financial wellness

Life, Death and Taxes

By Lisa Koerner, Insurance Advisor

If you are looking for some creative ways to avoid paying taxes, don’t overlook the benefits of life insurance. There are several different types of life insurance policies that serve different objectives, the greatest is a tax-free death benefit for your beneficiaries. Also, the death benefit does not go through probate, so only your beneficiaries can receive the money. There are a few things to look for when searching for the right life insurance.

When choosing life insurance programs, term life policies are typically the most popular. Term policies offer a larger death benefit for a smaller premium, however, the rates are only locked in for a certain number of years and don’t provide any cash return if you outlive the term or cancel the policy.

The advantage of a permanent policy is that it can build cash value in the policy that you can access tax-free while you are living and still provide a tax-free death benefit for your beneficiaries.

Universal life plans offer more flexibility but are also driven by interest rates. When setting up this policy, it is very important to work with your agent to make sure it is properly funded in the beginning to avoid the need to put more money into it later on.

Whole life policies can also be a good option for cash value growth, but there are things to look for here as well. If you choose a policy that has dividend options, you can set up the policy to allow you to access the dividends tax-free in the future without worrying about having a loan on the policy that could affect how the policy pays out. The biggest thing to be aware of with cash value policies is that if you take out more money than what you put in, the gains would be considered taxable income.

To learn more, reach out to Lisa Koerner or the WisMed Assure team at insurance@wismedassure.org, complete this quick online form or call 608.442.3810 for help with your insurance needs.

Note: This article is for informational purposes only and should not be considered as insurance advice related to your specific policy or situation. Please consult with a qualified insurance advisor or professional before making any policy decisions. Full disclaimer and contact information.

Peace of mind this holiday season

By Martin Hurst, Insurance Service Representative

The agents here at WisMed Assure do not focus solely on revenue, our agents go that extra mile to address individual and specific concerns and provide coverage within each customer’s budgetary needs. By putting clients’ needs first, our agents demonstrate their commitment to providing excellent service and building trust with physicians. Their expertise and attention to detail enables them to guide physicians through the complex world of insurance, explaining terms, conditions and benefits clearly and transparently. Ultimately, our agents strive to empower physicians with the knowledge and coverage necessary to protect their health and peace of mind.

As I navigate my first year here at WisMed Assure, the agency has prioritized providing me with direct training with our agents. Tom Strangstalien is one of the agents I have had the opportunity to sit down with to discuss Life and Disability policies. Recently, Tom and I reviewed disability quotes for a physician. Tom carefully considered the physician’s lifestyle, occupational practice and potential risks to tailor the policy to their unique needs.

Additionally, he broke down the various policy options, highlighting the specific benefits and limitations of each. He focused on the importance of comprehensive coverage that would provide adequate support if the physician ever faced a disability, without worry of the financial burden. After reviewing the quotes for this physician, he noted that the physician was concerned the monthly premium was exceeding their budget. This was to be expected as their initial meeting was to create the “ideal policy” without worrying about the premium cost. With this concern in mind Tom navigated to the riders page with the cost for each listed next to the rider and asked what I would keep or remove from the policy to reduce the overall cost. We went back and forth on keeping or removing certain riders, we looked at 90- or 180-day elimination periods, possibly decreasing the time covered in relation to retirement age of 65 or 67, to see the impact this would have on premiums. At the end of our meeting, we were able to give this physician several options that had the potential of saving them $4,000 in monthly premiums. This is an example of what each agent does here daily and is the reason I am grateful to work alongside so many unique and caring individuals.

As you’ll see in this edition of the Antidote, the WisMed Assure and WisMed Financial team is focused on building and maintaining relationships with clients, and always keeping the best interest of the client at the center of all we do. These real client stories help illustrate the WisMed difference. Contact us at 608.442.3810 or insurance@wismedassure.org.

Note: This article is for informational purposes only and should not be considered as insurance advice related to your specific policy or situation. Please consult with a qualified insurance advisor or professional before making any policy decisions. Full disclaimer and contact information.

