Budgeting / Saving Podcast

YFP 408: What Should You Do With an Old 401(k)?

Posted on by Caitlin Boyle

What should you do with an old 401(k)? Tim Ulbrich and Tim Baker explore your options, common pitfalls, rollover strategies, and how to make smart moves with old retirement accounts after leaving a job.

Episode Summary

When you leave a job, what happens to the retirement account you left behind? In this episode, YFP Co-Founder & CEO, Tim Ulbrich, PharmD, and YFP Co-Founder & COO, Tim Baker, CFP®, RLP®, RICP®, take a deep dive into the important financial decisions surrounding old employer-sponsored retirement plans, such as 401(k)s and 403(b)s.

Tim and Tim discuss the impact these often-overlooked accounts can have on your overall financial plan and explore your available options, whether that’s leaving the money in your former employer’s plan, rolling it over to your new employer’s plan, or transferring it to an IRA.

They break down the pros and cons of each approach, highlight common mistakes like the “set it and forget it” trap, and explain why understanding fees and account access is so important. The conversation also emphasizes the value of working with a fiduciary advisor and the serious risks of cashing out these accounts too soon.

To complement the episode, they introduce YFP’s new guide: The Best and Worst Moves to Make with an Old 401(k), designed to help you avoid costly missteps and feel confident in your next move.

Whether you’re changing jobs, planning ahead for a career transition, or simply want to be more intentional about your retirement savings, this episode will give you the clarity and guidance you need.

Key Points from the Episode

00:00 Introduction and Episode Overview
01:15 Sponsor Message: First Horizon
02:23 Discussion Begins: What to Do with Old Employer Retirement Accounts
03:35 Importance of Managing Old Retirement Accounts
05:53 Options for Old 401(k) and 403(b) Accounts
12:58 Pros and Cons of Leaving Money in Old Plans
19:18 Rolling Over to a New 401(k)
27:31 Understanding Asset Location and Allocation
27:47 Rolling Over to a New Employer’s Plan
28:04 Advantages and Disadvantages of Consolidation
29:50 Rolling Over to an IRA: A Common Approach
30:27 Investment Options and Flexibility in IRAs
33:44 The Importance of Transparency in Financial Services
46:23 Considering All Options for Old Retirement Accounts
47:22 Conclusion and Additional Resources

Episode Highlights

“ These employer-sponsored retirement plans may seem like old news, especially if you’ve been in the workforce for a while, but what you do or don’t do with them can have a lasting impact on your financial future.” – Tim Ulbrich [00:23]

“As your career continues, a 401k or if you rolled into an IRA will be one of the largest things on your balance sheet over time. So it’s really important to have an intentional plan with how you’re gonna manage these assets and how do they fit in the overall picture of your ability to build wealth and then to spend that wealth like in retirement.” – Tim Baker [7:23]

“ If you’re actively contributing to a 401k, the action of rebalancing kind of happens naturally every time you get paid and put money in if you leave that job. And that money’s just sitting there. The market does what it does, so that that asset loca, that asset allocation that you set will drift because you’re not actively putting money into it.” – Tim Baker [11:50]

Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: [00:00:00] Hey everybody. Tim Ulbrich here, and welcome to this week’s episode of the YFP Podcast where we strive to inspire and encourage you on your path towards achieving financial freedom. Whether you’re transitioning to a new job or just taking a closer look at your finances. One of the most overlooked but critically important pieces of your retirement plan is your old 401k or 4 0 3 B account.

Tim Ulbrich: These employer-sponsored retirement plans may seem like old news, especially if you’ve been in the workforce for a while, but what you do or don’t do with them can have a lasting impact on your financial future. In this episode, we’re diving deep into what happens after you leave a job and what your options are.

Tim Ulbrich: When it comes to your old 401k or four oh through B, we’ll tackle why it’s so important not to let these accounts fall into, set it and forget it mode. Explore the pros and cons of common rollover strategies and break down how fees, fund options, and even asset protection rules differ between the options.

Tim Ulbrich: [00:01:00] And finally, we’ll help you think through whether this is something you want to manage on your own, or if it might make sense to partner with a fiduciary advisor who can help you align this decision. With your broader financial plan and goals, before we jump in, let’s hear from today’s sponsor. First Horizon.

Tim Ulbrich: First Horizon is a paying sponsor of this episode of the Your Financial Pharmacist Podcast.

Tim Ulbrich: The saving 20% for a down payment on a home feel like an uphill battle. It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for down payment on a home may take years. First Horizon offers a professional home loan option, a KAA doctor or pharmacist loan that requires a 3% down payment for a single family home.

Tim Ulbrich: Or townhome for the first time. Home buyers, 5% for non-first time home buyers has no PMI and offers a 30 year fixed rate mortgage on home loans up to 8 0 6 500 in most areas. The pharmacist’s home loan is [00:02:00] available in all states except Alaska and Hawaii, and can be used to purchase condos as well.

Tim Ulbrich: However, rates may be higher. A condo review has to be completed. To check out the requirements of Pharmacist Home Loan through First Horizon, and to start the pre-approval process, visit your financial pharmacist.com/home-loan. Again, that’s your financial pharmacist.com/home-loan. Tim Baker, welcome back to the show.

Tim Baker: Good to be back. What’s going on, Tim?

Tim Ulbrich: I am looking forward to the discussion. Uh, today we’re gonna talk about, uh, a question that really comes up often in pharmacists that both you and I have a chance to converse with, which is, you know, what, what do I do with an old employer retirement account? Uh, it could be the first job transition or the fifth job transition, but you know, often, we’ll, we’ll have these 4 0 1 Ks or these 4 0 3 Bs and.

Tim Ulbrich: Wondering, like, what, what should I do with them? Should I leave them? Should I move them? And so today we’re gonna talk about the different options, some of the pros and cons of what you might do with those accounts. [00:03:00] Um, before we get too far into it, we have a brand new guide that we’ve released, uh, titled The Best and Worst Moves to Make with an old 401k.

Tim Ulbrich: You can download that guide, which is a, a supplement to today’s episode. Go to your financial pharmacist.com/moves. Again, your financial pharmacist.com/moves. And a shout out to Jeff Kimer, uh, pharmacist at. Has collaborated with us on, on several, uh, writings. He wrote the book, fire Rx, the Pharmacist Guide of Financial Independence.

Tim Ulbrich: He helped us put together the content for this guide, uh, as well, just an, an overall, uh, community pharmacist, uh, money nerd. So shout out to Jeff for his help in, in putting together this guide, Tim, this topic probably I would suspect, is you’re, you’re conversing with, uh, pharmacists that are. Wanting to learn more about our fee only financial planning services.

Tim Ulbrich: I’ve gotta believe that this is one that comes up fairly often. Is that, is that correct?

Tim Baker: It does. One of the things that, you know, when I talk to a prospective client that is [00:04:00] in transition, it’s like, you know, I’m unsure what the best. Path is for, you know, my old 401k, or, you know, some people, you know, make the habit of collecting 4 0 1 Ks or 4 0 3 Bs, and they’re just kind of scared,

Tim Ulbrich: Mm-hmm.

Tim Baker: So, you know, what is, what’s the best, you know, path for me and what should I do with those, with those plans. So, yeah, it’s important because as you, if you think about it, Tim, like, you know, 401k, 4 0 3 B. You know, often outside of your house, and then eventually it will eclipse the value of your, your house in terms of like the, the biggest asset on your

Tim Ulbrich: Mm-hmm.

Tim Baker: is a big really over the course of your career in terms of like what to do with, you know, your, your 401k, especially when you leave an employer. Um, You know, I think it’s important to analyze and examine and just try, try to figure out what, what’s the best thing for [00:05:00] you to do.

Tim Ulbrich: Yeah. And especially, you know, I think about the, the job transitions that may happen, it’s, it’s rare to see someone now that’s worked with the same employer, you know, for 20, 25 years, right? So if, if you’re changing jobs every 3, 4, 5 years, which can be pretty, pretty normal, uh, you know, you’re gonna start to, to accrue several of these accounts.

Tim Ulbrich: And what are the options that we have to do with them along the way and. We’re gonna talk about 401k, 4 0 3 B interchangeably. They are similar, yet different. Uh, we’ve covered that on on previous episodes. Both of them are employer-sponsored retirement plans. Typically, we think 401k. Those that work for a for-profit, 4 0 3 B, those that work for a, a non-profit or thinking about something like A TSP for those that work for the federal government.

Tim Ulbrich: So we’re gonna use those terms interchangeably, but they’re not. Not the same thing. There are important differences, uh, between them, but for the sake of the conversation of job transitions and what do I do with these accounts, we’re gonna lump, lump both of them together. Tim, before we get into the options.

Tim Ulbrich: Let’s cast a vision for, for why this is [00:06:00] important, right? When I think about my own experiences, you know, uh, fir first job or two specifically thinking back to a memory of, of Jess’s, uh, old 4 0 3 B, that was kind of hanging out there. And, you know, after a while we, we didn’t really remember kind of what, what was there.

Tim Ulbrich: And we, we were moving on to the next account. We left it at the time being, we would eventually do a transfer, uh, and a rollover that we’ll talk about in this episode. But when I think about the, the potential. Consequences here, things come to mind like, hey, it’s, it’s outta sight, outta mind, which means we might not just be paying a attention to it like we are, uh, other accounts and, and therefore it might not be optimized in, in the same way that we’re treating our other investment accounts.

Tim Ulbrich: What, what else comes to mind for you about why, why this is important? Before we talk about functionally what we do with them, why, why is it important that we evaluate what we might do with these old accounts?

Tim Baker: I mean, I think one of the first things that we do with clients when we kind of down the path of like our financial roadmap is. We call it a get [00:07:00] organized meeting where we’re essentially taking inventory of everything that we have. so you know, it’s cash, it’s it’s credit card debt, it’s student loans, it’s investment accounts. real estate, those types of things, right? So often what can sometimes be a black box in this, especially if you, if collected 4 0 1 Ks, is like, what are these plans and how are they actually invested and what am I actually paying in fees?

Tim Ulbrich: Hmm.

Tim Baker: So visibility is, is really the first step to, to build a cohesive, comprehensive plan. And like I mentioned, as your career continues, a 401k or if you rolled into an IRA will be one of the largest things on your balance sheet

Tim Ulbrich: Mm-hmm.

Tim Baker: So it’s really important to have a, intentional plan with how you’re gonna manage these assets and how do they fit [00:08:00] in the overall picture of your ability to build wealth and then to spend that wealth like in retirement. So. You know, a for a lot of people, you know, they’ll say like, I don’t even know where these

Tim Ulbrich: Mm-hmm.

Tim Baker: Or, I have a statement, I have no idea like how it’s invested or, or what it’s, you know, and it, and it’s, it could be, it could be at one extreme of like, I just don’t know what this is to like, you know, the other extreme of like, I know it’s probably not optimized and I need some help with this.

Tim Baker: So I think it’s really important to, you know, again, have a plan for this asset and, and make sure that. It is aligned with what you’re trying to achieve,

Tim Ulbrich: Yeah. When I think about the maintenance that we typically will do. With our clients on their various investment accounts, right? We’re looking at things like, you know, what’s, what’s the asset allocation according to our goals, according to our risk tolerance and capacity? And, you know, as the market does its thing over time and, and things may get outta whack, how do we rebalance those accounts?

Tim Ulbrich: How do we make sure that this is fee efficient, right? So [00:09:00] if, if that’s outta sight, outta mind, that’s the potential risk that we’re, we’re losing eyes on the intentionality of those funds. And, and one other thing I want to say here while we’re talking about this. Is that it’s not uncommon, correct me if I’m wrong, but it’s not uncommon for some financial planning firms to look at your current employer, 401k or 4 0 3 B uh, and say like, Hey, we see that, but we’re not necessarily gonna spend time helping you.

Tim Ulbrich: You manage that, which can be another, another thing to think about.

Tim Baker: Yeah, I think a quarter of advisors, if you’re working with a quarter of advisors, don’t help you with a current 401k, which I think is bonkers. Um, so to me, like if you’re, if you’re looking at a comprehensive plan, like I think that’s important to make sure. Like if I’m, you know, the, the, like when we do, you know, you don’t mention asset allocation.

Tim Baker: When we set, when we establish an asset allocation, what, whether it’s 90, 10, 90% equities, 10, 10% in bonds, or [00:10:00] 70 30 or 80, whatever it is, like to me that conversation isn’t complete until you give a 70 30 or a 90 10 or whatever it is for that held away or for that current 401k. I just think that, that, I don’t, lazy is not the word, but the reason that advisors don’t do that is ’cause they don’t get paid on those.

Tim Baker: They

Tim Ulbrich: Mm-hmm.

Tim Baker: on that. So part of this discussion is following the money. Like, you know, how, how does it, how do fees work? And, you know, what’s the scope for the fee that I’m paying? And to me, if advisors is, is unwilling to help me with a, with a, you know, a 401k, they’re not getting paid directly on.

Tim Baker: That’s, that to me is a red flag. Um. You know, you’re, if you have my best interest in mind, and this is a big part of my balance sheet, then help a brother, help a sister out. Is, is my, my viewpoint. Um, but you mentioned like asset allocation [00:11:00] is, is big, is a big part of this, but I think part of this discussion of like the options and, and what to do is also asset location and. And how an asset location is often forgotten. But I think it’s, it’s one of the things that is, is just as important as, as asset allocation. Meaning, you know, are these accounts taxable, pre-tax, Roth, that type of thing. And to me, you are confined inside of a 401k to be able to pull some levers to make sure that the percentages of where your assets are held, are. Controllable or you can affect change there. And in, in some, in some accounts you can and in others you can’t. Um, so it’s important to understand that. So, and again, one of the things you mentioned is like Reba, and just to address that really quick, know, if you’re, if you’re actively contributing to a 401k, the action of rebalancing kind of happens naturally every time you get paid and put money in if you [00:12:00] leave that job. And that money’s just sitting there. The market does what it does, so that that asset loca, that asset allocation that you set will drift because you’re not actively putting money into it. So you could drift into something that’s much, much more conservative or more likely, much, much more aggressive than what you signed up for. So that’s another thing to be aware of, is that, you know, one of the important things about this is that, you know, when you’re not actively putting dollars in. It, you tend to drift more out of, you know what you signed up for, which can be problematic, especially when the market turns sour.

Tim Ulbrich: Yeah. Great, great points. And, um, I’m glad you mentioned the asset location because that’s a really important one, that if, if we’re on autopilot with some of these things or we just leave them and forget ’em, we’re not necessarily thinking about those asset location questions, which will raise some important decisions like.

Tim Ulbrich: Might we or might we not do Roth conversions, you know, for example. So,

Tim Baker: Right,

Tim Ulbrich: um, really good stuff. Let, let’s talk about the various options. Option one, [00:13:00] perhaps the option, uh, that has the least amount of friction, uh, is do nothing and leave money in the old plan. So I, I leave my employer, I go to work for a new employer, and I just leave the funds in the provider that was managing the 401k for the employer That, that I just left.

Tim Ulbrich: Tim, where, where might this, or might this option not make the most sense?

Tim Baker: Yeah, if you’re, if you’re lazy or you don’t want to deal with, uh, pulling statements and everything that you know it takes to uh, an account, this might be right for you. Right? You just basically don’t do

Tim Ulbrich: Mm-hmm.

Tim Baker: Um, you still enjoy. I. The continued tax defer growth, whether it’s a traditional, um, bucket or a Roth bucket, you still get that benefit, which is great. Um, you still get potential, um, benefits of a lot of 4 0 1 Ks will have the options for like in institutional share classes, which are, can be

Tim Ulbrich: Mm-hmm.

Tim Baker: in [00:14:00] fees compared to like just a retail, you know, what you would buy on the street. Um. And one of the things that’s what’s great about, you know, keeping it at the 401k or even transferring it to a new 401k is that. 4 0 1 Ks had a little bit more protection, um, by erisa, which is the Employment Retirement Income Security Act. So under this federal law, creditors can’t touch your 401k in most cases. E you know, even in cases of like bankruptcy lawsuits or collections, they still, the I risk can still get to your money.

Tim Baker: If you’re in, in a divorce, a Quadra, a qualified domestic relations order, can still access those accounts or any type of CRI criminal risk. Restitution IRAs still have protection, but it could be limited compared. I can kind of get into that a little bit more when we talk about IRAs, but that’s, that’s the big benefit.

Tim Baker: Um, I think the cons here, you know, just like if you, if you leave it or if you move it, you’re still limited to the

Tim Ulbrich: Yeah.

Tim Baker: by that

Tim Ulbrich: Mm-hmm.

Tim Baker: So I always talk about like, you know, [00:15:00] with a 401k, you’re in a sandbox and you only have so many toys that

Tim Ulbrich: Mm-hmm.

Tim Baker: with. And those toys are typically mutual funds. average, 4 0 1 Ks have about 20 to 25 investment options, is typically good enough to build a, you know, a diverse portfolio. But looking at many, many 4 0 1 Ks, I think you can throw out of ’em because they’re crap. And what I mean crap is like they’re typically

Tim Ulbrich: Expense ratios. Yep.

Tim Baker: Exactly, so, so you’re, you’re, you’re often stuck with just,

Tim Ulbrich: I.

Tim Baker: maybe four or five or six funds that are, that are good.

Tim Baker: Most of them, most 4 0 1 Ks will have exposure to US stocks from large, mid small, not all the time. Um, most will have exposure to internationals. They’ll have bond funds. They’ll typically have a stable like money market fund. Um, but they often, they’ll miss things like real estate. If you believe in real estate, emerging market. A lot of 4 0 1 Ks don’t have a digital [00:16:00] exposure if you believe in commodities. Um, so I think that’s one of the cons. I think also one, the big, the big con I think is like the, the possibility of higher fees, um, related to the

Tim Ulbrich: Yeah.

Tim Baker: So we mentioned investment fees. Um. So this is the expense ratio that, the fee that the funds themselves take to

Tim Ulbrich: Mm-hmm.

Tim Baker: of a, uh, a balanced, um, ETF or a mutual fund in this case. So, a, on average the investment fees, uh, inside of a 401k are about 39 basis points or 0.39%. So if I have a hundred thousand dollars portfolio every year, $390 of that is basically being absorbed by the funds that I’m in. Um. And the other big thing that I think is a detriment to a 401k is administrative fee.

Tim Baker: So this covers the cost of running the plan, record keeping compliance, compliance tests, and maybe legal fees. Um, [00:17:00] so there’s really no getting away because, because these plans are, um. very much tested and looked at by the federal government. There’s a lot of record keeping that goes, and that typically is passed on to the participants, to the investor. So the average administrative fees for a smaller plan can range anywhere from 0.5% to 1%. So if it’s, if it’s 1% and I’m paying 30, you know, 0.39%. On, um, investment fees, that’s 1.39 or almost $1,400 of a hundred thousand dollars. As the plans get bigger, like a mid-size plan, so this is a plan that has assets of 10 to a hundred million. You know, you’re looking at 25 to 50 basis points, so a quarter of a percent to a half percent. And then larger plans, you know, you’re looking at, you know, 0.10, that type of thing, but then you add the investment. You know, the expense ratio, there could also be flat fees associated with, um, [00:18:00] administrative fees, that type of thing.

Tim Baker: So, you know, it’s important to, to understand this and this, this data is hard

Tim Ulbrich: Yes.

Tim Baker: not

Tim Ulbrich: Yeah.

Tim Baker: statement. It’s, it’s not transparent. We talked about how poor, um, financial services can be in terms of transparency. So you could be paying anywhere from. 20 basis points, 2.2% to 1.5% and not know it.

Tim Baker: Right. Um, so it’s important that, you know, and it’s kind of like the, the, the, the rule that if your employer is bigger, typically the plan is better. Not always. If your, if your employer is smaller, typically the worse it is for a participant. Um, so fees are gonna be a big thing. And, and we, what we talked about too is like the last couple things this year, like if you’re inside of a 401k, you can’t really do Roth

Tim Ulbrich: Mm-hmm.

