview, Melissa (Missy) Starowitz of Cornerstone Healthcare Consulting interviewed Alex Heringer and Jim Ginnane of Planned Futures Financial, located in Buffalo, New York. There were three main questions Missy posed to Jim and Alex. They were as follows:
- How important is disability insurance for a physician? What if I am just graduating Residency, is this something I need right now?
- I am just graduating Residency; I am in my late 20’s/early 30’s with lots of debt. Is it possible for me to plan for retirement with all my debt, and just finally starting to make money?
- Any tips on how to manage all that debt?
Clearly, the theme surrounded the topic of debt. With the need to complete an undergraduate program, and then attend medical school, becoming a physician will likely begin with a six-digit investment. Therefore, how is it possible to take on additional expenses, that may seem irrelevant to a young physician graduating Residency, who often is in their late 20’s/early 30’s? Thus, the relevance of the question, “How important is disability insurance for a physician?” Especially one in the above referenced age bracket. But, as Alex and Jim would likely express back to us…how can you afford not to? Jim began by saying, “…if they analyze it carefully they’ll
usually come to the conclusion that their ability to work and earn a paycheck is the biggest asset they’ll ever own”. If that didn’t capture your attention, he further went on to drive this message home by saying, “All the automobiles and homes and schooling and everything else that they’re ever going to purchase in their life is all predicated on their ability to earn a paycheck. So, I can’t think of anything that’s more important for somebody to insure. And the doctors and dentists and the professionals that we specialize in working with are particularly vulnerable, because they have the ability to command a very high income but at the same time they have the possibility of getting disabled no differently than anybody else, and so the drop of income, the difference in what their income would be if they if they got disabled and all they had was social security for instance, for disability insurance, so they didn’t have any personally owned disability insurance, that drop in income is dramatic for a person that’s making you know $80,000 a year, but the social security will provide a bigger percentage of their pay if they get disabled, but it doesn’t work that way for high income people”. Jim’s response answered the question of whether disability insurance is important. But is it affordable? The good news is, similar to life insurance, the younger and healthier you are, the less expensive it is. Alex said they actually have starter packages for disability insurance and have many clients who purchased the insurance before Residency, in their fourth year of medical school. He further went on to explain some of the specifics around pricing, as well as the discounts they have through their existing relationships with medical schools throughout the country. So, is disability insurance important? Yes. And is it affordable? Yes.
With all the discussion surrounding affordability and debt, it seemed only appropriate to then talk about how to manage that debt, and question if it is possible to plan for retirement, when just coming out of Residency. Although most residents would fall in the category of being in their late 20’s/early 30’s, and that is still quite young, they are beyond the age of when most financial advisors would recommend starting to plan for retirement. However, with all this debt to manage and just finally making money, how is that possible? It is, through what Jim calls the 85-15 rule. He described it as this, “If a person can discipline themselves to live on 85% of their gross income, therefore free up 15% of the gross income to put away for the future, but then it reduces the importance of where the money is invested, and if you time it with the time where someone has a dramatic increase in their income, it’s very easy to do actually because these young doctors are used to earning next to nothing, and then all of a sudden they get a decent income. And so, if they can start with that thought in mind that I’m going to live on 85% and put 15% away for my future, then it’s still a huge net pay increase from what they were used to.
And so, it makes it as painless as it can be and at the same time the indebtedness can be paid off over a period of time and that can be done concurrently with planning for their retirement”. He went on to further explain the important of starting early, and the cost if you do not.
In closing, an important question was posed to Jim and Alex; “Where is your favorite place to eat in Buffalo”? To gain the answer, as well as so many additional details to what was discussed, you will have to click to watch this great interview!
Interested to learn more about Planned Futures Financial Group? Click here to visit their website!