Protecting your most important asset can be a daunting task

By Lisa Koerner, Insurance Advisor

What is your most important asset? It’s your ability to earn an income. When choosing disability programs to protect your income, there are a number of different companies and benefits. It’s often a task that takes time and research, along with several discussions with an insurance agent. Sometimes, the biggest challenge is finding an agent who is willing to work with you at the times that you’re available. Many of the people I work with are surprised when I respond to phone calls, emails and text messages after 5 p.m. and on the weekends. I know the schedules for students, residents and physicians can sometimes be challenging so I try my best to accommodate them.

A resident I recently worked with scheduled several meetings with me after 6 p.m. so we could discuss the different benefits available in the quotes I had shared, how they worked and the different costs. As we worked out the best benefits, the premium still came in a little high for his budget. The insurance provider I worked with offered an option to pay a lower premium in the beginning, then increase it over time with an option to level out the payments after he started his fellowship and increased his income. He was very thankful that we were able to get him the benefits that were important to him with payments that were affordable.

I once had a client tell me that I don’t act like an insurance agent because of the way I try to explain things. That was the best compliment I’ve ever gotten. I try to explain things in a way that I would want them explained to me.

Our goal is not just to sell you a policy, but to provide guidance in helping you find solutions for you for now and for the future. The greatest gift we have to offer is the gift of education.

Reach out to Lisa Koerner or the WisMed Assure team at insurance@wismedassure.org, complete this quick online form or call 608.442.3810 for help with your insurance needs.

Note: This article is for informational purposes only and should not be considered as insurance advice related to your specific policy or situation. Please consult with a qualified insurance advisor or professional before making any policy decisions. Full disclaimer and contact information.

Income-Driven Repayment Plans

The ins, outs, upsides, and downsides you need to know

By Rufus Sweeney

Looking forward to residency also means looking forward to repaying your student loans.
Sounds like fun… doesn’t it?

OK, perhaps not a lot of fun, but unavoidable. So, to reduce your stress and feel good about your financial progress, you need to make the best choice. And, making the best choice for how to repay your student loans takes a little thinking.

Before we look at the different types of repayment plans here are two important things to remember:

  1. It’s critical to start loan repayment while in residency rather than use deferment or forbearance. This will save you thousands.
  2. In many cases, you can switch repayment plans if your financial situation changes. This relieves some of the uncertainty you may feel when making your initial choice.

Now, the basic premise of income-driven repayment (IDR) plans is simple; you repay your federal student loans based on your ability to pay.

Here are your choices:

  • Standard repayment plan
  • Graduated repayment plan
  • Extended repayment plan
  • Income-driven repayment plans (Yes, there’s more than one!)

Phew! Seems complicated… and it is, but here are some basic definitions to help you figure out how you can best navigate the loan repayment landscape.

Standard repayment plan: You pay off your loans in 10 years. Your monthly payments are fixed based on adding the amount you owe to the projected interest and dividing by 120. WARNING: If you do not choose another type of repayment plan, you will be automatically enrolled in this repayment plan

As a resident, because your monthly payments will most likely be more than you can afford, this is not the way to go.

Graduated repayment plan: These also run for 10 years, but monthly payments start out low and increase every two years. But, as with standard plans, even the lower monthly payments are still likely higher than you can afford on a resident’s salary.

Extended repayment plan: Now we’re looking at the long term. With this type of plan, you’re facing 25 years of fixed or graduated payments. This type of plan is good if you don’t qualify for an income-driven repayment plan. And, sorry to do this to you, but even thinking about this type of plan is a waste of time because, as a resident, you qualify for income-driven repayment plans.

Income-driven repayment plans: These plans peg the size of your monthly payment to your income.

The four types are:

  • Pay-As-You-Earn (PAYE)
  • Revised-Pay-As-You-Earn (REPAYE),
  • Income-Based Repayment (IBR)
  • Income-Contingent Repayment (ICR)

Generally speaking, these plans cap monthly payments at 10% of your discretionary income. (Very simply, your discretionary income is your income minus whatever the poverty line is for your family.)

Low income = low payments. Your payment size is recalculated every year after you file taxes. The good (great?) news is that after 20 to 25 years, what remains of your student loans is forgiven. (Next blog we’ll look at public service loan forgiveness; which are forgiven in only 10 years.)