Tim Baker: Which I think from an asset location perspective, it really limits your, in your, your ability to

Tim Ulbrich: Yeah.

Tim Baker: the tax, um, portion of your plan. Um, and I think just if you’re [00:19:00] keeping it there and you’re collecting 4 0 1 Ks, I think it’s harder to manage a cohesive plan that is pointing in the direction that you need to point it in and, and optimize for what you’re trying to do. So are pros, there’s obviously cons and a lot of the pros and cons will kind of. You know, we are kind of the same with the, the second option, which is kind of rolling it into your, your new 401k. Um, they’re very similar.

Tim Ulbrich: Yeah, and I think as you’re describing some of the limitations of, of a 401k, you know, we, we’ve seen in the clients that we’ve talked with and, and worked with everything from, Hey, I work for, let’s say, an independent pharmacy that doesn’t even offer. A 401k, or if they do, it might have very limited options, higher fee options, right?

Tim Ulbrich: Very small. E employer all the way up to, I work for a, a giant company where we’ve got, you know, may maybe more options, maybe not more options because of the sandbox that you were talking about, but I might have, you know, lower fees on, on the administrative side as well as the investment options. So 4 0 1 Ks are not all created equal, which, [00:20:00] which really plays into this decision.

Tim Ulbrich: What might I do with. This 401k, this old 401k in terms of either leave it or move it or put it in an IRA, and we’ll talk about here in a moment when, when you go from some of the variants, we’re talking about various 4 0 1 Ks, and you look at something like an IRA rollover, at that moment, we’re starting to level the playing field, right?

Tim Ulbrich: Because once we’re into the open market. You know, those limitations aren’t, aren’t necessarily the same that they were, uh, by any means. We’ve got more options to, to be able to choose from, which might might for some, to be fair, you know, this can be overwhelming and, and I think this is where.

Tim Baker: con.

Tim Ulbrich: It’s a con.

Tim Ulbrich: Yeah. And I, I, I think about some of the, the employers that I had early in my career, you know, I remember it was about 15, 20 options as you mentioned. And the visual that was coming to mind as you were talking is, you know, if we’re bowling and we got bumper lanes on, right. In terms of like, I can only, you know, mo move so far, thankfully I can’t put the ball in the gutter.

Tim Ulbrich: So if I’m overwhelmed by, you know, asset allocation decisions or choosing investments or not understanding where those investments might want [00:21:00] to go, you know, there, there’s a limited. Menu of choice, which can be valuable, but also as we start to really build the financial plan in a way that it’s, it’s custom to you and your goals and individualized to what we’re trying to achieve long term.

Tim Ulbrich: Some of those options that we have might be more valuable as well as you articulated, really trying to keep those fees down because as we’ve covered in this podcast many times before the, the erosion of the portfolio that can happen due to those fees can, can be very real over the long, long term. Tim, one other idea that just came to mind that I wanna get your thoughts on.

Tim Ulbrich: Uh, and, and probably I’m bringing my, my own personal experience bias here. ’cause I made this mistake on, uh, Jess and I made this mistake on her 4 0 3 B very early, uh, in, in our, uh, investing career is, it was a very small account, wasn’t there for a long period of time. We, we chose the option one, do nothing.

Tim Ulbrich: Uh, at that time, admittedly didn’t really have a good idea of what were the options available and it became a, a, a [00:22:00] nuisance after a while I remember getting these statements. Uh, in the mail periodically, and it was like just something we weren’t often thinking about, right? Because it was from a year ago, two years ago, whatever the timeline was.

Tim Ulbrich: And because the account was so small, I felt like the combination of outta sight outta mind and the smaller account balance, uh, drew us into the temptation of perhaps the absolute worst move to make, which is cash out that account. So I, I think, you know, if you, if you think of an account that’s relatively small.

Tim Ulbrich: And is kind of an annoyance factor outta sight, outta mind, that tendency, that risk arguably could increase. Versus if we’re able to combine that with other funds and we, we’ve set an intentional plan and strategy for those funds, I think, I think it might minimize the likelihood of making a decision like that.

Tim Baker: Yeah, and I don’t know if this is one up in you, Tim, but I, I think that. I did the same thing, but it was more of avoidance and they, they said, Hey. They basically, they were sending me [00:23:00] letters that said like, if you don’t do something with this, we’re gonna send you a check. Like, so they cashed it out for me. Um, which is obviously a, you know, something that you don’t want to do. Any, any dollars that you have the, the wall of, you know, a, a Roth or a traditional is

Tim Ulbrich: Mm-hmm.

Tim Baker: And, you know, if you extrapolate, extrapolate those dollars out over the course of a career, even if you don’t do anything with it, um, and it, you know, if we’re invested somewhat, um, appropriately, those dollars are gonna

Tim Ulbrich: Mm-hmm.

Tim Baker: and be, you know, potentially substantial by the end of a 30, 40, 50 year career. So, I mean, those are those, you know, some plans have, You have things built into the plan documents that say if they, if you’re not a

Tim Ulbrich: Right.

Tim Baker: a non participant, meaning you’ve moved on and the, the, the, um, account is this small, then they’re not

Tim Ulbrich: Mm-hmm.

Tim Baker: keep you on their books and they’re gonna basically force [00:24:00] a rollover, um, which. Then if you don’t know what you’re doing, you know, you go to cash and you’re paying the 10% penalty plus, plus the, uh, the taxes. So it might not seem that big of a deal, but I think in the grand scheme of things, it can, it can be. So, yes, absolutely. And, and, and again, I’m, I’m, I’m biased here, but I’m like, that’s

Tim Ulbrich: Mm-hmm.

Tim Baker: advisor.

Tim Baker: Just help

Tim Ulbrich: Mm-hmm. Mm-hmm.

Tim Baker: if you can get the statements, an advisor can do the rest. Um, so I think it’s really important to, um, you know, if you, if you’re. I, I, it’s frequent that I talk to, to pharmacists and they’re like, yeah, I have, you know, I have three old retirement accounts.

Tim Baker: My spouse has two old retirement accounts. We’re finally at a point where we just need to figure out, ’cause like, I’ll ask like, well, know, like, what’s your, you know, and if you, and if we add up these accounts, like there might be half a million dollars, 750,000, maybe even more. And I’m like, well, what’s your philosophy?

Tim Baker: Like, how are you managing it? And it’s like, uh. [00:25:00] Don’t

Tim Ulbrich: Mm-hmm.

Tim Baker: think, I think that, and we’ve talked about this before. A pharmacist with the count kind of money that pharmacists make and what they will amass over the, their course of their career. The sooner they answer that question or work with an advisor to help them answer the question, the more efficient and optimized they

Tim Ulbrich: Yeah.

Tim Baker: The longer that you’re like, I don’t know, or it’s in target date funds, and again, I don’t, I’m not hating on target date funds, but target date funds typically. Don’t, are more expensive and their glide paths of how they transition for from equity to fixed income over the course of the life of the fund is typically not in line with

Tim Ulbrich: Yeah. Yep.

Tim Baker: It’s just not

Tim Ulbrich: Yep.

Tim Baker: to me, the sooner that you are. On the path, you know, you’re following a roadmap from a financial perspective, the, the more efficient and it’s, you know, it’s kind of the whole adage of like, work smarter, not harder. Right? And [00:26:00] I think sometimes the dis disjointed, um, investment philosophy across multiple accounts lends itself to just being again, inefficient and wasting time and money that you don’t otherwise have to.

Tim Ulbrich: I think there’s also decision fatigue there. You know, when I think about the, the exam, the example you gave, which is not an uncommon one. You and I were talking about

Tim Baker: Mm-hmm.

Tim Ulbrich: a couple weeks ago and I wrote a blog post on this called The Accidental Millionaire, which is like, Hey, I wake up in my forties and we’ve been saving 10, 15, 20% of our account.

Tim Ulbrich: I. You know, of our income towards various investment accounts, and we wake up and we’re like, oh, wow, we’ve got north of a million dollars a, a fairly common situation. And, and naturally there’s this. Point, not of reckoning, but of like, well now what we, we haven’t really necessarily been super intentional on where we’re going, why we’re going there, what’s the asset allocation?

Tim Ulbrich: What’s the asset location? Are we on track? Are we not on track? I mean, but those unanswered questions can be exhausting and they’re all answerable questions. Right. And I think that’s to the point you’re making [00:27:00] of like, let’s figure ’em out.

Tim Baker: Yeah. I mean, I mean, in the beginning you’re just like, it’s just the start, right? And just get it rolling. And then it’s kind of, you know, you’re kind of shooting first ask questions later, but eventually you need to ask those questions of like, am I truly optimized? And again, like we’re not talking chump change, you know, the, the, the wealth that you should amass over the course of your career. Um. That should sustain you till the end of your life substantial, or it should be

Tim Ulbrich: Mm-hmm.

Tim Baker: um, you know, having a, a plan and a strategy, um, asset location, asset allocation. Again, if all those things sound like foreign to you, that’s okay,

Tim Ulbrich: Mm-hmm.

Tim Baker: you know, but I would say hire an advisor like you need it.

Tim Ulbrich: So option two is we can roll it over to our new employer. So let’s say I worked at a hospital, I had a 4 0 3 b, I left that hospital. I’m now working for another hospital. I do have an option to roll over my [00:28:00] old 4 0 3 B or old 401k to my new employer count. Now this might Tim, bring an advantage of consolidation.

Tim Ulbrich: It could bring an advantage that we have everything in one place. We can see it, we can be intentional. It’s not that out ofci outta sight, outta mind risk that we were just talking about, but it still carries all the similar, same limitations we were just talking about. Of the, of the limited options and fees within the the retirement Plan sandbox, correct?

Tim Baker: Yeah, you, you, you consolidate. So instead of collecting, you know, two or three or 4, 4 0 1 ks, you still have the one, if you leave that job, you can

Tim Ulbrich: Mm-hmm.

Tim Baker: and you still have the one. Um, you know, there are things that 4 0 1 ks offer, like loan provisions and things like that, that IRAs do not, um, that I guess can be a pro, you know, you still have the, you know, the creditor protection, um, under the, the new 401k. it can allow for easier. Backdoor Roth, IRA contributions since it keeps, you know, pre-tax

Tim Ulbrich: Mm.

Tim Baker: out of a traditional

Tim Ulbrich: Mm-hmm.

Tim Baker: So that’s a big, that would be a big plan, uh, plus as well. [00:29:00] But yeah, to your point, the cons are you’re still limited by the investment menu, that you’re still limited by the fees, which I think are substantial compared to, um, an IRA, uh, you can’t do those conversions, which I think are gonna be more important.

Tim Baker: More important down the road. And I think, again, the sooner that you can kind of figure out. How much you should have in each bucket, the easier it is to do. If you’re overly weighted and pre-tax or overly weighted in taxable or Roth, then that’s a problem, um, or can be a problem. Um, and then there’s some plans, Tim, that don’t accept rollovers.

Tim Baker: They just don’t do it. Which I think is becoming more and more rare, but they

Tim Ulbrich: Hmm.

Tim Baker: those do exist. Um, so you might be forced to, to do, you know, to either leave it or roll to an an IRA. So yeah, a lot of the same things. Pros and cons, that you know, your old 401k will follow you to the

Tim Ulbrich: Mm-hmm. Option three, Tim, then is that we could roll it over to an IRA. So we’re gonna move a old 401k, or an old 4 0 3 B, or multiple old 4 [00:30:00] 0 1 Ks. 4 0 3 Bs into an IRA. And I know this is a very common approach. It’s what, you know, I did in my own 4 0 1 a when I left, left Ohio State. Um, and ultimately put that in, into an IRA.

Tim Ulbrich: And the idea is that you could, you know, if you have multiple old accounts, eventually you can consolidate those all into one. So tell us about this option. Why often, but not always. Why often it’s, it may be the preferred option. And, and what are some of the pros and cons here?

Tim Baker: Yeah, so, so the big thing is like, you’re, you’re, you have wider. Investment options, right? So that can be a pro anacon. So you’re, you’re out of the sandbox. You’re not limit to what the 401k offers. And there’s thousands of stocks, bonds, mutual funds, ETFs, that cover all asset classes. So typically of, you know, some of the, the risk associated with investments, 4 0 1 Ks don’t want to do certain asset classes.

Tim Baker: So they say, Hey, we’re just gonna offer these, they’re kind of down the middle and that’s it. [00:31:00] So outside of the 401k and in IRAs, you can really tailor the portfolio to what you want as an investor. So that could be looking at all the asset classes that we mentioned and have a diversified portfolio that way. It could be where you are a vanguard, you’re a boggle head, and you want all Vanguard. Sometimes you can’t do that inside of a 401k ’cause they only offer

Tim Ulbrich: Mm-hmm.

Tim Baker: Fidelity or things like that. Um, most 4 0 1 Ks don’t offer like a digital asset exposure if you believe in that. Um. lot of 4 0 1 Ks won’t allow you to, um, invest directly into stocks outside of the, the, the stock that they, you know, their own, you know, the employer stock. Um, so some people like things like, you know, individual stocks or like right now my brokerage account is invested like direct index in, so this enables you to buy stocks that make up a particular index, like the s and p 500 that has. benefits. So you can book tax losses on positions that [00:32:00] have decreased in value. Um, so these losses can be harvested. Um, even when the, the market is, you know, up overall. So this is another, you know, strategy that one can use that is not available inside of a 401k. And then, you know, if you lean more towards value or growth or emerging market, some of those things might not be available in a 401k.

Tim Baker: So you can kind of get a little bit more nuanced, with what you’re trying to achieve. The big thing here is that. The fees, the fees are often, you know, not the same. So like, like we mentioned, you could be paying north of 1%, one and a half percent, um, in a 401k, which that, that doesn’t necessarily exist in a, in, in IRA.

Tim Baker: Now there’s a caveat, and I’ll get to that in a second. Um, you know, it simplifies the planning, you know, if, if you consolidate counts, which is true if you consolidate a 401k to a 401k. Um, the big thing again, asset location, is that you can convert.

Tim Ulbrich: Yeah,

Tim Baker: IRA, which is

Tim Ulbrich: I.

Tim Baker: with the traditional [00:33:00] IRA to a Roth IRA and do that like this has nothing to do with a, a backdoor conversion.

Tim Baker: This is, I have a hundred thousand dollars in a traditional, I’m not making any money this year. I’m gonna put $40,000 from my traditional to my Roth. Pay the taxes when I don’t make, I’m not making any money. basically now I have $40,000 in a Roth and $60,000 in a traditional, there’s a lot of power in that and the ability to do that in a four in a IRA that you can’t do in a 401k.

Tim Baker: So those levers that we’re pulling, um, as we’re in the accumulation phase to then with then go into the withdrawal phase, that’s work that can be done in the accumulation phase that you can’t do on a 401k. Um. The big thing here, and I think from a, a advisor perspective, is follow the money. So why is my advisor telling me that a hundred percent of my time I should roll it over? Typically it’s because that’s how advisors get [00:34:00] paid. So advisors will say, Hey, I can’t help you unless you have a half a million dollars, or, I, I can’t help you unless I have a million dollars. You have a million dollars. What does that actually mean? That means that that advisor only works with clients that have investible assets of a half a million or a million dollars. Investible assets are typically old, 4 0 1 Ks old, 4 0 3 Bs, IRA accounts, Roth IRAs, brokerage

Tim Ulbrich: Yep.

Tim Baker: Any other, any other accounts are typically not. Accounts that tho that advisor can get managed on. So there’s a conflict of interest there in, in their advice to their, to their client or to a prospective client. Um, and that should be known. And again, I think what we have said often, um, and consistently is that in financial services. We are terrible at being transparent with the scope of work that’s being provided [00:35:00] and the fee that’s being charged. It’s often nebulous in terms of the scope of work. Yeah, we do plan and well, what does that mean?

Tim Baker: Are you gonna help me with my, my 401k that I contributed a lot of times? No. Um, are you gonna help me with my student loans? Are you gonna help me with, um, you know, insurance or whatever that is? And a lot of the case like it is. Not explain and the client is left confused. And then how am I being charged?

Tim Baker: And we went through that whole episode, Tim, is it buried in a, uh, insurance product? Um, is it transparent? Can I actually see the fee or not? So what we have found is that, again, transparency and, and explaining the conflicts of interest are important. So if you have an old 401k. And you can roll it over a lot of the times for the reason that we, we talk about it’s important or it’s good for you to do that.

Tim Baker: However, at YFP, we’re gonna bill part of your fee [00:36:00] from that

Tim Ulbrich: Yep.

Tim Baker: It. And what we have found is it’s more of a sustainable relationship with clients if we’re billing them from the assets that we’re managing versus cash flow. What do I mean by that? What I mean by that is if we’re charging 1% on a $500,000, um, you know, old 401k that we’re managing, that is easier for a client to pay than to bill. Um, and pay out a cash flow or to pay out a credit, a credit card, that money is still your money. Money is fungible. It’s still important to understand that

Tim Ulbrich: Mm-hmm.

Tim Baker: that, but, um, from a longevity perspective, it’s easier to pay from an asset. So a lot of advisors say, I can’t help you unless you have that amount of, those amount of assets.

Tim Baker: So I think it’s just be really important to be upfront. I think what a lot of people do is like, they’re like, oh, well I’m, I’m paying 1%, or I’m paying half a percent at my 401k. Like, it doesn’t make sense for me to roll it [00:37:00] over the apple’s. The orange it is, is that if you’re working with an advisor, if they’re doing it correctly, you get access to a comprehensive plan that is going to not only advise on the asset that they’re managing, but the held away assets and every other a, you know, part of the financial plan.

Tim Baker: Right. So. The, the assets is often, are often the engine for which to pay an advisor. It’s just important to know that upfront, which a lot of people don’t

Tim Ulbrich: Yeah, I think what you’re talking about there is, is transparency, right? In that model and making sure that we, we understand it as you mentioned, where a fee comes from. Money is money. Um, and as long as we, we, we know where it’s coming from. We feel comfortable. We understand that, that that’s really important.

Tim Ulbrich: And, and I’ll add to your, your discussion, why is longevity of the relationship important? Right. What we know, myself included, yourself included, is that the market cycles are going to have significant ups and downs, and we are in this for the long run, not just the long run to like retirement, like the [00:38:00] long run of our funds, being able to continue to grow and produce a retirement paycheck so that inflation doesn’t erode our purchasing power.

Tim Ulbrich: That means that we need to sustain. The progress and the momentum, not only on our investments, but as you highlighted in every other part of the financial plan. And if the market’s going to do what it has done historically in every five years, we’re gonna have a fairly significant drop of, say, 20% or more.

Tim Ulbrich: Human behavior and emotion suggests that most of us, if we do this completely ourselves at one point, if not more than one point, are going to make a mistake, whether it be buy in high or sell low, and not keeping that long-term horizon in mind and a huge piece of the value equation. Again, we’re only talking about investments key part of the financial plan.

Tim Ulbrich: But of course there’s a lot more than just the investment. Part of the plan is to have a person in our corner that is helping us keep the long-term perspective and horizon, uh, in, in mind because we know that it’s [00:39:00] those decisions If we make them irrationally, which. A lot of us, I’ve done it before. I was telling you, you know, before we hit record, like I’m guilty of back in the day, you know, buying Circuit City Penny stock.

Tim Ulbrich: I was convinced him Circuit City was coming back, like laughable. Right At this moment, you know, I, I’ve cashed out an old 4 0 3 B account. Like these things, when we look at the volatility and this season we’re in right now is just a great reminder. You know, if, if you would’ve been napping the last three months, it’s like nothing has happened in the market.

Tim Ulbrich: Right. But if you’re checking your accounts every single day, especially thinking about those people that are nearing retirement or transitioning out, like palpitations might be happening, we, we need someone alongside of us to say, Hey, we’ve got this. We’ve planned for this, we accounted for this. Let the markets do its thing and we’re gonna be able to weather this and look at the long term perspective.

Tim Baker: Yeah, and like, you know, like we, we were talking about like asset location, like in a RoboAdvisor is not gonna

Tim Ulbrich: Totally.

Tim Baker: most and most, again, most, a lot of advisors aren’t looking at that. They’re. [00:40:00] I’ve had so many conversations in the last couple weeks, Tim, where it’s like I’m, I’ve been working with an advisor, you know, they are like the one I had recently.

Tim Baker: It’s like I have a Roth IRA with them. I have a brokerage account with them, and I’m like, why are you funding a brokerage account? And he’s like, I don’t know, I just recommended him. I’m like, are you maxing out your 401k? He’s like, no. Um, so they’re like, they’re setting up these accounts that they can get paid on. They

Tim Ulbrich: a whole life, A whole life policy or, yeah.

Tim Baker: crappy insurance that they, they don’t need, no help on the student loans. No help on, you know, this goal or that goal. I’m like, did you guys sit down and talk about goals? No. So, and again, like, I don’t want to sit here and like, like talk negative about, but like, that, that’s just not serving your interest.

Tim Baker: Like it’s not serving your interest. And, you know, to me, um. You know, I think what we’re talking about is, is again, looking at this from A to Z, you know, and

Tim Ulbrich: Yep.

Tim Baker: it’s, it’s not like, oh, well, we’re not getting [00:41:00] paid on that directly, so I, I can’t help

Tim Ulbrich: Mm-hmm.

Tim Baker: that’s asinine. So it’s really aligning yourself with a planner, I think that has your best interest in mind. And it’s hard to talk about this without kind of sounding like, you know, Hey, these people are bad. I don’t think they’re bad. I just think it, I think it’s the, the environment that they’re, they are in is not conducive to put in the interest of their clients first.

Tim Baker: You could li you could listen to that and be like, and, and be scared away and be like, well, I don’t wanna work with advisor.

Tim Baker: But I also would say that the majority

Tim Ulbrich: I.

Tim Baker: of, of the people listening to this podcast. I think need an

Tim Ulbrich: Mm-hmm.

Tim Baker: on the level of wealth that we’re, that we’re, you know, we’re talking about, um, know, pharmacists are in the, the top 10 to 15% of income earners in the United States. Those are typically individuals that need professional help, that, you know, it becomes more complicated as your estate grows, the taxes all, you know, the complexity, all that. Um, and again, I think the sooner that you get in front of [00:42:00] that, the more efficient you’re gonna be. So, um. But I, I think us speaking about this directly, ’cause I’m just like, you know, I, I kind of get it exasperated. I’m like, why? Like, why? Because like, you know, I’m, and I’m sure there’s examples in the medical world where

Tim Ulbrich: Mm-hmm.

Tim Baker: is this prescribed?

Tim Baker: Or like, what, what

Tim Ulbrich: Mm-hmm.

Tim Baker: on here? And it’s like, you probably follow the money with the doctor’s office, right? No offense to doctors, but I’m sure there’s, you know, we talk, I’ve talked about this, like when I first got into financial services. We’d have mutual fund, whole mutual fund wholesalers come to our office in a fancy car wearing a fancy suit, taking, take us out to a fancy lunch, show us fancy glossaries of their fancy funds, and said, Hey, Tim, when client X, Y, Z rolls over their half a million dollar portfolio, wink like, use our funds.

Tim Baker: And I’m just like,

Tim Ulbrich: Mm-hmm.

Tim Baker: your funds are. 20 times more expensive than, you know, what, what you can get out there. Are they 20 times better from a performance perspective? Are they 20 times safer for the same amount of performance? And often the time is [00:43:00] the, the answer to that is no. So you know, it is kind of following the money.

Tim Baker: And I think most of the time when you ask advisors, they kind of

Tim Ulbrich: Mm-hmm.

Tim Baker: seat about how they arrive at fees or how they get paid or things like that. And I think that’s a huge red flag.

Tim Ulbrich: Yeah, and I think this is really where the fiduciary obligation matters. We throw that term around a lot, but you know, if, if you’re having a conversation with someone about what should I do with an old account? I. Right. We, we, we’ve kind of made the case that in, in many instances, it may make senator to roll, roll it over an IRA, but there may be a case where that doesn’t, for, for whatever reason.

Tim Ulbrich: Um, and so to have that perspective where, you know, yes, this may be where the fees derive, but if that were to be the case or the situation, right? The fiduciary obligations says I’m acting in the best interest of the client as they’re making these decisions. So as we wrap up this third option of rolling it over to an IRA, some of the key benefits I heard you say, were consolidation.

Tim Ulbrich: Right. We have multiple accounts that we can have eyes in one account. We have more investment options. We’re outta the sandbox. We typically can have lower, [00:44:00] lower fees. Uh, as we look at more options. And then asset location, we, we’ve made a case about why asset location is so important and inside of an employer account, we don’t have that same flexibility.

Tim Ulbrich: If we were to want to do things like a Roth conversion, you know, for example.

Tim Baker: And, and if we think about this with the end in mind, like I think if, if I’m building out, like if I’m looking at a client, the, and, and I’m trying to build out a retirement paycheck, I think the perfect makeup of that client in terms of the ability to have a con, like a concentrated focused strategy that I can then spend is. That they have a brokerage account, they have a pre-tax, a rollover, or traditional IRA have a Roth. And then we’re figuring out social security and, and maybe they’re making consultant income and things like that, but that’s essentially it. Like the 401k that they had, we’ve

Tim Ulbrich: Mm-hmm.

Tim Baker: um, they might get some pension dollars.

Tim Baker: That’s great, that’s gravy. But those are the three accounts in which we’re basically [00:45:00] pulling the levers to then say, Hey. You know, you need $55,000 out of your, out of these three accounts, we’re gonna get X per year, or, you know, per month from social security, maybe x from a, a pension, maybe some. But that, that to me is the end in mind.

Tim Baker: You’re not looking at. 401k. Old 401k IRAs. It’s, it’s those three accounts that you’re essentially is your dashboard. I will say, Tim, I just wanna mention, mention the cons on this. So we mentioned of, of doing, going to an IRA, it’s the paralysis by an analysis, right?

Tim Ulbrich: Yeah.

Tim Baker: overthinker, you know, I don’t want these, you know, accounts being stuck in cash ’cause

Tim Ulbrich: Yeah.

Tim Baker: what to do.

Tim Baker: Um. IRAs typically don’t offer loan provisions, which can be both a pro

Tim Ulbrich: Yeah, yeah.

Tim Baker: Uh, the creditor protection might be

Tim Ulbrich: Mm-hmm.

Tim Baker: in bankruptcy, IRAs are protected up to 1.512 million, um, under federal bankruptcy law. So, and then per like, different states have different, you know, things, so that might be something to, to consider. Um, and then moving [00:46:00] funds here could complicate like a backdoor

Tim Ulbrich: Yep.

Tim Baker: um, potentially. So those are are the cons. But you know, to me. To me, this is all about transparency, understanding the conflict of interest, um, and knowing, again, like if you’re gonna work with someone, how does, what’s the scope of

Tim Ulbrich: Mm-hmm.

Tim Baker: does the fee get charged? And then being able to make, you know, a, a decision that you think is best for you. I.

Tim Ulbrich: So we’ve covered three options, right? Option one was do nothing. Option two is roll it over to a new employer account. Uh, option three is rolled to IRA to be complete. There’s technically a fourth option, which would be that you could cash it out. I think we’ve made the case for why that’s typically, if not always, not what we want to do, right?

Tim Ulbrich: So. If it’s something we cash out, if it ever hits your bank account, and it’s not a direct rollover to either a new employer account or to an IRA, we’ve got a tax problem on on a traditional account. So that’s gonna be subject to to federal income tax, state income tax, and often because of when those funds hit and it may be a while till your fire taxes, that might [00:47:00] mean we have a surprise coming at tax.

Tim Ulbrich: Tax filing time if we weren’t thinking about what the impact of that was gonna be. So that account’s gonna take a major haircut. Um, and so if at all possible, especially if they, we have a lot of time for that money to grow compound for time, value, money to work its magic, we wanna let those funds continue to do that.

Tim Ulbrich: Uh, whether it mean a rollover or one of the other options we’ve already discussed. All right, as we wrap up here, um, we’ve covered several options of what you can do with an old 401k, 4 0 3 b. As a reminder, we’ve got a brand new guide, uh, that will help give you some more information on this topic. You can download that guide Bests and wor Worst Moves to Make with an old 401k.

Tim Ulbrich: By going to your financial pharmacist.com/moves. Again, that’s your financial pharmacist.com/moves. And if you’re listening to this, say, Hey, I’d love to have a conversation to learn more about Y fps one-on-one fee only financial planning services. We’d love to do that. We work with pharmacists virtually all across the country.

Tim Ulbrich: Uh, you can book a discovery call by going to your financial [00:48:00] pharmacist.com. You’ll see an option to book a discovery call. Tim Baker leaves, leads those calls, typically 45 to 60 minutes in length. It is an opportunity for us to learn more about your financial situation, your goals, what’s going on, not only with something like an old account, but what’s going on with the rest of the financial plan.

Tim Ulbrich: What are the goals? What’s our progress? How are we tracking? We can share more about our services and ultimately see whether or not there’s a good fit for there. So again, your financial pharmacist.com, and you can click on the option to book a discovery call. Tim Baker. Great stuff as always. Uh, thanks so much and, uh, wishing everyone a great week.

Tim Ulbrich: Take care. Thank you so much for listening to this week’s episode of the YFP Podcast. And if you like what you heard, please do us a favor and leave us a rating and review on Apple Podcast or wherever you listen to the show, which will help other pharmacists find the podcast. Before we conclude, I wanna again, thank this week’s sponsor of the Or Financial Pharmacist Podcast, first Horizon.

Tim Ulbrich: First Horizon offers a professional home loan option, a KAA doctor or pharmacist loan that requires a 3% down [00:49:00] payment for a single family home or town home for first time home buyers. 5% for non-first time home buyers, has no PMI and offers a 30 year fixed rate mortgage on home loans up to 8 0 6 500 in most areas.

Tim Ulbrich: The pharmacist’s home loan is available in all states except Alaska and Hawaii can be used to purchase condos as well. However, rates may be higher and a condo review has to be completed. And finally, an important reminder that the content in this podcast is provided for informational purposes only, and is not intended to provide and should not be relied on for investment or any other advice.

Tim Ulbrich: Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. For more information on this, you can visit your financial pharmacist.com/disclaimer. Thanks so much for listening. Have a great rest of your week.

[END]

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YFP 407: Ask YFP: Using 529s for Student Loans & Buying Bitcoin Efficiently

Posted on by Caitlin Boyle

Tim Ulbrich and Tim Baker answer two questions from the YFP community on using 529 funds for student loans and the most cost-efficient ways to invest in digital assets like Bitcoin.

Episode Summary

In this episode, YFP Co-Founder & CEO Tim Ulbrich, PharmD, is joined by YFP Co-Founder & COO Tim Baker, CFP®, RLP®, RICP®, to answer two insightful financial questions from the YFP community.

First, they explore whether it makes sense to use 529 plan funds to pay off student loans. Tim and Tim break down the relevant provisions of the SECURE Act, highlight key limitations and tax implications, and discuss scenarios where this strategy could be beneficial—or not.

Next, they tackle a question about buying Bitcoin efficiently. They compare the most cost-efficient ways to invest, including using various platforms, ETFs, and tax-advantaged accounts like IRAs. They also weigh the pros and cons of each approach, including fee structures, accessibility, and long-term considerations.

Whether you’re considering how to best use your 529 funds or exploring your first steps into cryptocurrency, this episode provides practical, pharmacist-specific guidance to help you make informed financial decisions.

Key Points from the Episode

00:00 Welcome to the YFP Podcast
00:42 Question 1: Using 529 Funds to Pay Off Student Loans
03:35 Options for Overfunded 529 Plans
16:56 Question 2: Buying Bitcoin and Digital Assets
33:24 Conclusion and Listener Reminder

Episode Highlights

”This is not your dad’s 529 plan anymore. What I mean by that is that they continue to make these, I think, more favorable. You have more exit opportunities, if you will, right, in terms of how these funds might be used if you run into a situation like an oversave situation, which I would argue is a good problem, right?” – Tim Ulbrich [11:40]

”When you buy a spot Bitcoin ETF, you don’t hold the Bitcoin directly.

You just have shares of that fund. But the fund essentially owns it and you have a partial ownership of the fund. So when you buy it on Coinbase or Robinhood, you’re an owner, right? Your keys are on that ledger. And it’s there for public consumption.” – Tim Baker [19:44]

“ I own Bitcoin both ways. I own it through an ETF, and I own it directly. And part of me is worried that one day I’ll wake up and I’ll hear a story that X, Y, Z was hacked, and all of my Bitcoin is gone. It’s just the reality, right? And that’s one of the downsides of digital assets.” – Tim Baker [20:48]

Mentioned in Today’s Episode

Episode Transcript

[00:00:00]

Tim Ulbrich: Hey everybody. Tim Ulbrich here and welcome to this week’s episode of the YFP podcast where we strive to inspire and encourage you on your path towards achieving financial freedom. YFP co-founder, COO and Certified Financial Planner, Tim Baker joins me to answer two questions. I. Came in from the YFP community one on whether or not it makes sense to use 5 29 funds to pay off student loans. And another question on the most cost efficient way to buy digital assets like Bitcoin. you have a question that you’d like us to feature on an upcoming episode, head on over to your financial pharmacist.com/ask yfp to record your question or send us an email [email protected]. Alright, let’s take our first question from the YFP community, which came to us via email. Tim, what are your [00:01:00] thoughts on using 5 29 savings as a vehicle to pay off student loan debt? Tim, we were talking before the show, maybe a couple different ways to interpret this question. So what? What are your thoughts?

Tim Ulbrich: I.

Tim Baker: Yeah, and we actually interpret it differently. So, um, you know, I. You know, I, I think I, I was looking at this question as almost like, um, using the 5 29 as like a pass through. So like I, I’m a student loan borrower and I have, you know, let’s just say I have $50,000 left to pay off. You know, one of the things that you could do is I could open a 5 29 and I’ll use State of Ohio, which was where we lived, Tim.

Tim Baker: I could put in for this year, $4,000 in my own name, get a state tax deduction for that, and then, you know, if it grows, great, if not, but I can basically just take that $4,000 out and then pay off, you know, 4,000 out of the 50,000 that I still have, [00:02:00] you know, left to pay. So. That is an option, right? That you, you can, you can absolutely do.

Tim Baker: Um, I think the way that you interpreted, and correct me if I’m wrong, it’s like, you know, you were thinking about it from the, the standpoint of like, Hey, I have student loans, but I’m also saving for my kids’ education. Could I potentially use some of what I, you know, am put in towards the boys’ education for my own student loans?

Tim Baker: And I think that is actually an option as well. Now, the big thing, this was one of the, the big things that. Um, either the Secure Act, uh, in 2020 basically allows for, you can now use up to $10,000 lifetime per beneficiary from a 5 29 to pay qualified student loans. So I, I’ve kind of been on record like to say like, I don’t love the the 10,000 lifetime beneficiary ’cause it’s such a drop in the bucket, especially with the kind of loans that we see, but.

Tim Baker: You know, I think that, I think that cap should be higher, but I would imagine that like [00:03:00] lawmakers are trying to preserve the intended use of the 5 29 and not turn it into like a tax loophole or safe haven for like wealthy families. So I would imagine that’s why, um, it just feels like it’s very inconsequential.

Tim Baker: Um, but yeah, so I think you, I think both of those scenarios, Tim can actually. Like happen, right? So you could say, you know, you, you could say, Hey, this, this, you know, maybe you, maybe, you know, your, your youngest has like the least amount. You could say, Hey, this is now my 5 29. You know, I peel off the 10,000 lifetime amount.

Tim Baker: Apply that to my, um. My own loans and then maybe, you know, recategorize that 5 29 back to your youngest. So I think that’s an option. I, I think what I, what the way I want to answer this question, you know, it’s kind of similar to like, you know, when you leave an employer, like what do you do with your 401k and there’s like a, a myriad of options.

Tim Baker: Like you can leave it, you [00:04:00] can cash it out, you can transfer it to an IRA, you can, you know, roll it over to your current employer. So I kind of wanna look at that. This question this way. So like what are the options if you’ve overfunded a 5 29, um, and let’s us just assume, Tim, that there’s no more school for your child, right?

Tim Baker: So I’m gonna use Olivia as an example. Olivia Baker, great student, great swimmer, she’s a junior Olympian. And the breaststroke great kid. But like, I think the way that I would look at this is, um, if she goes to school. And let’s say, you know, she has money left over to me. The, the, the, the, the number that I’m looking at right now is the magic number for Overfunded five 20 nines is 45,000.

Tim Baker: And I’ll kind of break that down here in a second. So the options that we have with Olivia, so let’s assume she goes through school and maybe she gets scholarships or whatever. What do we do with that Overfund at 5 29? The, the one thing that you [00:05:00] could do is you could change the beneficiary, which is kinda what we just talked about.

Tim Baker: Like, yeah, I could change, you could change it in your name, pay off your student loans, and then change it back so you could change the beneficiary to siblings. So I could, I could change it to Liam. I could change it to Zoe. I could change it. To, uh, grandchildren that might not be here. I could change it to aunts and uncles, my parents, nieces and nephews.

Tim Baker: I could change it to Shea if you decide to go back to school or even myself, like we talked about that. So there’s a lot of, there’s a lot of flexibility. What, what to do with that. Um, this, the second option, which we just talked about is what you, you can use $10,000 to pay down student loans. So this applies to the original beneficiary and each of the symbol.

Tim Baker: And so I, this is one of the things I have to clarify. It’s like I, I think I would be able to use it for myself, but I’m not clear on that. You know, one of the, one of the things I was recent researching it says is fors. So if we look at it from that perspective, then for the Baker family, I see this as like a $30,000 benefit, right?

Tim Baker: 10,000 for Olivia, 10,000 for Liam’s student loans, 10,000 [00:06:00] for Zoe student loans. The other option that also opened up in the Secure Act was. The rollover to a Roth IRA that started in 2024. So you can now roll up to 35,000 lifetime from a 5 29 to a Roth. Um, and there’s some contingence, but that’s where I get the, the 45,000.

Tim Baker: So in my mind, those dollars in all intents and purposes are for Olivia’s education. However, to me, if she has. $50,000 in that account when she’s kind of through school, then I think I would probably leave 40, 45, 10 for potential student loans if that were to pop up. And then 35 to roll over to kind of get started on her retirement saving.

Tim Baker: And then I might take that five. And apply it for Liam or Zoe or something like that. The big conditions here, Tim, is that the, the five 20 for us to be able to roll over to a Roth, the 5 29 has to be open for at least 15 years. So we’re thinking like a long-term play. The rollover is limited to the [00:07:00] annual Roth IRA contribution each year.

Tim Baker: So right now that’s seven. Thousand dollars. So you’d have to do it, you know, um, over basically a five year period, seven time, 7,000 times, five years. Now, those, those limits will be different in the future. And the beneficiary of the Roth IRA must be the same as the 5 29. So there’s some hoops that you have to jump through.

Tim Baker: Um, but outside of that, the two other options that I see, and we kind of talked about this. Um, is you can save for future generations. So there’s no time limit on when the funds must be used. So I’ve always looked at this as like the last resort. So like if we, you know, and that’s one of the big fears, people like, I know about five 20 nines ’cause it’s limited in use, blah, blah, blah.

Tim Baker: In my mind, like if I’m given money to grandkids in the future, I’m good with that, right? Like. It’s a good problem to have. Right? And it’s a great tool for multi-generation wealth transfer for the purposes of education. And then the last one that, which I know you’ve brought up that’s like it’s not the end of the world, is like you can always make a non-qualified [00:08:00] withdrawal and pay taxes and penalty, the 10% penalty.

Tim Baker: You typically pay ordinary income tax on the earnings, plus a 10% penalty on the earnings, um, which is not, again, the end of the world. So to me, like the 5 29 as a. Tool to pay off student loans. Yes. Like you can do that. The, the problem is, is that it’s a $10,000 lifetime limit, but I’m also looking at these other avenues potentially, you know, and, and again, like the 45,000, you know, dollar limit.