As you have probably realized, IDR plans work well for residents who are trying to get by on a $60,000 salary and owe a lot of money (roughly $50,000 or more).

PAYE and REPAYE

PAYE differs from REPAYE in two significant ways.

First, to qualify for PAYE you have to prove you can’t afford to make the payments a standard 10-year repayment plan requires. REPAYE doesn’t ask for this proof… no matter what your salary, your payments will never be more than 10% of discretionary income.

Secondly, PAYE is limited to the repayment of William D. Ford Direct Loans received after Oct. 1, 2007 and funds disbursed on or after Oct. 1, 2011. These loans include Direct Loans, subsidized and unsubsidized, Graduate PLUS loans and Direct Consolidation Loans made after Oct. 1, 2011, unless they include Direct or FFEL loans made after Oct. 1, 2007. Phew!

REPAYE is available to people who borrowed from the Direct Loan program, except for parents who took out PLUS loans. You qualify for REPAYE no matter when you took out your loan and as long as you borrowed from the list of qualified William D. Ford Federal Direct Loan programs.

A major benefit of REPAYE is you remain eligible for the Public Service Loan Forgiveness program.

Payments on the REPAYE program are adjusted every year based on income and family size. If you file your taxes separately, PAYE won’t take your spouse’s income into account when calculating your payments. With REPAYE, your spouse’s income is taken into account.

The best part of these programs is that after 20 years of on-time loan payments, your debt is forgiven.

Income-Based Repayment (IBR)

Income-based repayment (IBR) is another income-driven repayment plan that caps monthly payments at 10 to 15% of discretionary income. This type of plan is an option if you don’t qualify for PAYE and don’t want to include your spouse’s income into your discretionary income. (That said, almost every resident qualifies for PAYE.)

Income-Contingent Repayment (ICR)

This type of repayment plan work well if you are paying back student loans your parents took out on your behalf. They also work well for parents themselves who need an affordable way to pay back the loans they took for you. If you aren’t paying back loans from your kids or loans from your parents, ICR is probably not the plan for you.

A final word on flexibility

You can switch from on repayment plan to another. For example, if you graduated recently, you could choose REPAYE to take advantage of the government interest subsidy. Then, if you’re lucky enough to marry someone with a high income, you could switch to PAYE to avoid having your spouse’s income included in your monthly payment calculations. And, sometime down the road, you may quit your income-driven plan altogether because you want to make larger payments.

If you need help managing your debt, one of your best resources is your financial aid officer. And, I highly recommend visiting the White Coat Investor website. It’s a great source for guidance on how to acquire and manage the “good” forms of debt.

Financial Success Requires Offense and Defense

…and, defense may not be what you think it is

By Tom Strangstalien, Financial Protection Advisor

Offense, financially speaking, is focused on growth. Defense is focused on keeping what you have. Pretty simple concepts all-in-all. However, each has nuances that vary depending on your tolerance for risk, age, retirement goals, current and future lifestyle goals, and of course, income.

Income itself is one of your offensive tools. This includes the income you earn from working and passive income earned by investments. The other form of offense shows up in investment portfolio design and is generally about choosing assets or combinations of assets that have a high probability for growth… and generally, a greater degree of risk. And, of course, you can also play defense in your portfolio by choosing assets that are slower growing and less risky. The proportion of offense and defense in your portfolio is dependent on the variables mentioned above. This is where the advice of a professional investment advisor who understands your current situation, along with your goals and desires, is essential to your success.

As to other forms of defense, well that’s where I have spent my life helping people figure out. For example, during your earning years, your salary and other earned income is your most formidable offensive asset. But what happens to your plans if due to illness, injury or – God forbid – death, reduces or eliminates your income? How will you and your family maintain your standard of living? How will you be able to continue pursuing your retirement plans?

A substantial market for income replacement insurance has steadily developed for decades. (I include life insurance in this definition as it provides income for your family if you die.) There are as many options as there are individuals who need this type of defense, which means you have the opportunity to choose the type of insurance that exactly fits your current situation (including budget), and future goals.