Tim Baker: Like I’m, I’m thinking of this as like, if there is money left over. It’s probably because Olivia did something that allowed her to kind of not pay as much for, you know, like, I’m thinking like scholarships, right? So I don’t wanna, I still would wanna reward her. So like, you know, I was just kind of checking our numbers of like what we will project to have for her.

Tim Baker: Um, I think we did this exercise in a previous episode. Um, so I just updated those [00:09:00] numbers and, you know, we’re, we’re about 60, you know, we talked about the one third rule. Right now we’re on track to save about 60%. Um, so for her, the future value of her four year education, um, so she’s 10 and a half now. So really in seven and and a half years, we’ll pay about 175,000.

Tim Baker: We’re on track to save about a hundred, we’ll call it 105. Um. So, but we could, we could get there and she could get a swim scholarship and now we have 105,000. And we’re like, what do we do with that? You know? And I think that’s when we start kind of going down that decision tree of like, let’s, you know, let’s keep that 45 for her for potential 10,000 student loans for, you know, 35,000 in Roth.

Tim Baker: And then potentially peel some of that money off for Liam, for Zoe, for whatever. Um, so I think it’s a great question and kind of, you know, again, we interpret it very differently, but I think there’s, I think one of the, the, the feelings for a lot of parents is like, am I locked into this? And I think there’s just a lot [00:10:00] of wiggle room of what you could do with those dollars.

Tim Baker: Um, and I think we’ll continue to be, you know, opened up and, and flexible. But at the end of the day, I think the very last thing that you could do is just pay the 10% penalty. It’s not the end of the world.

Tim Ulbrich: Yeah, and I think, um, a couple things of reference. Great stuff, Tim. Um, you know, as you were walking through your example calculations for Olivia.

Tim Baker: Yeah.

Tim Ulbrich: reminded me of that episode we did previously, which I wanna make sure we have reference. So that was 360 8. How much is enough for kids college and and the premise of that was we talk all the time about saving for retirement, determining your nest egg. I remember one day, a couple years ago, you had this aha of like, why don’t we apply this same mindset to kids college, right? We have

Tim Baker: Right.

Tim Ulbrich: of thumb framework, the third, a third, a third. We’ve talked about that on this show before, Same for kids. College is a mathematical set of assumptions.

Tim Ulbrich: Just like we think about retirement, sure things may change, will change. Markets will kind of do their thing depending on how we have those invested, but we should be able [00:11:00] to plan. In a similar fashion, especially if we’re looking at this over a long period of time, you know, 15, 18 years that we’re, we’re saving.

Tim Ulbrich: So, um, I wanna make sure we reference that episode as well as two 11 when we talked about the ins and outs of the 5 2 9 college savings plan. So I know some of our listeners, especially may, maybe mid, mid-career pharmacists that have some kids that are in high school, a little bit older, getting ready to go to college, perhaps well versed in this topic, but for others that. Maybe younger kids are wanting to learn more about what, what is the 5, 2 9 and, and how might it fit as a priority of investing in the financial plan given all these other things I have going on, right? Whether it be just starting a family, buying a home, saving for retirement, student loans that are hanging around, how might this fit in as a priority with other. Investments and other things, other goals. So make sure to check out that episode as well. you know, one of the thoughts that came to mind as you were talking is like, thi this is not your dad’s 5, 2, 9 plan anymore. What, what I mean by that is we’ve talked at length the show [00:12:00] that they continue as you highlighted just a few moments ago, to make these, I think, more favorable.

Tim Ulbrich: You, you have more exit. Opportunities, if you will, right? In terms of how these funds might be used if you run into a situation like an over save situation, which I would argue is, is a good problem, right? Whether it be because, hey, my kid got a scholarship, they didn’t think they were gonna get a scholarship or, you know, perhaps they decided that it was a different career path than than college and, and now we’ve got funds, we gotta figure out what to do it.

Tim Ulbrich: There are more exit opportunities now than ever, including some of the most recent ones you mentioned, like the Roth. Conversions, and we’ve got a plan and, and there’s certain details that we’ve gotta think about in doing that. Um, but there are more options than we’ve had before in terms of how these funds can be used.

Tim Ulbrich: And of course, everyone’s situation is different. You know, I’m thinking about parents that might have larger families where there’s multiple kids, or the likelihood of more grandkids versus a single child and what that might look like. So everyone’s [00:13:00] situation, of course, is different, but. I wanna reemphasize that because I, I had a conversation just last week, Tim, with a faculty member at a college who was given advice by a non fee only financial planner.

Tim Ulbrich: And so a shout out to the most recent episode we did on five questions Ask when Hiring a financial planner. the advice was, Hey, you work at a university. Your kids could go to the university of which you work and, and go there for free, which could happen and that’s an awesome benefit, but also may not happen. Um, and therefore like, don’t put money in a 5 2 9 and instead buy a whole life insurance policy. And you know, I,

Tim Baker: I’m shaking my for. Yeah, for, for those that are not watching the video, I’m shaking my head. I, I had a, I had a similar conversation where, you know, somebody was talking about a 5 29 and the advisor was saying, um. They were saying two things. They were saying, don’t put money in a 5, 2, 9, and actually don’t put money into your 401k, [00:14:00] put it in a brokerage account.

Tim Baker: Um, or like an IRA and, and I was like, I was asking the, I know this is the tangent, but I was asking the question. I’m like, you know why they said that, right? Like, not to put money in the four five, the 401k, and not to put money in a 5 29. They’re like, no, why? And I’m like, because they don’t get paid on those accounts.

Tim Baker: So you get. Yeah, like they’re held away accounts, you don’t get paid. I mean, advisors can get paid on a 5 29. Um, like when I was prac, when I was practicing my first, you know, job in financial services, there was a Maryland 5 29, but we used the Virginia 5 29 for most of our, our clients. And you know why that was, Tim, is because Virginia 5 29, at least at the time, like it was open to advisors to get to, to set up and get paid.

Tim Baker: So even though the Maryland. Uh, clients weren’t getting the state benefit like we were. We were be, we were benefiting because we could like earn commissions on that. So like, yeah. I mean, [00:15:00] yeah. Not to cut you off, but like, it’s that, that kind of stuff just like makes me angry.

Tim Ulbrich: Yeah, and what was frustrating about that is, you know, we talked about this when we did the episode on five key key questions to ask for hiring a financial planner is, you know, there’s some half truth slash good

Tim Baker: I.

Tim Ulbrich: in there. Like of course, you know, if I were to still be working at Ohio State, my kids can go to Ohio State.

Tim Ulbrich: Awesome. Like, that’s a great benefit, but one that may not happen. You know, they might say, Hey dad, by the way, like. not cool. I don’t want to go to Ohio State

Tim Baker: Right.

Tim Ulbrich: or, you know, whatever would be the scenario. Um, then also, like that doesn’t just mean like, okay, go, go buy a whole life insurance policy instead because I’m gonna earn a commission off of that.

Tim Ulbrich: So, you know, I, I think it was one of those things that there’s still a lot of advice out there that I hear in talking with pharmacists. I know you hear as well, not, not just that related to the example I gave, but that are operating under. of the older rules in construct and framework around 5, 2, 9 plans.

Tim Ulbrich: [00:16:00] It didn’t have the flexibility and options that it might have today.

Tim Baker: Yeah.

Tim Ulbrich: and so, you know, I think that’s something to be aware with.

Tim Baker: Yeah. And I think the last thing that I would, I would just interject here that I didn’t say is that like. You know, if your student gets a scholarship, you can withdraw up to the amount of the scholarship without penalty. You’ll still owe income tax on the earnings. But like, you know, like if, if your, if your kid gets a, you know, a $30,000 a year scholarship to go to x, y, Z school, like, you can take out $30,000 a year without, you know, without, you know, paying that 10% penalty.

Tim Baker: So, again, like it just, you know, there’s just lots of different avenues. To go down to potentially, um, you know, exhaust those funds before you, you know, you get to the point of like, with, you know, making a non-qualified, you know, withdrawal. So, but it’s, it’s a preference, right? Like, you know, I’m just thinking about this whole like, you know, buy a whole life policy.

Tim Baker: It’s, you know, like, Hey, you don’t have to worry about education ’cause you, you know, you work at the university, it’s almost like don’t save [00:17:00] for retirement ’cause you know you’re gonna get an inheritance or something. I don’t know, just it, it’s kind of silly to me.

Tim Ulbrich: All right. Great stuff. I’m sure we’ll talk about kids college more. Um, second question, but, and before I go into this second question, which is around digital assets and, and buying Bitcoin, I wanna reference people, we did a two part podcast series on this topic, so especially for, for folks that. Cryptocurrency digital assets might be more introductory to where this does or does not fit into their financial plan. Make sure to check out those episodes. 3 86 3 87. We’ll link to those in the show notes. We talked about definitions of cryptocurrency, digital assets, some of the origins risks, investment considerations, tax implications, really good comprehensive overview of cryptocurrency, digital assets.

Tim Ulbrich: So great background information. Check out those episodes. Tim, with that backdrop, the question is. What is the best way to buy Bitcoin? What are the pros and cons of using a tax sheltered account versus a brokerage account? And what is a cost efficient way to buy Bitcoin [00:18:00] in a brokerage account using Robinhood versus an ETF?

Tim Ulbrich: What? What are your thoughts here? I.

Tim Baker: Yeah, so very three very different questions, so I’ll kind of unpack them in turn. So the best way to buy Bitcoin, I think this is kind of somewhat analogous to. Like real estate. So like if I’m a real estate investor, you know, I can be a direct owner where I buy a property, let’s say a single family home, and I’m dealing with all of the things, right?

Tim Baker: I have to deal with tenants repairs, contractors taxes, HOAs agreements, things like that, versus the other end of the spectrum, I can just buy. A reit, you know, a real estate investment trust, and that’s probably the most passive way to own a real estate. So a lot of listeners, if you’re not familiar with a reit, you actually might be an investor in a reit, you know, in your 401k or an IRA.

Tim Baker: It’s, it’s a, it’s a very, um. Popular way to invest in, in real estate passively. So if I, if I apply that analogy to [00:19:00] say Bitcoin, you know, purchasing a property directly is kind of like pur purchasing, you know, Bitcoin directly on a platform like Robinhood or Coinbase, Kraken, Gemini. But you’re dealing with a lot of the things and it’s private keys, hot and cold wallets, tax reporting, maybe some worry over, you know, a partial or.

Tim Baker: Permanent loss. So just, just a lot more, even though you’re a direct, you know, owner and there’s benefits of it for that to that like you just have more worry versus like you could just buy the spot. Bitcoin ETF, which launched, I think that was the beginning of last year and it’s probably the most passive way to own Bitcoin.

Tim Baker: So I don’t know if there is a best way. I think if you are more of the keep it simple stupid type of approach, like the spot Bitcoin, ETF is probably the better way. Um. If you like a little bit more of the hands-on then buying it directly I think is. Probably better, right? So when you buy a spot, Bitcoin, ETF, you don’t hold the [00:20:00] Bitcoin directly.

Tim Baker: You just buy sh you have shares or of like, of that fund. But the fund essentially owns it and you have, you know, a partial, uh, ownership of the fund. So when you buy it on Coinbase or, or Robinhood, you’re, you’re an owner, right? Your, your, your keys are on that, on that ledger. And, and it’s, you know, there for public consumption.

Tim Baker: So. Again, like when I talk about real estate, there’s often people that are like, oh yeah, I’m all about it. And then when, when we kind of get into the, the nitty gritty of it and I, I get to the end of like, my presentation, I’m like, if all of this is kind of overwhelming, and we kind of talk about like, you know, um.

Tim Baker: Different, different types of real estate investment. It’s not just like a single family home. There’s hacking and um, just different ways that you can invest in real estate. If you get to the end of that presentation, you’re overwhelmed. I’m like, just buy a reit. And actually, like most of our portfolios, we we’re in real estate.

Tim Baker: Um. I think it’s the, kind of the same, the same way. Because you know, I own Bitcoin both ways. I own it through an ETF and I own it [00:21:00] directly. And part of me is worried that one day I’ll wake up and I’ll hear a story that X, Y, Z, um, was hacked. And like all of my Bitcoin is gone. It’s just something that’s, it’s the reality, right?

Tim Baker: And that’s one of the, that’s one of the downsides of digital assets. So, um.

Tim Ulbrich: a thought here real quick to, to tack on what you’re saying. Um, and not, not an investment advice by any means, but, you know, I look at my portfolio, I’m, I’m interested in some exposure for the reasons that we talked about on previous episodes, but

Tim Baker: Yeah.

Tim Ulbrich: I. I have zero interest in, you know, kind of maintaining that myself, but I respect the people where this is partly a hobby, you know, like they, some people just geek out on like going through the transactions and, you know, dealing with the wallet, you know, stuff and figuring out how all of that, uh, fits in.

Tim Ulbrich: Just like, you know, sometimes people like to take a small percentage of their portfolio and do some individual stock type of trading and track that. So I, I think it’s a little bit of like, know thyself in terms of, [00:22:00] first where does this, might it fit overall in your, your financial plan. And I think, you know, for, for our clients, speaking about them in particular, it’s a great conversation to have your financial planner, with the financial planning team of like, is this something I want exposure to in my portfolio?

Tim Ulbrich: And then if yes, does that look like? Right. And I know you’re gonna continue on in terms of some of the types of accounts as well.

Tim Baker: Yeah. Yeah. I mean, it, it, it definitely is that there’s a lot of people that are like, you know, I’m, I’m at a point now where this is not a gimmick. I think, you know, digital assets are here to stay and, and I think the, the advent of the spot Bitcoin spot, Ethereum, ETFs, that launch is. A logical next step for them.

Tim Baker: Like they don’t necessarily have to be wanting to, you know, they don’t wanna deal with hot and cold wallets and private keys. And I completely understand that part of me, what you described is that nerd of like, you know, building, you know, I was invested in digital assets before the, the spot Bitcoin ets, but you know, even, even now, I’m like, eh, should I be doing that [00:23:00] a hundred percent there?

Tim Baker: Now I won’t sell my, I won’t sell my directly held coins, but like I know that there’s risk. If I continue to buy or if I continue to hold them, you know, because of what I just described. So, yeah, just it’s kind of understanding where, where you’re at in that spectrum. So the second question, you know, that was asked is like, what are the pros and cons of using a tax sheltered account versus like a brokerage account?

Tim Baker: And I would just answer, this is like any other investment, right? So like, well, let me just say this, like to, in most cases, the IRA. Um, are, unless, unless it’s a self-directed IRA, you’re typically not holding Bitcoin directly in those IRAs. It wasn’t until, again, the spot Bitcoin. That’s why Ethereum, I. Came out that, you know, the, the general, you know, the broad, um, based investor had access to that.

Tim Baker: So [00:24:00] once those happened, then it really opened up kind of the three main options for tech sheltered versus brokerage account. So the tax sheltered being the tax deferred, which is traditional gross tax free. It’s text coming out. After tax or Roth is tax going in, but you know, gross, tax free, um, and then not tax coming out.

Tim Baker: And then the taxable or brokerage account, which you’re gonna pay capital gains on, right? So, you know, short-term capital gains, if it’s, you know, bought, you know, bought and sold inside of a year and then long-term capital gains if it’s, um, held for longer than a year. So, you know, with an asset that is, that is potentially, um.

Tim Baker: Very much appreciable. I think that’s a word, meaning you buy it and then your hoping that, you know, what’s Bitcoin priced at it right now? Like 93. 93,000 per per Bitcoin. You know, there are some that believe. That, you know, [00:25:00] that it could go up to 250, 400 50,000 per coin, right? So in that case, like something like a Roth would be very, very attractive, if not a traditional.

Tim Baker: And then probably last but not least, the taxable. Now the, the problem with the, the tax sheltered accounts is that for you to access that, do those dollars. And actually spend and consume them. You typically have to be 59 and a half, or there’s a slew of other exceptions, whereas a taxable account, you can access that today.

Tim Baker: Right? So I would just answer this as like any other, um, any other investment. However, if you think that Bitcoin. Will continue to go up and it’s, you view it as a very appreciable asset and something like a Roth is probably the best thing to potentially, you know, pay the tax now, but that asset grows tax free.

Tim Baker: And then when you pour it out potentially in retirement, you know, you’re not having to worry about, you know, taxes then. Um. And then the last part of the question, Tim, was what is the co [00:26:00] the most cost efficient way to buy Bitcoin? So if we go back to the, the, the two best ways to buy Bitcoin, which is the spot, Bitcoin, ET, F, or directly on a PAT platform like Robinhood, Coinbase, Kraken, Gemini, I would say that probably the most cost efficient way would be the spot, Bitcoin, ETF, the expense ratios.

Tim Baker: For those ETFs that are out there, and I think there are, I don’t know, maybe a dozen or so, they range from 0.15% to one point a half percent. So, um, in terms of expense ratio, so this is what the fund takes the et f takes to basically pay their expenses to, to be profitable. So. If you have a hundred thousand dollars in a spot, Bitcoin, e, t, F, and I would say not to have that unless you are very, very, very wealthy.

Tim Baker: Um, you know, a hundred thousand dollars if you’re [00:27:00] paid paying 15 basis points or 0.15%, that’s $150 per year versus a. On the, on the higher end, one, one and a half percent is $1,500 per year that that fund takes, um, to essentially, you know, uh, allow you to have exposure to Bitcoin. Um, if you compare that to platforms like, um, the ones I mentioned, typically the way and every platform has a different price strategy, but typically the way that they price for kind of the smaller trades of said coin is that they charge a spread.

Tim Baker: Um, so, so if you’re buy-in, typically the spread is, um, what the coin is priced at, plus maybe half a percent. And it varies from platform to platform of what you actually buy it at. Um, so if, if, if Bitcoin is, is selling at. You know, 93,000, I might be buying it for 94,000. So you, you, you, you [00:28:00] purchase it on a spread, and then you also sell it on a spread.

Tim Baker: So again, the, the, the, the counter of that is, is true, but then you’ll also also pay typically a transaction fee, or it’s kind of like a commission. So on top of the spread, you’ll pay a, a flat fee. So that can be as little as like a dollar to $2, $3, or it can also be a percentage of what you buy. Um, like I said, every platform is gonna be different.

Tim Baker: Some are gonna be a little bit better than others. Um, you can actually like pay a membership fee, you know, at, at some of ’em to like get better pricing, but you’re paying a membership fee, right? So, um, there’s lots. So I would say just in, in general, even though you’re not holding the coin directly, it’s probably more cost efficient to hold it in a spot.

Tim Baker: Bitcoin, ETF. Than paying the transaction fees of holding the coins directly and the, and the, and the spread. Um, now the greater the volume, so if you’re, if you’re trading [00:29:00] many, many thousands, if not hundreds of thousands. That decision gets, you know, it’s a little bit ’cause because the big difference between like an expense ratio, you pay like an ongoing, like every year you’re paying that with a commission or a spread fee, you pay that one time.

Tim Baker: Right? So that’s, that’s a big difference. Um, so that’s something to consider as you’re thinking about cost efficiency.

Tim Ulbrich: Tim, I’m looking at, uh, the fees for some of the spot Bitcoin ETFs, to your point, ranging from 0.15. So I’m looking at. Options like, uh, the Bitcoin MIDI trust, um, I see some in the 0.2, 0.25 range. Point two, something like the Bitwise, Bitcoin, ETF, all the way up to 1.5, the grayscale Bitcoin trust. That’s a huge range. what is it No different than any other? Range that we look at when we talked about before on the show is, is does the same apply here? That you know, you’re gonna see a big range of fees and, and there’s a question that we have to assess [00:30:00] of like, what am I

Tim Baker: Okay

Tim Ulbrich: fees?

Tim Ulbrich: Why, why such a big spread on these, on these Bitcoin

Tim Baker: It’s a good question. The gray, the grayscale, um, from what I understand has been around even before like the, the grayscale Bitcoin trust that’s priced, its, uh, ticker symbol GBTC and non-investment advice. Um, my belief is that that was around even before the spot Bitcoin ETFs. Um, so I think they changed something when the.

Tim Baker: Like those came online, um, to kind of be like in the same bucket. But those were a thing. I don’t know if they were a mutual fund before, but they were, they were a thing before, like all of these other options came on, and I’m not sure why they’re priced so high. I, I, you could make a case that these types of funds, you know, and then Grayscale came out with the Bitcoin mini trusts, which I didn’t even know.

Tim Baker: Like that was a thing, like when these first launched, you know, the, the spot [00:31:00] Bitcoin, that wasn’t, that’s a newer fund. So I think they’re trying to be more competitive in the space, and I completely honest, I don’t know what the difference is between those two. Um, you know, we, we used two of these in our portfolios.

Tim Baker: Um, and part of it is because, like the, the one company we use is because that’s is all they do. Like they’re experts in digital assets. And I’m not saying like iShares or Fidelity are not. Um, but this is, you know what, this is their main, you know, um, business. This is the remain offer. And so, um, I’m not sure, but I, I, I think you could make a case because of how specialized and really how new these are that.

Tim Baker: You know, these are a, a bargain, and I’m not saying the one and a half, but I’m saying, you know, the 0.15 to, I’d say, you know, 25 basis points. Yeah. And I think, again, it’s competitive market. There’s lots of dollars that float into ’em, especially in the, you know, when they first launched, um, [00:32:00] you know, our expense ratios.

Tim Baker: Um, you know, even with some of these in our portfolios, typically 0.0 5.06. So super competitive and I think super low cost. Um, so I think something special. Typically, the more specialized the fund, typically the higher it is. And this is pretty, pretty dang specialized. So I, I view this as, even though it’s an ongoing cost, it, it gives you all of the things that we talked about that, you know, like you don’t, if I’m, if I hold one of these, like I’m, I’m not having to worry about.

Tim Baker: Cold wallets and security and things like that. This company, and they typically have themselves, and then there’s, they, they typically partner, like I know one of these funds actually partners with Coinbase to kind of do the, the verifying and all the things that they, they have to do per, I believe the SEC, um, and everything, from what I understand from most of these funds, all of these, all of the Bitcoin that they hold is in a cold wallet, meaning it’s off the internet, you know, it’s kind of in cold [00:33:00] storage, you know, which, which really, really.

Tim Baker: Lessens the, or eliminates the ability to like hack it, you know, to like, for someone to get in and steal it. Um, so all of that kind of worry and things that I have with the coins I hold directly, I don’t have that with, with these funds. So I would say for what you get for the price, I think it’s, it’s pretty good.

Tim Baker: Um, so yep.

Tim Ulbrich: Great stuff, Tim. And again, to the listeners episodes 3 86 3 87, we did a broad overview of cryptocurrency, digital assets. Make sure to check those two episodes out. We’ll link to those in the show notes. Thanks so much for listening. Have a great rest of your week.

[END]

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YFP 406: Should You Pay Off Your House Early?

Posted on by Caitlin Boyle

Should you pay off your mortgage early? YFP Co-Founder & CEO, Tim Ulbrich, PharmD, unpacks the math, emotions, and big-picture factors in the mortgage payoff debate—plus 5 reasons when it may or may not make sense to pay extra on your mortgage.

Episode Summary

Should you pay off your mortgage early? It’s a question that comes up often in personal finance—and the answer isn’t always as straightforward as the math suggests.

In this episode, YFP Co-Founder and CEO Tim Ulbrich, PharmD, unpacks the numbers, the emotions, and the bigger picture behind this important decision. Using a real-life example and the YFP Early Payoff Calculator, Tim walks through how even small extra payments can shave years off your loan term and save you thousands in interest.

But here’s the twist: despite the financial benefits, Tim has personally decided not to pay off his mortgage early. He shares his thought process along with five compelling reasons why making extra mortgage payments might make sense for others.

Whether you’re deep into your mortgage or just getting started, this episode will help you evaluate your options and make a decision that aligns with your long-term goals.

Key Points from the Episode

00:00 Introduction and Episode Overview
00:12 The Big Question: Should You Pay Off Your Mortgage Early?
01:41 Factors to Consider: Math and Emotions
03:59 Using the YFP Early Payoff Calculator
04:45 Real-Life Example: Mortgage Payoff Scenarios
08:00 Opportunity Cost and Financial Decisions
10:29 Personal Decision: Why I’m Not Paying Off My Mortgage Early
11:39 Five Reasons to Consider Paying Extra on Your Mortgage
22:00 Listener Engagement and Conclusion

Episode Highlights

“ But as with many financial decisions that we make, there’s the math, there’s the emotions, and there are other goals that we have to consider in the financial plan. We don’t want to fall into the trap of making decisions in a silo.” – Tim Ulbrich [3:46]

“ We have to zoom out and always ask ourselves, what is the opportunity cost of making that financial decision of extra payments? Because anytime you make a financial decision, there’s always an opportunity cost that we have to weigh that against, and we have to consider the math of that opportunity cost as well as the emotions.” – Tim Ulbrich [8:04]

“ The emotional relief here is what we’re talking about where some people say, ‘Hey, that’s important to me. I want head into retirement with no mortgage,’ and that might be a trade off that’s worth considering.” – Tim Ulbrich [19:35]

Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich: Hey guys, so today I’m tackling a common question that I get and one that I’ve thought a lot about in my own financial situation, and admittedly one that I’ve gone back and forth on throughout the years, which is, should I pay off the house early by making extra mortgage payments? So, what’s the answer, right?

Tim Ulbrich: As I alluded to in the introduction, is it really depends. It depends on a lot of different factors in one’s personal financial situation, and we’re gonna unpack those individual factors today. And there’s both mathematical considerations as there always is, and there’s emotional considerations that we have to factor in when we’re making this decision.

Tim Ulbrich: I think sometimes in personal finance when it comes to topics like paying off debt versus investing, right? These, should I [00:01:00] do this or should I do that? Sometimes we can make these black and white when in fact there are a lot of iterations that we have to consider. And it’s my partner to make often says on the show, you are a unique snowflake.

Tim Ulbrich: Your financial situation is unique, right? And as we’re gonna talk about today, when it comes to paying off the house early, we have to factor in a lot of different things. Whether it be the interest rate, other goals that are going on, what’s the term of the loan? What’s the purchase price of the the house?

Tim Ulbrich: How much did you put as a down payment? All of these things are gonna impact, along with the emotions, how we’re going to approach this decision, and there is no one right answer, right? Because of everyone’s emotions can be different because of how the math can be different based on your individual situation.

Tim Ulbrich: So let’s start with the math. Okay. The, the math doesn’t lie. Making extra payments on your mortgage can cut off a significant amount of time from. [00:02:00] The amount of years you’re gonna be paying off this debt, right? From the term of the loan, especially if you have a 30 year term loan, which is probably for most listening, uh, is is the case.

Tim Ulbrich: Some of you might have a 20 or a 15, 20, not so common. Maybe more. More so on the 15 year side. And we’ve probably all heard something along the lines of, Hey, if you make an extra payment per year, if you make one extra payment per year, it can cut off so many years, right? You might hear four years, five years, six years, seven years off your mortgage.

Tim Ulbrich: We hear that and we’re like, wow, if I could have this paid off in 23, 24, 25 years instead of 30 years, that is significant, right? But as with many financial decisions that we make, there’s the math, there’s the emotions, and there’s other I. Goals that we have to consider in the financial plan. We, we don’t wanna fall into the trap of making decisions in a silo.

Tim Ulbrich: Now, if you use the YFP Early Payoff calculator, we’ll, we’ll make a link to that in our show notes. If you’re not already aware, if you go to our homepage, your financial pharmacist.com, [00:03:00] you’ll see a section that we have a bunch of different calculators that you can use in your own financial plan. And one of those is an early payoff calculator.

Tim Ulbrich: You can use that to run some numbers on your own, and whether it’s a mortgage like we’re talking about today, whether it’s student loans, whether it’s a car loan, any debt that you have, you can run some simulations to say, Hey, if I make an extra lump sum payment, or I add to my monthly payment, or whatever is the frequency of your payment, you can see what that will change in terms of the, the loan term, when you’ll have that paid off, as well as how much interest you’ll say save by making extra payments.

Tim Ulbrich: So let’s, let’s look at an example. If, let’s say that you bought a $350,000 house. Now I know for those of you that heard that, and you’re on the west coast, you’re in the northeast, you’re in the dc, Virginia area, you’re like, Tim, you’re out of touch. You live in Ohio, right? I get it. Walk, walk with me through this example.

Tim Ulbrich: So let’s say you bought a 350,000 house back in 2018, and between the down payment and about [00:04:00] seven years worth of payments that you’ve been making. You now have a balance due of $230,000. Okay? So you bought a $350,000 house. That was the original, uh, mortgage that you have. We had a little bit of a down payment.

Tim Ulbrich: You’ve been making payments over seven years, and now we’ve got a balance due of 233, 200 $30,000. Now, if we assume a 3% 30 year fixed interest rate, now some of you’re like, Tim, what in what world does a 3% interest rate? Where does that come from? Well before the pandemic, that was a pretty common interest rate and a lot of you listening probably locked in your mortgage at that rate.

Tim Ulbrich: And that’s why we have in part, uh, a challenge for many first time home buyers being able to get into homes because existing home buyers with low interest rates don’t wanna move out of their house and give up that interest rate. Now stay with me because if you’re in today’s market of buying a home or you’ve recently bought a home, you know that those days of 3% are long gone.

Tim Ulbrich: And now we’re looking at six to 7%. But stay with me just for this example in [00:05:00] math. So again, $350,000 house 2018. Between the down payment and some payments that we make, we now owe $230,000 and we have a 3% 30 year fixed interest rate. Now, if you were to make an extra $100 per month. Payment on top of the minimum payment that’s due at the end of the loan.

Tim Ulbrich: If we fast forward to when it’s all said and done, you would save about $11,000 of interest and pay off that house about 2.6 years early. Okay, so we turn a 30 year fixed. Loan into just over 27 years. Okay? That’s an extra a hundred dollars a month. If you were to put an extra $200 per month on top of the minimum payment, you would save about $19,000 of interest.

Tim Ulbrich: And now we’re gonna cut off about 4.6 years. Pretty significant, right? 30 years. Now we’re looking at about 25 to 26 years. If you put an extra $300 a month. Or $3,600 a year on top of [00:06:00] the minimum payment, that would now save $26,000 of interest, and we’d pay it off about 6.3 years early. And finally, an extra $400 per month, $4,800 per year.

Tim Ulbrich: We’d save about $31,000 of interest, and that would pay off about 7.6 years early again. 3% interest rate, right? So you get the point extra payments, and you can run these O your own numbers. Again, using the YFP early payoff calculator, we’ll link to that in the show notes, but extra payments, even small, relatively small, a hundred dollars a month.

Tim Ulbrich: Obviously. As that goes up, we see greater savings can lead to significant savings, both in the interest. That we’re gonna save as well as the shaving of some years off of the mortgage. Now if we just stop there, right, and we zoom in onto this one area of the financial plan, and we look at the math. If we make a decision only on that information, I think we’re making a mistake.

Tim Ulbrich: I. Because even if you get to the same decision, we have to zoom out and always ask ourselves, [00:07:00] what is the opportunity cost of making that financial decision of extra payments? Because anytime you make a financial decision, there’s always an opportunity cost that we have to weigh that against, and we have to consider the math of that opportunity cost as well as the emotions.

Tim Ulbrich: That are involved in both the debt repayment here, we’re talking about extra debt on the mortgage and what else you could do with those funds, right? Because you could always do something else with the funds. And that’s true on the other side of the coin as well, if you were to, instead of paying extra on your mortgage, you were to spend that money, let’s say on life experiences, travel, vacation, whatever, there’s an opportunity cost that we have to consider there, uh, as well.

Tim Ulbrich: So the math is intriguing, right? But is it the right move? Again, it, it depends. It depends on a lot of variables. You know, what’s the balance of, of the mortgage, you know, was it a $350,000 house with two 30 left like you saw in this example? Or was it a million dollar home that has $950,000 left on the [00:08:00] loan?

Tim Ulbrich: What’s the interest rate? 3% versus today’s interest rate? Very different outcomes that we might get in terms of the opportunity cost question that I just posed. I’ll share here in, in, in a little bit that for us, in our own situation, when I look at 3% debt, and this is not advice of what you should or shouldn’t do, I look at that and say, Hey, I’m not ready to make extra payments on that because I.

Tim Ulbrich: We could have those dollars working elsewhere for us in the financial plan. Other variables. What are your feelings towards the debt? No right or wrong answer. There are some folks that regardless of the interest rate, there’s an aversion to the debt. And I’m not here to tell you that you’re right or wrong with that.

Tim Ulbrich: We have to acknowledge and understand what is the emotion that we feel towards the debt. What is the monthly cash flow look like? How much margin do we have in the budget? And if we were to put extra towards a mortgage payment. Is there still extra or is there not still extra to do? Other goals and other things that we’re trying to work on?

Tim Ulbrich: And of course, what else is going on in the [00:09:00] financial plan? We know that we’re not only focused on paying off a mortgage. What else is going on? Is there, is there student loan debt? Is there other debt such as credit card debt? Where are we at with the emergency fund? How are we doing with the retirement savings?

Tim Ulbrich: How are we doing with kids’ college savings? What about our experience? Types of things that are important in our financial plan, vacation, travel, et cetera. All of these things we have to look at together. As we try to evaluate how we’re gonna make a decision in one part of the financial plan now personally.

Tim Ulbrich: I’ve decided, we’ve decided, Jess and I, that we’re not going to be paying off the mortgage early. At least not yet. Now why? You, you, you probably can figure out why I just shared, you know, an example that is also true for us. We happen to buy our home in 2018, and I think at the time we bought it at 4.625, I think was the interest rate.

Tim Ulbrich: And we refinanced that in 2019 or 2020 down to 3%. So when I look at a 30 year fixed rate loan at 3%. To me the the math supports making other [00:10:00] financial moves in lieu of making extra mortgage payment. Now my interest rate, our interest rate and how we feel about that, it may be different than your situation and that’s okay.

Tim Ulbrich: Right? That’s okay. So I wanna walk through with that background of mine in mind. I wanna walk through five reasons. When it may make sense to pay extra on your debt, and of course with each one of these, you could apply the opposite to where it may not make sense to pay extra on your debt. So we’ll walk through five different reasons that I want you to be thinking through.

Tim Ulbrich: So number one is aversion to debt or the emotions surrounding the debt, right? All debt is not equal, and everyone’s debt tolerance is different. And as I’ve highlighted a couple times now, and I’m gonna continue to reiterate, the financial plan is not just about the math. Of course, we have to consider the math, we have to weigh the opportunity costs.

Tim Ulbrich: But if we make a decision. It flies in the face of considering the emotions, I think we’re missing, at [00:11:00] least in terms of looking at that decision holistically. And for some, the aversion to debt is strong enough that despite all the numbers screaming, don’t do it. It still might be the right move. In addition to peace of mind, there’s a tangible benefit that can come from a feeling of momentum and progress, and the calculator doesn’t yet have a function.

Tim Ulbrich: To factor in peace of mind and momentum, right? To factor in more the emotional side of this equation. And so I, I joke about that, but in all reality, that’s how we have to think about it. What, what is the mathematical opportunity cost, right? If we use my example of a 3% 30 or fixed rate loan, if I put an extra $200 per month onto that mortgage payment.

Tim Ulbrich: The opportunity cost, just as one example is that I could put $200 a month, let’s say in a Roth IRA or in a 401k or in another type of investment, and we can model that out and mathematically using historical rate of returns, it’s gonna [00:12:00] show that that money invested will be any savings I’m gonna have on the debt repayment.

Tim Ulbrich: However, if I were to have a strong aversion to debt, how do you factor that in, right? We have to be able to weigh that end. I think it would be cool if we had a calculator that could make some assumptions and adjustments accordingly. The number two reason when it may not make sense to pay on your mortgage, of course, would relate to the interest rate, right?

Tim Ulbrich: Having low interest rates. I mentioned that in our example the 3%, whether fixed or variable higher interest rates on homes have been around long enough that those that are holding onto a 3% mortgage are starting to sound a little bit old and and out of touch with reality. And again, mathematically speaking, the decision and opportunity cost of paying off 3% debt versus 7% debt, as we look at today’s interest rate environment is very, very different.

Tim Ulbrich: That said, one should also consider whether or not they’ll be able to refinance in the future [00:13:00] before you pay down that debt, right? We don’t know where interest rates are gonna go, but if you were to buy a home today, in today’s 7% environment. We may not stay at a 7%, we will probably not stay at a 7% environment forever.

Tim Ulbrich: May go up more. It could may go down more. I think probably it will, probably not to 3%, but I think we’ll probably see those come down. So there is an opportunity to refinance, meaning that the way you look at it today at that rate and how you pay down that debt, that might look different if you’re able to refi, say from a 7% down to a 5% or four point a half percent in the future.

Tim Ulbrich: So the higher the interest rate, the more the math favors extra payments. The less convincing the argument becomes that these dollars could be used elsewhere in the financial plan. I say this all the time with student loans, right? Not all student loans are created equal. If you have a private student loan that’s at 8, 9, 10, 11, 12%, we might look at that very differently than you would have say, a federal loan at four or 5% is one example.

Tim Ulbrich: [00:14:00] So not all loans are created equal and the interest rate, and therefore the opportunity cost decision changes. As the interest rate, uh, changes for that loan. Number three relates to building up equity to have options. Because mortgages are front loaded with interest. For those of you that have a have a home, you know this all too well.

Tim Ulbrich: Hopefully you’ve looked at the amateurization table before. If not, you should pull a statement and check it out. But essentially, these loans are front loaded, meaning that the majority of your payment upfront is going toward interest and every payment that you make a little bit more might just be a few dollars, but a little bit more per month is going towards principal or the original cost of borrowing and a little bit less is going towards interest.

Tim Ulbrich: Eventually you start to flip that payment where a majority goes toward principal and a minority goes toward interest right as you pay off the debt. So because the mortgages are front loaded with interest, if you had a very small down payment. There is a potential that you could find [00:15:00] yourself in an equity buying.

Tim Ulbrich: Well, what do I mean by that? When you have a very small down payment, right? There are loans out there, we talk about them on the show here, they certainly can be a good fit, such as the pharmacist home loan, where you may have 3% down. Some doctor loans out there might even be a little bit less. With a small down payment, there’s always the potential risk of the market.

Tim Ulbrich: Downturn, meaning that house values go the opposite direction of what they have been doing, and that could leave someone what’s known as being underwater on a loan, right? Owing more than the home is worth. Now I think in today’s market that’s probably not likely. Every micro market is very different, but it’s always a possibility.

Tim Ulbrich: And as long as you stay in the market long enough for home values to do what they’ve done historically, that risk is, is fairly small, and that’s why we can often feel comfortable using some of those products out there that have a lower down payment. The other risk to consider is if you find yourself unexpectedly moving, so you buy, you think you’re gonna be there for a long [00:16:00] time.

Tim Ulbrich: Job, family, something comes up, you move one or two years later, and you don’t have enough equity in the home to cover the transaction costs and the down payment on the new home. Now we have ourselves in a potential cash bind, right? And we have to kind of figure that out and work through it. One argument to pay off your home early would be is that as you’re making extra payments, you’re building up the amount of equity that you have in the home, so that if you were to have to move or sell the home, you can be able to use that equity to help you, whether it be with a transaction cost, or putting a new down payment on the home that you move into.

Tim Ulbrich: Now that said, there’s another side of this coin, right? You could also argue that any extra payments that you make. To build up more equity, you could simply just set aside in an investment account or even more conservative, something like a high yield savings account for that purpose if it were to arise, if you were to move.

Tim Ulbrich: And that certainly does make sense and can afford you more [00:17:00] flexibility. But behaviorally, we all know that it’s hard to hold muddy aside for a maybe situation. When you have other expenses that are in front of you right now, of today, right? So equity and paying down your mortgage early to build up equity, it’s kind of that forced position that unless you have a debt vehicle where you’re drawing off of that equity, something like a HELOC for example, it’s kind of there and you’re not thinking about it, versus money that would be sitting in a high-yield savings account, so that that’s the third potential option where it might make sense to make extra payments, maybe at a low down payment.