A general feeling within the insurance industry, is that once a couple reaches the age of 55, there is substantial probability that one of them will need a form of long term care during their lifetime.   I have personally witnessed this within couples that I have worked with throughout my career.  That’s where another form of defense plays an exceptionally important role in protecting your immediate financial security and the integrity of your estate.

Now, like income protection insurance, there are many long-term care insurance options. To choose the option that’s right for you, you have to take into consideration how much tax you are paying and will pay. Again, the nuances can be quite subtle, but generally speaking, an experienced advisor will be able to show you all the ins and outs of the insurance products available.

One thing is for certain; the best time to do this type of planning and make your decisions is now. The sooner the better because, as you age, your options may become more limited, and for certain, the cost will increase.

If you would like a personalized tour of all the options that are right for where you are today and where you want to be in the future, contact me. I look forward to being your defensive coach.

Tom Strangstalien 

Direct:  608-442-3730

Cell:  608-304-1579

tom.strangstalien@wismedassure.org

Different Kinds of Debt: The Good, the Bad, and the Just-Don’t-Do-It!

By Rufus Sweeney

Amassing a considerable amount of debt during medical school is “situation normal” for practically every medical student. Even though debt is rarely seen as a good thing, you need to know the difference between good debt, bad debt, and debt to be avoided at all cost.

Choosing wisely now makes paying off your debt much easier.

In the category of “Just-Don’t-Do-It”, all sorts of credit cards are available and in many cases, actively promoted to medical students with special offers that include an interest free period, cash back on purchases, and all too easy sign up terms. But once that interest free introductory offer ends, you’re on the hook for anywhere from 12 to 25 percent interest on any balance you carry from month to month.

When you use a credit card to finance your lifestyle choices or, worse case, pay for essentials without a plan for paying off your balance each month, you’re playing with financial fire.

The “bad” in comparison to credit card debt, doesn’t look all that bad, but still with interest rates ranging from six to 10%, unsubsidized student loans are an expensive choice.

The “good” are those loans with the lowest possible interest. For example, interest rates for institutional loans from medical schools range from four to five percent. If low interest was the only criteria for determining “good” debt, then a mortgage at three to five percent and car loans at four to five percent would also fall into this category. That said, check out my previous blogs and podcasts on the pros and cons of buying a home and the reasons why it is a good idea to live like a resident, even after you become an attending physician.

Paying the piper

No conversation about interest rates is complete without a word or two about repaying debt.

Generally speaking, there are two popular methods: the snowball method and the avalanche method.

Popular financial expert Dave Ramsey recommends the snowball method because he says, “… personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely.”

Here’s how it works:

Step 1: List your debts from smallest to largest regardless of interest rate
Step 2: Make minimum payments on all your debts except the smallest
Step 3: Pay as much as possible on your smallest debt
Step 4: Repeat until each debt is paid in full

Here’s an example using four different debts:

  1. $500 medical bill—$50 payment
  2. $2,500 credit card debt—$63 payment
  3. $7,000 car loan—$135 payment
  4. $10,000 student loan—$96 payment

Using the snowball method, you would make minimum payments on everything except the medical bill. You would pay as much as possible each month on the medical bill until it is paid off.  You would then take the money you used for the minimum payment on the medical bill, plus as much extra as you can afford and use it to pay off your credit card debt. As soon as that debt is paid, you take all the money you previously used to pay the medical bill and credit card debt off and apply it to your car loan.

By the time you are ready to pay off your student loan, you’ve got a pretty big debt repayment snowball working for you.

The avalanche method takes a more practical approach… at least mathematically speaking.  You make minimum payments on all debt and use any remaining money to pay off the debt with the highest interest rate. Like I said, this method is a more practical approach because it allows you to save hundreds of dollars in interest payments and reduce the time it takes to pay off all your debt.

When it comes to choosing which method to use, remember what Dave Ramsey says… “personal finance is 20% head knowledge and 80% behavior”.

In my next blog, we will explore the different ways in which interest rates are calculated.

If you need help managing your debt, one of your best resources is your financial aid officer. And, I highly recommend visiting the White Coat Investor website. It’s a great source for guidance on how to acquire and manage the “good” forms of debt.