Tim Ulbrich: You’re trying to build up your equity position in the home. Number four is working towards a milestone, working towards a milestone. So similar to number one, right? Which was that aversion I talked to, to that more, that emotional component. This one working towards a milestone is more about peace of mind than it is the numbers.

Tim Ulbrich: So the most common example I I hear as it relates to this one, working towards a milestone would be entering [00:18:00] retirement without a mortgage payment. This concept of, Hey, I wanna get to retirement and I don’t wanna have to think about this mortgage payment, even if there’s. Funds that are available throughout the retirement plan when you build your retirement paycheck, even if that were to be the case, there’s this mental clarity that many people describe of, Hey, I don’t wanna have a mortgage when I enter retirement.

Tim Ulbrich: So even when the math might say, Hey, you could invest that extra cash, you could do other things, you might be able to get better returns. The emotional relief here is what we’re talking about where some people say, Hey, that that’s important to me. I wanna head into retirement with no mortgage, and that might be a trade off that’s worth considering.

Tim Ulbrich: I. It’s a personal decision, obviously, as, as all of this is for many, but it aligns with the larger goal of financial freedom and security in retirement. And again, back to the, the joke I made about, hey, where do we hit the function on the calculator to add the emotional piece? This would be another example of that.

Tim Ulbrich: Number five, on this list, as we look at some reasons, it [00:19:00] may make sense, and again, the opposite could be true or it may not make sense. Number five is, are your other goals on track? And I mentioned this earlier, but often when we talk about any part of the financial plan here, we’re talking about paying off your house early.

Tim Ulbrich: It could be should I pay extra on my student loan debt? It could be, should I put more towards my investment and retirement? Should I put more in my kids’ 5 29 account? Any one of these we, we can get into the trap and tendency of thinking in a silo. We have to zoom out to look at all of the other pieces of the financial puzzle.

Tim Ulbrich: What else is going on with the financial plan? And again, as we think about opportunity costs, how might those dollars be used elsewhere? Even if we still get to the same decision, yes, I want to, or I don’t want to pay extra on my mortgage. We wanna know that we’ve considered it in the context of other things that are happening in the financial plan.

Tim Ulbrich: So again. It could be emergency fund, it could be student loans, could be kids’ college, could be retirement. All these other things that we’re trying to prioritize and balance. [00:20:00] And if you’re listening and you’re thinking about this decision, should I pay extra on my mortgage or not? If you’re someone who is checking all the boxes, right?

Tim Ulbrich: You’ve built a strong foundation, you’re saving for retirement, you’re on track, kids’ college funding, all the goals are moving where you want them to move and you have extra cash available to pay off extra or put extra towards the mortgage. That’s a very different conversation. Someone who’s asking themselves, Hey, should I pay extra on the mortgage?

Tim Ulbrich: And those other boxes are not checked. So the fifth item we’re looking at here today is what else is going on in the financial plan? Are we on track? Essentially, are we not? And then how we make this decision, whether we’re on track or whether or not might sway us as to whether or not those dollars could be used elsewhere.

Tim Ulbrich: So there you have it, five different factors to think about, or five reasons where it may make sense to pay extra on your mortgage. And I’m really curious to hear your thoughts. So for those that are currently making extra payments, I know several people that might. [00:21:00] Start with a 30 year term and go down to a 15 year term or leave it at a 30, but pay extra on the payments.

Tim Ulbrich: Why have you made that decision? What was it about your personal situation that led you down the path to making extra mortgage payments? Was it the math? Was it feelings? Was it something else? A milestone like I talked about on today’s show, for those that are not paying extra on your mortgage, why have you made that decision?

Tim Ulbrich: Why have you made the decision to let your debt and the term of the loan go out to the life of the loan and focus on other financial goals? Love to hear from you. Send us an email [email protected]. You can also record a voice [email protected] slash ask yfp. Well, thanks so much for joining me today and listening to this week’s episode of the YP Podcast.

Tim Ulbrich: If you like what you heard, do us a favor and leave us a rating and review on Apple Podcasts or Google reviews, which will help other pharmacists find the show. And finally, an important reminder that the content in this podcast is [00:22:00] provided for informational purposes only and should not be relied on.

Tim Ulbrich: For investment or any other advice, information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related product. For more information on this, you can visit your financial pharmacist.com/disclaimer. Thanks so much for listening.

Tim Ulbrich: Have a great rest of your week.

[END]

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YFP 383: 5 Overlooked & Undervalued Areas of the Financial Plan

Posted on by YFP Media

Tim Ulbrich, YFP CEO explores five often-overlooked areas of financial planning from credit, tax planning, emergency funds, insurance, and estate planning.

Episode Summary

Tim Ulbrich, YFP CEO, dives into five critical—but often overlooked—areas of financial planning that deserve more attention. While these topics might not be as thrilling as investing, making big purchases, or debt reduction, they’re essential for a strong financial foundation. Tim covers the importance of: building and maintaining credit; proactive tax planning; establishing an emergency fund; reviewing health, life and disability insurance policies; and estate planning.

Learn how to give these areas the attention they deserve, helping you create a more resilient and well-rounded financial plan.

About Today’s Guest

Tim Ulbrich is the Co-Founder and CEO of Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 15,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements. To date, YFP has partnered with 75+ organizations to provide personal finance education.

Tim received his Doctor of Pharmacy degree from Ohio Northern University and completed postgraduate residency training at The Ohio State University. He spent 9 years on faculty at Northeast Ohio Medical University prior to joining Ohio State University College of Pharmacy in 2019 as Clinical Professor and Director of the Master’s in Health-System Pharmacy Administration Program.

Tim is the host of the Your Financial Pharmacist Podcast which has more than 1 million downloads. Tim is also the co-author of Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth. Tim has presented to over 200 pharmacy associations, colleges, and groups on various personal finance topics including debt management, investing, retirement planning, and financial well-being.

Key Points from the Episode

Importance of credit in the financial plan [0:00]
Shifting mindset from tax preparation to tax planning [3:30]
Setting up an emergency fund [9:51]
Reviewing insurance coverage [13:31]
Estate planning [19:51]
Invitation to consider YFP’s financial planning services [24:57]

Episode Highlights

“[Life insurance] is especially important for those that have a spouse, a partner, a significant other, or dependents that are reliant upon your income or partially reliant upon your income.When we think about the purpose of a life insurance policy, one of the main purposes is income protection.” – Tim Ulbrich [13:31]

“I really want you to shift your mindset to think proactively and strategically about your tax situation. And I recognize that sounds obvious, but I used to view, as perhaps some of you may, tax very much to be as something in the rear view mirror.” – Tim Ulbrich [6:30]

“According to a 2023 caring.com survey, two out of three Americans do not have any type of estate planning documents in place, and that makes sense, right? It’s not super fun to be thinking about, but the whole purpose of the estate plan is that we want to have a process to arrange the management of our assets.” – Tim Ulbrich [22:57]

“What we should also be doing practically here is making sure that we check our beneficiaries on our various accounts, and as we have talked about before on the show, updating or implementing a legacy folder, which is an important one stop shop where you have all of our financial documents and information.” – Tim Ulbrich [24:00]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP podcast, where, each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, on flying solo, to talk about five areas of the financial plan that are often overlooked and undervalued. Now, to be fair, none of these areas are very exciting to think about, especially if you’re focused on more inspiring goals, like investing, making a large purchase, giving or paying down debt, where you can feel the progress, or in the case of something like giving, you can see the impact that that may be having in the area that you’re giving or in your community. But with these five areas, what I’m referring to here are estate planning, the emergency fund, insurance coverage, tax planning and credit that isn’t necessarily the case. And there are instances where, when we are doing well in these individual areas, we might be able to see or reap the benefits of that. But for the most part, this is some of the boring work of the financial plan that we’re really playing defense in several of these cases and making sure that we’ve got that strong base and foundation in place.

Tim Ulbrich 01:04

So let’s take a closer look at each one of these areas, starting off with number one, which is credit. Now we just talked about credit on the Yfp podcast not too long ago, episode 380 we’ll link to that episode in the show notes, understanding and improving your credit score. And as we said on that show at the time, credit is one of those threads that touches many parts of the financial plan, and having good credit puts you in a position to take calculated risks in the form of leverage that could be buying a home, that could be buying a second property, that could be starting a business and doing so at the lowest cost possible. And fair or not, our financial system rewards those who can take on and pay off credit. And I know many of us were told at one time or another, probably by a parent or a family member, to build your credit. Right? Build your credit. But how much does building your credit and improving your credit actually matter? Well, let’s take it look at one example, if we assume that we have two home buyers, let’s assume one has a credit score that is considered excellent at a 10, and another home buyer has a credit score that’s considered fair score of 640 well that might end up being the difference of a 6% interest rate on a 30 year mortgage, thinking of the excellent credit versus a 7% interest rate on a 30 year mortgage, that would be for the person with the Fair Credit Score. Now, what does that actually mean per month and over the life of the loan? Well, the individual who got the lower interest rate because the better credit would have a monthly payment of about $2,400 per month, principal and interest only, and the individual had fair credit would have a higher monthly payment of a little over 2660 per month, again, principal and interest only. Now, over the course of the life of the loan, over 30 years, that ends up being a total cost of loan of 958,000 approximately principal and interest for the individual with fair credit, versus 863,000 for the individual that had excellent credit, same house, same situation, but two people with different credit scores, which shows a difference of about $260 a month, or $94,000 over the life of the loan.

Now if you start to apply this concept is securing other debt, right? Credit card, car purchase, investment property, starting a business, taking on a loan, et cetera. That cost of credit adds up in the form of less favorable lending terms. And since your credit score is a key metric that will be used by lenders to determine how favorable or not the lending terms are, it’s really important that we understand what goes in to the credit score, because the more we understand about those factors, the more levers we can pull to improve our score. And as we talked about on Episode 380, the top factors that impact your credit include payment history, so making sure we’re making on time payments and credit utilization, so the amount of credit that we’re using each month alongside the maximum amount that we’re given. Those two alone make up about two thirds of their credit score other factors, and would be age of credit history, total number of accounts and the number of hard inquiries on your credit. So again, check out Episode 380 and this is something we encourage you to be looking at your credit score on a regular basis as well as polling your credit report, not the same thing as your credit score, to make sure that there’s no negative marks, derogatory marks on your credit report that you’re not aware of, and so that you can clean those up and evaluate those further if need be. So that’s number one on our list of five overlooked and undervalued areas of the financial plan, all right.

Number two on our list is tax planning, with the October 15 extension, filing extension deadline officially behind us. The 2023 tax season is over. I know our tax team is excited about that. There’s a couple outliers because of. Some taxpayers in disaster areas are impacted by the hurricanes that are getting additional time for good reason. Now on that note, did you know that with an extension you have until October 15, right? We typically think mid April, but with an extension you have until October 15 to file your individual taxes, and for those that do that, October 15 extension, which is actually very common for many of our clients at wifey tax, we believe in right over rushed. Extending the deadline does not mean that you are not responsible for payments on any tax due. Incredibly important, right? The IRS expects you will make payments on time, and if not, penalties and interest will be assessed. So the October 15 extension is a beautiful thing. If you’re doing good tax planning throughout the year and don’t have a big balance due, as that would occur, incur a penalty and interest if we don’t pay it on time, or the other side of the equation, if you have a big refund coming, while many of us think big refund equals good, in that case, we just delayed now the time of getting that refund and putting those dollars to work. All right, enough about that. But when we think about tax as one of the overlooked and undervalued areas of the financial plan, similar to credit, right? This is a thread that runs throughout many areas of our financial plan, and I really want you to be shifting your mindset to be thinking proactively and strategically about your tax situation. And I recognize that sounds obvious, but I used to view as perhaps some of you may as well tax very much to be as something in the rear view mirror. Right? We file each year by the mid April, or as you learn here, the mid October deadline to meet the IRS requirements and to account for what happened the previous year. And I remember early on, you know, whether you’re using TurboTax or some software to do yourself, you’re working with an accountant, you kind of hold your breath and wait for the news, right? Am I going to get a refund? Am I going to have a certain amount of due? But we probably didn’t pay too much attention throughout the year, and ultimately, what that led to was either several refunds. That was the case for us early on, that we could have been putting those dollars to use elsewhere throughout the year. So when you go to File each year and we’re finally what happened in the previous year, that’s retroactive, right? And want us to shift our thinking, to be more proactive, and so to move our mindset from tax preparation, that’s important. It’s necessary. The IRS says we have to do it. We have to file our taxes, but to think more in the mindset of tax planning, right? A very important distinction of mindset shift so that we can think proactively and how we can optimize our tax strategy. Now I want to challenge you that if you don’t already know your key numbers, things like your effective tax rate, your adjusted gross income, it’s time to get out the IRS Form 1040 we’ll link to a copy in the show notes, and take 10 or 15 minutes to make sure that you understand the terminology and the flow of dollars. Because when we start to understand how the 1040 flows, we understand these terms, we can really begin to have this concept of tax planning come to life adjusted gross income, just as one example, has very important implications on things like student loan payments for those that are doing an income driven repayment plan, as well as certain phase outs on things like child and child care credits, Ira contribution, student loan interest deduction and so much more. Now on Episode 309 of the podcast, our CPA and director of tax, Sean Richards, cover the top 10 tax blunders that pharmacists have made, as we’ve seen through the filing process. So whether someone has a negative net worth or a net worth of several million dollars, I think you’re gonna find some value in that episode if you didn’t already listen to that. These are mistakes like having a surprise bill or refund at filing. And what are the common causes pharmacists that potentially could be employing something like a bunching strategy for their giving and just not aware of that strategy, those that should be thinking about estimated taxes throughout the year and are caught by a surprise after that, not not optimizing things like the HSA or traditional retirement contributions to reduce our taxable income, and an oldie but a goodie, not factoring in public service loan forgiveness when choosing married filing separately or married filing jointly. So again, make sure to check out that episode. Episode 309. Great time of year to be thinking about that as we’re heading into the 2024, tax season. That’s number two on our list of five overlooked and undervalues areas of the financial plan, tax planning.

Number three on our list is the emergency fund. Now, if you’ve been listening to the podcast for a while, you hear me harping on the emergency fund every once in a while, and because it’s that important, right? Saving for a rainy day, saving for an emergency it’s not easy. It’s not fun. It takes discipline, it takes patience, it takes trust to save for something you can’t yet, see, feel or experience. In the moment, but we all know that it’s not a matter of if, but it’s a matter of when. And so as we’re putting in other key parts of the financial plan, we don’t want something that is likely to happen, although we don’t know exactly what it will be, right, whether it’s a cut in Job hours, whether it’s a health emergency, whatever it might be, we don’t want that to derail our progress in other parts of the financial plan, as I’ve shared before in the show in the not too distant past, Jess and I have had to dip into the emergency fund for an unexpected knee surgery that we had to pay 100% out of pocket because of our health insurance. We had a dislocated elbow for our youngest, a trip to the ER for our oldest, for the busted lip, right? The list can go on. And so life happens. That’s the point, and we want to be ready to be able to incur those expenses. And when it comes to things like health care expenses and unexpected health care expenses, everyone’s insurance is different, right? So we got to look at what is a deductible, what’s the out of pocket Max, and know that we have to have a backstop of our emergency fund at a minimum to cover those things, as well as other emergencies that will come along the way. So this area of the plan is all about peace of mind, as I mentioned, it’s about making sure we’re not derailing other parts of the financial plan. And my experience tells me that when you have an emergency come up, and you have an unexpected expense come up, and we’ve got the funds that are there to handle it, a really important mindset shift happens. It’s not fun to write those checks, but when we’re able to do that, because we plan for it, we go from playing defense to playing offense. We’ve got breathing room, we’ve got margin, and perhaps we can even take some calculated risk in other areas of our financial plan that might have been unthinkable just knowing that we’ve got this backstop, we’ve got this foundation in place. So we’ve talked about the emergency fund at length on the show before. I’m not going to bore you further on this, but we want to be making sure that we’re answering important questions like, Is it adequately funded? Generally speaking, that’s three to six months worth of essential expenses. Everyone’s situation, of course, is different. We need to be answering questions like, do we have too much saved in an emergency fund? Right? There’s value in having a cushion, but having too much of a cushion comes with an opportunity cost, and so have we grown that to a point that we might be able to use some of that for other parts of the financial plan? We need to answer questions like, Are we optimizing our emergency fund? This is not the place that we’re going to take risk necessarily. We want this money to be liquid and accessible and available when we need it, but we also don’t want this sitting in our checking account earning next to nothing, right? So this, this could be in a high yield savings account, money market account, US Treasuries, something that the money is working for us, or at least coming as close as possible to keeping up with inflation. And as I mentioned, you know, with other parts of the financial plan, we want to make sure this isn’t a set it and forget it. So life changes as we progress. Our expenses change over time. And so each year, I would challenge you to look at this once a year to see what is that amount, what’s that target goal when it comes to the emergency fund, and is there a potential boost that is needed to the emergency fund?

Number four on our list is insurance coverage. And there is lots to think about when it comes to insurance, but I want to narrow in on two policies in particular, which would be life insurance and Long Term Disability Insurance. Now life insurance, for obvious reasons, is not fun to think about. Right? Nobody wants to consider what a premature death may look like and how the impact of that would be on their family and on the financial plan.

This is especially important for those that have a spouse, a partner, a significant other, or dependents that are reliant upon your income or partially reliant upon your income. Right? When we think about the purpose of a life insurance policy, one of the main purposes is income protection. So in order to determine how much of a policy we may need, we need to ultimately determine what would be the need if you were to prematurely pass away, and what part of your income that is no longer coming in from work do we need to replace in the form of an insurance policy to be able to achieve various goals that could be paying down a mortgage, that could be investing for the future, that could be saving for kids college, right? What are the things that we would need for this policy to fund lots of work to be done there, and why generic calculations shouldn’t be applied when it comes to things like life insurance. Now there are two main buckets of life insurance. There’s a category of life insurance called permanent insurance. These would be things like whole life insurance policies, universal life insurance policies, variable life insurance policies, variable, universal life insurance policies, right? The alphabet soup of whole whole life and permanent insurance, and then the second bucket is term life insurance. And for the sake of this episode and our time together, I’m going to spend our time there, because I believe that for a majority of folks listening, a term life insurance policy is going to be the way to go. That’s not an absolute. That’s not a. Ice that’s not for everyone, but for many folks, that’s going to be the area of focus. And we’ve got a great resource on this, if you want to nerd out. It’s called the life insurance for pharmacists, our ultimate guide to free resource. We’ll link to that in the show notes. But essentially, with a term life insurance policy, what differs it from a permanent insurance policy it is, is that it is insurance alone. It is not paired with an investment product.

Another important difference is that with a term life insurance policy, as the name suggests, it lasts for a term or a period that could be 15 years, 2025, or 30 years, and you’re going to pay a monthly premium. And for that monthly premium you’re gonna have a set amount that that policy would pay out could be a half million dollars, $1,000,000.02 million dollars, whatever you decide is the need in the event of your death, and once that policy is period is complete, once that term is over, if you’re no longer needing that policy, meaning that you’ve survived or outlived that policy, which is good news, right? There’s no dollars that are coming back to you. So the premiums you’ve been paying each and every month, let’s say you pay 40 bucks a month for a million dollar term life policy over a 20 year period. At the end of 20 years, if we don’t have to enact or use the policy, that’s it. The policy is over. None of those premium dollars are coming back to you, which is the point that is typically used when folks are selling permanent insurance policies that are like, why would you want that money just to go down the drain again? Check out our article life insurance pharmacist, The Ultimate Guide for a more in depth discussion of the different aspects of these policies. This, in my opinion, for most folks listening, why term life insurance coverage is the focus is because this is really meant to be catastrophic coverage, keeping our costs low, so we can use those dollars elsewhere in the financial plan, typically permanent and child policies are much more expensive, typically carry some fees on the investments may not necessarily perform as well as we could invest the dollars on our own, or we’re in working with a professional so with term life insurance, assuming someone is healthy, very much dependent on medical conditions and age of that individual in terms of how much that policy will be, as well as the term or length, but relatively inexpensive for most folks, and is going to allow us to put our cash and dollars to use elsewhere in the financial plan. That’s just a couple key nuggets when it comes to something like life insurance. Now, with long term Disability insurance, one of the greatest assets that you have as a pharmacist is your ability to generate an income. Right?

Think about how long it took you to be able to get that point of becoming licensed, to be able to earn that six figure plus income. And so the focus of long term disability is what would happen in the event that you were unable to earn that income. Now we address the death scenario in something like a term life policy. Here we’re talking about could be a disability, like a chronic medical condition, rheumatoid arthritis, some other condition that would prevent someone from working or working in their position, or it could be something like a car accident, right? Not likely, but these are things that we need to protect if that were to happen, what is the plan to be able to replace your income that you’re earning while you’re able to work as a pharmacist? That’s the purpose of disability insurance. Again, we’ve got a great resource here, disability insurance for pharmacists, The Ultimate Guide. We’ll link to that in the show notes. Lots to think about in terms of how much coverage you might need, the different terms like elimination periods of time, what’s the length of the policy, the potential costs, these are typically more expensive than term life insurance policy.

So make sure to check out that resource from Yfp that we published disability insurance for pharmacists, The Ultimate Guide. We’ll link to both of those in the short show notes. Now, when it comes to purchasing term life insurance and disability insurance, there are a lot of factors to consider. This is one of the reasons why our planning team spends time with our clients individually, going through these policies to make sure they’re customized to the individual. Things like, what’s the goal or the purpose? What are we trying to accomplish with these policies? What employer coverage Do you already have in place, and do we need additional coverage? What are the tax differences between an employer policy that pays out versus a policy on your own? And then, of course, everyone’s situation is different, right? What’s your household income? Is there one income two incomes in the household? What are their goals? What reserves do you have? What expenses are we trying to replace? All these things are going to help us determine what policy is needed, and then from there, we can look to make a purchasing decision that aligns. So that’s number four on our list when it comes to insurance.

Number five, our final of our five overlooked and undervalued areas of the financial plan is the estate plan. Now if you’re listening and you realize that you’ve got some work to do in getting your estate planning documents in place. Know that you aren’t alone. According to a 2023 caring.com survey, we’ll link to that in the show notes, two out of three Americans do not have any type of estate planning documents in place, and that makes sense, right? Just like we’ve been talking about some of these other areas. Nine. Not super fun to be thinking about, but the whole purpose of the estate plan is that we want to have a process to arrange the management of our assets. The management of our property decisions around dependents could be decisions around child care or assets that are going to dependents or others, and in the case of our health, if we were to become, let’s say, incapacitated. Who’s making healthcare decisions? What are those decisions that we want to have made, and making those from a viewpoint in which we’re able to think about those with a clear mind? So that’s the estate planning process in a nutshell, and especially for those that have dependents and have beneficiaries, these are documents that we want to have in place, and just like we talked about with the emergency fund, this is not a set it and forget it. So yes, there’s some upfront work to be done here, from some upfront costs, typically, as well, to do these documents and do them well with a consultation from an estate planning attorney as well as hopefully working with a financial planner. But things change right? Things evolve over time, and we want to make sure that we have a process to update these documents along the way. So the objective with estate planning, yes, it’s peace of mind, right, knowing that we’ve got plans in place for our family, for our assets, for the stuff, for our health care and the decisions that are being made, but as folks accrue assets over time, there are also some tax planning considerations when we think about the transfer of assets that are really important to be considering along the way as well. So practically speaking, what do we need to do here? Well, check out Episode 310, of the podcast, if you didn’t already catch it, where Tim and I talked about dusting off your estate plan. We’ll link to that in the show notes. These are important documents, like wills and living trusts, advanced medical directives, durable powers of attorney.

And at YFP, our financial planning team is are working with clients, one on one to put a framework in place for what are the estate planning needs, and then working with a solution that relies on estate planning attorneys and legal advice to make sure that those are being executed appropriately for the state in which that individual lives. What we should also be doing practically here is making sure that we check our beneficiaries on our various accounts, and as we have talked about before on the show, updating or implementing if you don’t already have one, a legacy folder, right, which is an important one stop shop where we have all of our financial documents and information in place at our house. We call this the blue folder. Much of it is electronic now, but the original version was a hard copy blue folder. Some of it resides electronically. Some of it resides in our safe but it’s the one stop shop that we know that if Jess and I were in a situation where we weren’t able to access that information or communicate that that our family knows where that information is, like our state planning documents, important insurance policies, tax returns, our various investment accounts, all the information that would be needed to make some decisions along the way. We’ve got a checklist resource here if you want to develop your own legacy folder, you can go to your financial pharmacist.com, forward slash legacy and begin to implement that in your own financial plan. Well, there you have it. Those are five overlooked and undervalued areas of the financial plan. A lot of information and things to be thinking about. These are all areas of the financial plan that our team of certified financial planners are working one on one with our financial planning clients as well as our tax planning clients at Yfp tax and so if you’re interested in learning more about what those comprehensive financial planning and tax planning services look like, we’d love to have an opportunity to talk with you further to learn more about your situation. You can learn more about our services and determine, ultimately, whether or not there’s a good fit there, you can book a free discovery call by going to your financial pharmacist.com, you’ll see at the top of the home page an option to book that call. Thanks so much for listening. Hope you enjoyed this week’s episode. Have a great rest of your week.

[DISCLAIMER]

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only, and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive, newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyzes expressed herein are solely those of your financial pharmacists, unless otherwise noted, and constitute judgments as of the dates published such information may contain forward looking statements which are not intended to be guarantees of future events, actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer.

Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

[END]

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	$500* Loans â‰¥50K = $500	Variable: 4.99%+ (with autopay)* Fixed: 4.96%+ (with autopay)** Read rates and terms at SplashFinancial.com	Splash is a marketplace with loans available from an exclusive network of credit unions and banks as well as U-Fi, Laurenl Road, and PenFed	Check Rate

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YFP 371: 5 Wealth-Building Strategies to Become a Seven Figure Pharmacist

Posted on by YFP Media

Tim Ulbrich, YFP Co-Founder and CEO shares five wealth-building strategies to include in your own financial plan.

Episode Summary

In this episode, Tim Ulbrich, YFP Co-Founder and CEO, shares five wealth-building strategies you can incorporate into your own financial plan. Drawing from his own financial journey, these strategies have been tested, refined, and used by Tim and his wife, Jess.

From setting savings goals to tracking net worth monthly to increasing your financial IQ, Tim makes setting up your financial path for success more attainable.

About Today’s Guest

Tim is the host of the Your Financial Pharmacist Podcast which has more than 1 million downloads. Tim is also the co-author of Seven Figure Pharmacist: How to Maximize Your Income, Eliminate Debt and Create Wealth. Tim has presented to over 200 pharmacy associations, colleges, and groups on various personal finance topics including debt management, investing, retirement planning, and financial well-being.

Key Points from the Episode

Wealth-building strategies for pharmacists with student loan debt. [0:00]
Financial struggles and debt repayment for pharmacists. [3:21]
Financial planning for pharmacists, focusing on strategies for success. [8:28]
Tracking net worth and setting savings buckets for financial goals. [12:33]
Financial planning, saving, and investing for pharmacists. [17:41]
Wealth-building strategies and financial planning. [22:33]

Episode Highlights

“And I had realized that despite the amazing opportunities that graduating with a pharmacy degree had offered, there was a little discussed truth among practitioners in the field. And that is that most pharmacists make a good income, but have significant student loan debt and feel like, hey, there should be more here; I shouldn’t feel as stressed and overwhelmed as I do with my financial situation.” – Tim Ulbrich [2:52]

“But it takes a lot of intention, time and effort to translate that income, to making sure that we’re actually progressing in our financial plan and finding the ever so important balance between saving for the future while also living a rich life today and investing in those things that are most meaningful to us.” – Tim Ulbrich [6:46]

“We learned a very important lesson that there is no such thing as arrived. When it comes to the financial plan, there is always an opportunity to grow and learn.” – Tim Ulbrich [7:25]

“These strategies are not overly complicated. It doesn’t have to include fancy spreadsheets and nuanced investment vehicles. It doesn’t take an exorbitant amount of time. And it doesn’t mean that you have to live on rice and beans. I did it and you can do it too.” – Tim Ulbrich [9:36]

“I want you to take a step back and ask yourself a few questions. What am I trying to accomplish? What’s the purpose? What does success look like? After all, money is a tool for living a rich life. And it’s up to you to decide what that rich life looks like.” – Tim Ulbrich [12:04]

“Resist the urge to try to do too much. And eventually getting to a place of frustration where you don’t make much progress at all. What is the one next move that you can make? This is a marathon, not a sprint, one step after another over a long period of time will yield big results.” – Tim Ulbrich [25:44]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey guys, welcome to this week’s episode of the YFP Podcast. I gotta admit, I’m pumped up for this one, I’m going to be talking through five wealth building strategies that you should employ in your own financial plan. No theory, no textbook stuff here. These are all strategies, all five of them, that Jess and I have tested, refined and used in our own financial plan. Now, before I get into these five wealth building strategies, I have two goals for this episode that I want to share with you. First, my hope and desire is to motivate and inspire you to take action. It is so easy to become overwhelmed, and fall into that paralysis analysis when it comes to the financial plan. So for those of you that are listening, that are feeling overwhelmed, or anxious, or frustrated, maybe stuck, or just this lingering, nagging feeling that there’s something more that could be done, I want to be a source of inspiration through sharing my own journey, and encouraging you on your journey as well. Now, that doesn’t mean it’s going to be easy. That doesn’t mean that you’re not going to have some mistakes and roadblocks along the way, there certainly will be. My second goal is to give you specific strategies that you can implement, starting today in your own plan; to take the motivation and to then take action that can yield results as you take steps in applying this to your own situation.

Tim Ulbrich 01:25

Okay, let’s jump in. I’m going to start with my own story that really begins back in 2009. 2009. So at this point in time, I had just finished my PGY one residency, I was making a whopping $31,000. At the time, thankfully, residents make a little bit more these days. And I finally had reached the other side, right? Ready to cash in on the mystical, six figure pharmacist income that I often thought about during pharmacy school. Now, everything was looking good. Until I realized that I overlooked one very important minor detail. And that was that I was broke. No not broke, broke, but definitely high earner high income broke. My wife Jess and I were in spectacular shape on the surface. But underneath our lifestyle and this new six figure income, really our finances underneath that had a different story, we had over $200,000 of student loan debt that was almost all my student loan debt. Actually, the vast majority of that $185,000 or so was my student loan debt. We had a house at this point with almost no equity. We had very little in savings. And we soon had a growing family to support today we’ve got four boys, our oldest was born in 2011. So there was a lot of things that were going on and happening financially, perhaps some of you can relate to that. And I had realized that despite the amazing opportunities that graduating with the pharmacy degree had offered, there was a little discussed truth among practitioners in the field. And that is that most pharmacists make a good income, but find themselves in exactly the same boat that I’m describing, right. Earning a good income, significant student loan debt and feeling like, hey, there should be more here, they shouldn’t feel as stressed and overwhelmed as I do with my financial situation. Now, as I reflect on that journey, I am certainly grateful for the experiences I’ve had, and for what I have learned along the way. I also feel though, the fear and anxiety coming up when acknowledging that my perception of the six figure income and the reality of what it could be, were two very different things. Now it took me four humbling years, hopefully it won’t take you as long but it took me four humbling years to realize that this six figure income wasn’t all that it was cracked up to be. Now one book in particular, if you’ve listened to the podcast before, you’ve heard me talk about this book, but one book at this point in time 2012, 2013 hit me at the perfect moment. It was a wake up call that I needed. And that book was The Millionaire Next Door by Dr. Tom Stanley. We’ll link to that in the show notes. And that book taught me a very important lesson. And that lesson being that net worth, not income, net worth is a much better indicator of your financial health. Now more to come on this here and a little bit but understand for the time being that net worth is your assets what you own, minus your liabilities what you owe, and it paints a nice picture of what did or didn’t happen with your income, right, that’s earned. And after reading this book, I decided that it was time to put pen to paper and do our own calculation. Now when I did this, the assets column, right, on the left hand side of the paper, I had the liabilities on the right hand side of the paper and the left side was pretty blank. Didn’t have a whole lot of assets at that point a little bit in a 401K,little bit in an IRA, we had some value in the home that that was offset by the liability. But the right side the liabilities, what we owed, there was a laundry list of things that are highlighted by none other than that couple $100,000 of student loan debt that I mentioned, most of which was at a fixed interest rate of 6.8%. A number I will never forget. I know many of you are perhaps facing a similar situation. Now this calculation, this net worth calculation at the time, showed that just four years after graduating from pharmacy school, finishing up my residency, had earned about a half a million dollars of income. But I had a net worth, again, assets minus liabilities of negative $225,000. Ouch, right? Ouch. I was overwhelmed with student loan debt. I was confused about how to best save and invest for the future, I was frustrated by the fact that, hey, we’re making a good income. But we’re not progressing financially as quickly as we should be, or at least as I thought we should be. So if you are like most pharmacists that I talked with, perhaps your journey may include something similar. You might even be there right now, some of you have gone down this journey before or perhaps for students listening. It’s something that you’re thinking about in the future. And, you know, as I think about this, it wouldn’t be so frustrating if you didn’t do everything that perhaps you were told was the right quote, “right thing to do.” Right, you got the degree, you landed the high paying job, you started making some of those smart decisions, some of you have already purchased a home, you’ve been investing, maybe you got that reliable car, and you’re finally reaping the benefits of all that hard work. But it takes a lot more intention, time and effort to translate that income, to making sure that we’re actually progressing in our financial plan and finding the ever so important balance between saving for the future, taking care of our future selves, living a rich life today and investing in those things that are most meaningful to us.

Now, thankfully, for our story, there’s a happy ending. Three years after that point where we realize, hey, we’re making a good income, but the net worth is negative, it’s not showing, we decided through that time period to really get serious, to stop messing around, to take control of our financial future. And in the fall of 2015, we hit submit on the very last payment of that $200,000 of student loan debt. I still have the screenshot saved at the time. Navient was the loan servicer, it’s an image I’ll never forget. Now to get there. We had to sever self teach ourselves personal finance. This was what led to me starting the Your Financial Pharmacist Community shortly thereafter, in 2015. And we made several mistakes along the way. And I’m going to talk about some of those here in just a little bit. Now, at the time, no one in our sphere no one in our community is really talking about this. And it was hard. It was hard, but it was worth it. Now, a little bit more on this story, when we hit submit on that last student loan payment is the fall of 2015, it sure felt like we had arrived financially finally, right? That would be the first however, of many times that we would learn a very important lesson that there is no such thing as arrived. When it comes to the financial plan, there is always an opportunity to grow and learn. Once we had crossed the line from a negative net worth to zero, and eventually working towards positive, it was go time it was time to play offense. Right. Finally, we could begin to play offense with a financial plan. And through methodical savings, investing, diligent spending, planning, and working our butt off building a business, we would eventually cross a net worth of $1 million in 2020. That’s right, negative 225,000 in 2012, to a net worth north of 1 million and approximately eight years. And I want pharmacists like yourself to be fully armed and empowered with the knowledge and tools needed, again, to find that balance between living a rich life today. And tomorrow, you can get there. But in addition to your income, it’s going to require that you have the right mindset, some strategy, and you have habits and behaviors in place that will help you to achieve success, it can be done. And that’s why I’m excited to share some of these strategies with you. It’s not complicated or overly complicated. It doesn’t have to include fancy spreadsheets and nuance investment vehicles. It doesn’t take an exorbitant amount of time. And it doesn’t mean that you have to live on rice and beans. I did it and you can do it too.

Tim Ulbrich 09:56

I recently had the chance to talk with a group of pharmacists and I asked them to reflect on a question that was intended to help them clarify what matters most to them in their lives and how their financial plan can support those different areas. And here are just a few of the responses that I received. From that group of pharmacists, quote, “I would love to travel the world give generously, and fund my kids hopes.” Another was, “to take my kids to see the world.” Another, “to have a home in space and time to host family and friends often.” Another, “to volunteer locally, spend time with family and learn new skills.” Another, “To open my new business.” “Working part time without the fear of finances would allow me to volunteer more and do something more passionate about.” Another: “To create a community center for people who use drugs to help provide basic social needs and treatment.” Yes, yes. And yes. Notice what you don’t hear here. You don’t hear people talking about having a pristine, zero based budget. Yes, I think that’s important to help us execute, but that’s not what people are talking about. You don’t hear people talking about having a certain amount of money in the bank. You don’t hear people talking about having a complicated time intensive investment strategy. You don’t hear people talking about their 4.6% high yield savings account and how advantageous that is over another one that’s only 4%. You don’t hear any comments about how to optimize public service loan forgiveness or other student loan strategies. And while there’s nothing wrong with those things, right, I myself like a good budget, like a good student loan repayment strategy, things we talked about often in the show, it’s important to remember that these things aren’t the end goals and determinants of success, but rather steps that are along the way to support again, living that rich life today and tomorrow. So before I get into these five strategies, and before you go all Type A pharmacist on me and start making moves, hitting and checking things off that list, I want you to take a step back and ask yourself a few questions. What am I trying to accomplish? What’s the purpose? What does success look like? Right? After all, money is a tool for living a rich life. And it’s up to you to decide what that rich life looks like. Okay, so let’s jump into these five wealth building strategies, it’s time to take action. Again, none of that fluffy and practical stuff. I’ve implemented all of these in my financial plan. Step number one, you probably saw it was coming based on my discussion of net worth. Step number one is you have to be tracking your net worth. As I mentioned, and that book, The Millionaire Next Door, one of the quotes from that book from the author Tom Stanley is, quote, “one of the reasons that millionaires are economically successful is that they think differently.” And what he’s referring to is that those who build wealth realize that income is not the metric of success, but rather a tool for building wealth, right, and it’s worth repeating the calculation we talked about before, net worth what you own, minus what you owe, so your assets minus your liability. Net worth not income. But net worth is the true indicator of your financial health. And if you understand and respect this calculation, it will propel your financial plan. Discovering net worth was a mindset shift and a pivot point in our own financial planning journey. Now for Jess and I, we update a net worth tracking sheet once per month, which allows us to take a step back and see the overall trajectory and bigger picture, while also focusing on the short term goals. And I have this tracking sheet along with several other resources. I’ll reference throughout the podcast available in a Google Drive, a toolbox. We’ll link to that in the show notes. You can go to that toolbox to access those for free, you can make a copy, edit, customize, make it your own, and be able to implement it in your own financial situation. It’s a very simple spreadsheet. Again, nothing fancy, right, we have a list of all of our assets, all of our liabilities. So this includes things like our emergency funds, various business accounts, kids 529 accounts, all our retirement accounts, different real estate that we own, and so forth. All assets, all liabilities, once a month. This is the big view picture of are we tracking, are we trending in the right direction. So that’s wealth building strategy number one.

Number two, you’ve heard me talk about this on the show before is setting up savings buckets. I love savings buckets. All about intentionality. Once Jess and I are on the same page with our financial goals for a given year, it’s then time to write them down and prioritize them accordingly so that we can start to implement a plan to achieve them, right? Otherwise, it’s a hope, a wish or a dream. So for each goal that we have for the year, we defined several things. First, the amount that is needed to achieve that goal. So for example, if we were to say, hey, we want to refinish the basement, it’s a goal we’re working on here in 2024, we got to put a budget to that we gotta put a number to it. And we got to put eventually a timeline to it. So first, we have to have an amount needed to achieve the goal. Second, is we have to identify the current amount we have saved towards a goal, sometimes that’s a zero. Sometimes that might be a portion of the goal. The third thing is then the gap between the amount needed and the amount saved. Right? This is common sense stuff. And the fourth thing is the monthly contribution needed to close the gap. That’s the key. So we have to know where we’re going, how much do we need? When do we need it? What do we already have saved? What’s the gap? What’s the timeline difference and a monthly contribution that’s going to help us get there because then we can implement that, right, we can do something with that, to be able to put ourselves on track to achieve it. Now, I mentioned the tool box before, there’s another resource in there. I have our savings buckets spreadsheet that you can again, nothing complicated, you can download it, you’ll see it’s just a sheet that outlines different priorities, what the status is, what the goal is, what’s the current funding? What’s the amount, what’s the gap, and what’s the contribution needed to get there with some notes for each of those items as well. So once we have this from here, once we have a prioritized list of our goals, we can then work the budget, or the spending plan, whatever you want to call it to determine how much is available each month to allocate towards the goals and make any necessary adjustments. Now just to give you some context of things that we’re thinking about here, right, this would be items like home improvements, saving and retirement accounts, putting money away into an HSA saving for vacations, saving for a future car purchase, right? These are the types of goals and things that we’re working on. And once we have this prioritized list, and we can begin to weave it into the monthly spending plan, based on hey, we know what you’re gonna make, we know the fixed expenses, the discretionary expenses, we know what’s leftover, then we can allocate whatever is projected to be left over towards the goals we’ve already defined in advance. And this is where the buckets come in. Because once we do this work, we can set up savings buckets. Now we use Ally Online Bank, this is not commercial for Ally, you can do this with many other banks, or you can track it on your own, to have a bucket for each goal. Except for those things that go directly to outside accounts. Right. So I don’t want things like IRA savings, HSAs, 529s to be sitting around in a high yield savings account. But I want those to go to work as quickly as possible for us. But for everything else, right. I mentioned several of these: vacation, home improvement projects, saving for educational expenses, not for future like 529. But for us, that would be homeschool expenses and things that we know are coming throughout the year could be gifts, insurance payments. I said vacations, vehicles, etc. emergency fund savings, right. So when I log on to our Ally online savings accounts, I see all these buckets, which are really just virtual buckets within a high yield savings account that we can then identify and earmark. It’s so important that if we think we’re saving for something, let’s actually do the accounting for it and create the bucket that allows us to see the progress made. This can sound complicated, don’t let it fool you. It’s not complicated. This system took us about 15 to 20 minutes set up. Once we had already done the work right, which is the hard work is talking about the goals and prioritizing the goals. So that’s number two, setting up the bucket system.

Tim Ulbrich 18:51

Number three in our list of five wealth building strategies, is creating a legacy folder again, something I have talked about in the podcast before. And while a legacy folder isn’t going to directly move the needle on your net worth, don’t underestimate what it can offer in terms of peace of mind. And knowing that in the event in an emergency, all your financial documents are organized and in one location. So think of the legacy folder as a one stop shop where you have all of your important financial information, records and systems such that if someone else had access, needed access in the event of emergency, something happened to you, they could quickly pick up where you left off. So our legacy folder is a combination of a shared Google Drive folder, and a fireproof safe at home. Right. So I think about things like passports, birth certificates, etc. copy of estate planning documents, those are going to be inside of a safe, and then we’ve got other things that are on a shared Google Drive. So our financial planning team at YFP has shared access to the Google Drive as well as family who would be caring for our boys in the event that something happened to us, and then we use One Password as a tool to share and store all of our passwords. You can access again in the toolbox resource I mentioned already, we’ll link to that show notes: YourFinancialPharmacist.com/toolbox, I have a legacy folder table of contents that we use that you can download, make a copy, modify and make it your own.

Tim Ulbrich 20:25

Alright, number four on our list of five, upping your financial IQ. So here are just some of the questions I’ve received recently, from pharmacists in our community: how much should I save for retirement? How can I best save and invest for the future? What should my asset allocation be? Do I need a life or disability insurance policy? How can I optimize student loan or other debt payments? Should I save and invest or pay down debt instead? If any of these sound familiar, this is real life stuff. And know that you aren’t alone if several of these questions are swirling around in your mind as well. And as I reflect on my own journey, I realized that knowledge, along with community and accountability, was a key missing ingredient early on. You know, despite being a personal finance nerd today, my financial IQ early in my pharmacy career was very limited. When I was just finishing up my pharmacy school training in 2008, residency 2009. At the time, I could not tell you the difference between a 401K and an IRA a stock versus a bond secured versus unsecured debt, unsubsidized versus subsidized loans, a tax credit versus a deduction, right, the list goes on and on. And my ignorance, my lack of financial IQ led to mistakes and really led to a delay in our progress. But that really wasn’t my fault as I reflect on the journey. Now, taking responsibility of that and learning those things. Certainly, there’s an opportunity there. But know that for many of us, we just don’t have that background. Right, that strong fine foundation and financial literacy, our K-12 system, to be frank does an atrocious job of prioritizing financial literacy. And while I’m grateful for my AP Calculus class, and how that saved me from having to take a semester of calculus in pharmacy school, I use very little calculus in my life today. But contrast that with personal finance, which I use in some form, or fashion every single day. So why do we invest so little time in financial literacy, knowing that its application will be wide for everyone? That’s a great question, right. And it’s a tragedy, but it’s one that we have to overcome, and we can take responsibility to overcome. And so the good news is that we can make progress here we can up our financial IQ if we’re willing to invest some time and energy and I’m not talking about an AP course level type of time, just a little bit of time invested is going to yield big benefits. I hope you continue to listen to podcasts, attend our webinars, read our newsletters, I think those are great ways that you can stay engaged and increase your financial IQ.

Tim Ulbrich 23:04

Alright, number five on our list of five wealth building strategies is respect the power of compound interest and time value of money. If you aren’t in awe of that time value of money, you haven’t spent enough time nerding out on a savings calculators. As Albert Einstein is credited with saying compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t pays it. This quote should pique our curiosity about the power of investing, more specifically, the power of compound interest in time value of money. It’s one of those financial jargon terms compound interest, time value, money that we throw around, that we know is important, but may not be sure what it exactly means and why it matters. And simply compound interest is the process by which an investment grows exponentially over time, because both the original investment and the interest gain earn interest over time. So we save a little bit today, it grows and then the future growth is the initial savings plus the growth plus the growth plus the growth and we continue that over and over again. And you can use a simple compound interest calculator, we have one available on our website, we’ll link to that in the show notes. Just to see that what would it mean for you when it comes to savings and where you’re at and how much you have saved? And how will that project out into the future? So what we know, which is something we’ve all heard before is that the earlier we save, the less aggressive we have to be in saving, right? And that’s where we really start to see the magic of compound interest and time value of money do its thing.

Tim Ulbrich 24:44

Alright, so those are five wealth building strategies that I think you can implement in your own financial plan. And it’s it’s your turn now, right and as you start to implement your plan, let me give you two words of encouragement First, avoid analysis paralysis by identifying what the next move the one next move you can make. Remember, this is a marathon, not a sprint, and I just talked about a whole lot of things. And some of you are probably gonna want to this long checklist and start moving things forward. Resist the urge to try to do too much. And eventually getting to a place of frustration where you don’t make much progress at all. What is the one next move that you can make? This is a marathon, not a sprint, one step after another over a long period of time will yield big results. That’s what Darren Hardy is talking about, in his book, The Compound Effect when he says that small, smart choices, plus consistency plus time equals radical difference, small smart choices, plus consistency, plus time equals a radical difference. So that’s the first note of encouragement. The second one is your journey will inevitably include mistakes, trust me, I’ve made my fair share. Here are just a few I’ve paid too much student loan debt, because I didn’t understand the different options that were available such as loan forgiveness and refinancing. Second, I bought a home to be frank by just a little bit too early, without having enough equity in that home and a renting situation would have been fine for a little bit longer. Third, delaying the purchase of term life insurance with young children. Fourth, delaying the establishment of estate planning documents. Fifth, cashing out a small but still a pre tax retirement fund. And finally buying a car that at the time, we really had no interest in buying. So since mistakes will happen, right? It’s part of the journey, we must learn to give ourselves some grace. You’ve got this, I’m cheering you on. And I hope that you will continue to engage with our community as you go through your own journey. If you have a question that you have, in the moment, a roadblock that you’re facing, a win that you want to share, just an ear to listen of something that’s frustrating you in the moment, send us an email. I would love to hear from you [email protected]. And for those of you that are listening, saying hey, I really could use some help one on one, and really moving the financial plan forward to take all these different priorities no matter where you are in your journey, whether that’s a mid career pharmacist like myself, someone who’s approaching retirement, someone who’s a little bit early in their career, we’d love to have the opportunity to talk with you further. To learn more about our fee only financial planning and tax planning services and to determine whether or not they’re a good fit. You can book a free discovery call by going to yourfinancialpharmacist.com you’ll see a link to do so there to learn more about the services and to again, see whether or not that’s a good fit for your own financial plan. Thanks so much for listening. As always, I hope you found this episode helpful. And we’ll catch you again next week. Take care.

Tim Ulbrich 27:51

As we conclude this week’s podcast, an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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YFP 365: Millionaire Theme Hour: From $0 to 7 Figure Pharmacist with Mike Byers

Posted on by YFP Media

Mike Byers, PharmD shares how he was able to achieve financial freedom and replace his retail pharmacist income through savings and real estate investments.

Episode Summary

In this episode, Michael Byers, PharmD shares how he was able to achieve financial freedom and step away from his job as a retail pharmacist at age 42. Mike outlines how he went from a position of financial weakness to a position of financial strength through frugality and real estate investing. A father of two young boys, Mike talks about the importance of having options and flexibility in this season as he and his wife raise their family.

About Today’s Guest

Mike Byers is a 2008 graduate of the University of Pittsburgh School of Pharmacy. He spent 16 years as a retail pharmacist for Giant Eagle where he worked as a staff pharmacist, a pharmacy team leader and a floater. After successfully investing in real estate for over 10 years, Mike decided to take a break from pharmacy in 2023 to spend time with his wife and two young boys. He loves his family, houses, outdoor adventure, and trying to find the right balance between YOLO and delayed gratification. He can be found on Instagram @DIYrentalGuy.

Key Points from the Episode

Pharmacist’s financial journey to seven figures, early retirement, and mindset shifts. [0:00]
Financial journey after graduation, including materialism, divorce, and saving for retirement. [5:59]
Saving money, investing, and finding balance in life. [13:58]
Real estate investing, personal growth, and overcoming setbacks. [23:17]
Building wealth through real estate investing and managing cash flow. [28:54]
Financial independence, real estate investing, and career development. [33:12]

Episode Highlights

“You have to be honest with yourself and say, what am I doing now? What is the result going to be? If I’m saving so much that it’s driving me crazy, the result is you’re going to go crazy. But for me, the end result was adventure.” – Mike Byers [20:51]

“I mean, just because you go down a path of a certain savings rate doesn’t mean you have to stay there, you can make adjustments.” – Mike Byers [21:41]

“What I’m looking at is that I have this money saved because I was diligent in being able to save, what does the next 10 years look like? Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars?” – Mike Byers [32:07]

“And that’s something that you think about when you turn a certain age and you start wondering how much more do I really need to be comfortable after 65. I don’t want to be self-insuring myself if there’s an insurance product or an annuity that you can buy that would serve that same purpose.” – Mike Byers [32:52]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This episode we have a millionaire theme hour featuring Mike a 42 year old retired work optional pharmacist living in Pittsburgh, Pennsylvania. We discuss the highs and lows of his journey as he looks back, including how he felt trapped by big fixed expenses as a new graduate, why his early savings paid off big 20 years later, how his mindset shifted over time, why his real estate investing played an important role in his journey, ultimately replacing his pharmacist income, and why patience and short term frugality and sacrifice were key ingredients to his success.

Tim Ulbrich 00:41

Now, before we jump into today’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. And we’ll hear that on today’s episode. Yes, you’ve worked hard to get where you are, yes, you’re earning to get income. But if you ever wondered, Am I on track to retire? How do I prioritize and fund all of these competing financial goals that I have? How do I plan financially for big upcoming life events and changes like moving, having a child, changing jobs, getting married, or retiring? And perhaps why am I not as far along financially at this point in my career, as I thought I would be? The answer may be that your six figure income is not a financial plan. Yes, as a pharmacist, you have an incredible tool in your toolbox and that’s your salary. But without a vision and an intentional plan that good income will only go so far. That’s in part why we started your financial pharmacists back in 2015. At YFP we support pharmacists at every stage of their career to take control their finances, reach their financial goals and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners and tax professionals work with pharmacists all across the United States and helps our clients set their future selves up for success. While living a rich life today. You can learn more and book a free discovery call by visiting yourfinancialpharmacist.com/learn. Again, that’s yourfinancialpharmacist.com/learn. Alright, let’s jump into my interview with Mike.

Tim Ulbrich 02:11

Mike, welcome to the show.

Mike Byers 02:13

Hey, I’m happy to be here.

Tim Ulbrich 02:14

Before we jump into your financial journey and the path of becoming a seven figure pharmacist, tell us more about your career in pharmacy. What led you into the profession? Where do you go to school? When did you graduate and the type that you have work you’ve been doing since?

Mike Byers 02:28

I think I started off like most folks going from high school to college, I went to the University of Pittsburgh. I started there. And of course, I was thinking about medicine, dentistry, pharmacy as my options and I was thinking about the path to get there. I don’t quite know what I wanted to do. My life kind of hit a roadblock sophomore year, I have a condition called ulcerative colitis. And I had to drop out of school at that time. And for a semester I was in the hospital for 16 days. And after the end of it and being in the hospital and experiencing things firsthand, I said, I think being a doctor is too hard for me. I think it’s it’s just not in the cards for what I have going on. And I didn’t know at the time that this disease wouldn’t be a huge part of my life. I found medicines over the years to control things. But I was also still dating my high school sweetheart at the time. And oddly enough, her father was a pharmacist. He owned an independent pharmacy. And I thought why not. So I finished my undergrad, I got a degree in economics and also a minor in engineering. And I went to pharmacy school from there.

Tim Ulbrich 03:54

And after graduation, those that are native to your area or where I lived for 10 plus years in Northeast Ohio, they’ll recognize the name Giant Eagle, but others will not. So tell us more about the work that you’ve been doing with Giant Eagle after graduation.

Mike Byers 04:09

Sure. So that was an exciting time to be in pharmacy school. I mean, you were going to school, you were learning things that were helping people and developing these skills and it was very fulfilling and the whole time, salaries were going up and you hear you would hear interesting things like the Alaska deal and all the things you’ve probably heard about it that time. But I did graduate and I worked for Giant Eagle. I was an intern there and stayed on as a staff pharmacist. I had some experience leading three different stores, which I learned a ton from and I was also floater and then staff again. So it was about 20 years from the time that I signed on as an intern to last year when I did resign.

Tim Ulbrich 04:59

Mike is a fellow 2008 grad. I graduated from Ohio Northern, I remember those times, right? It was the sign-on bonuses with the cars and classmates showing up with new cars in the parking lot and the Alaska deal, which I never saw on paper, but I heard of it as well. So we’ll share with our listeners, what is that all about? What I remember if it was, it was a big retail pharmacy chain that was offering a three year deal in Alaska for a million dollars. That’s what I remember the deal.

Mike Byers 05:28

The only thing I remember is sitting in class and hearing somebody turn around in their seat and say, I heard this. I heard a million dollars, three years. I’m gonna do it. And then I’m going to retire. Yeah, so maybe that planted the seed for some kind of early retirement financial independence at that point.

Tim Ulbrich 05:46

Nonetheless, it’s a very different time right here in 2024. So we’re going to dig into your current state of being a seven figure pharmacist achievement, financial independence, getting to this point of being work optional. We’ll talk about how you did that, and how real estate and traditional investments played into that. But I want to go all the way back to 2008 when you graduated with a net worth of zero, clean slate, no mounds of student loan debt, right, our listeners today are graduating $150k, $200k, you know, smaller debt loads, some might look at that and say, Hey, net worth, is your graduation, smooth sailing, but not so fast. Right? Tell us more.

Mike Byers 06:23

Yeah, before you throw tomatoes at the podcast, I did have a little bit of student debt. Which it was I mean, the difference between what I was making what I was spending, I can’t even remember how I paid it off. It was about $20,000. But I did go through a divorce, which cost some money, and I did have a real estate deal go south where I lost a lot of money. So I have had to dig myself out several times since 2008. But yes, I did. I did graduate with roughly a clean slate. And worked my way up to now where my passive income through real estate pretty much replaces my salary at 30 hours a week as a pharmacist.

Tim Ulbrich 07:13

What were some of the decisions, and we’ll dig deeper as we go throughout. But what were some of the decisions that you made early on as a new practitioner, you know, as it relates to car purchases and other things. You know, one of the things you shared with me prior to recording was that quote, “I became obnoxiously materialistic, which I partly blame for my marriage falling apart.” What do you mean by that? And how did this ultimately, you know, play into not only the financial plan, obviously the relationship but what would be the beginning of of, you know, that trench that you would eventually dig yourself out of.

Mike Byers 07:44

So like, like we mentioned, it was exciting times to graduate with bonuses. And we I graduated and I was married, we got married the last year of school during rotations. And we were living in her parent’s basement, not because we needed to financially, but because we weren’t sure where we were going to end up for her job. But I bought an Audi. A luxurious Audi. While it wasn’t even three months after I graduated, still living in my in-laws basement, bought this fancy new car. And it just seemed like the thing I was supposed to do. Long story short, I mean, we eventually moved. She got a job north of the city, we moved into a nice townhome rental. Not much longer after that, I’m on Zillow shopping for a nice, big, fancy house. So the fancy house came not much long after that. And I did become obnoxiously materialistic. And it wasn’t long after I moved into that house where I saw the house on the next street. He said, Gee, I wonder when or what it would take to get that bigger house. And that was just the way I was operating and had we not gotten divorced, I could still be operating that way. But it was just a mindset where I blame being really materialistic 10%. 90% we were young and ultimately not right for each other. But it wasn’t much longer after living in that house a couple of years where the bomb went off and divorced, trying to pick up the pieces again.

Tim Ulbrich 09:34

So you don’t go from that point to becoming a seven figure pharmacist by continuing that mindset and continuing those behaviors. So something shifted, something happened from a mindset and a behavior perspective. It sounds like that was the divorce. Tell us more about that.

Mike Byers 09:50

It absolutely was. I realized that I didn’t need a big house and a fancy car to be happy. I said the exact opposite – how little can I survive on? Or how little can I have material wise in order to live a happy life and I somehow found a studio apartment in the city, it was 350ish square feet. When my mom first saw it the first time, took her breath away, because it was just that small – the bedroom was in the kitchen. Yeah. And those were those were happy times. I lived that way for a couple years. And it felt really comfortable. But I still wasn’t saving. A couple years goes by and I’m like, well, kind of on this path where my rent is relatively cheap, my salary is relatively high. Why don’t I have a savings goal? Because I didn’t feel like I was doing the right thing at the time. So my goal that year, I think this was about 2012. So a couple years after divorce four years after graduating, I decided I wanted to save in addition to 401k, I wanted to save $2,000 a month. And each month I would play the game, if I wanted to buy something I worked extra. If it looked like I wasn’t going to hit my goal I cut back. And that’s what I did for that year to in addition to maxing out 401k to build up some cash savings.

Tim Ulbrich 10:11

So if I’m following correctly from jump street, you’re maxing out your 401k. So you’re leveraging the tax advantage account. And then you hit this point, shortly after the divorce four years into your pharmacy career. You’re in this studio apartment 350 square feet, and you realize, Hey, I’ve got an opportunity to more aggressively save. And so you set this target, which you know, to be on, I mean, $2,000 as a percentage of one’s take home pay, that’s a big chunk of money. And you see this a lot in the financial independence, retire early the FIRE community where there’s very aggressive savings rates, right, you’re in your early 40s. So to get to a net worth of seven figure plus, it’s going to take a substantial amount of savings to do that at an early age. So did your savings rate stay there? What did the trajectory look like as you were building that over time?

Mike Byers 12:21

So I hit that number, okay. And I was able to save about $25,000 that year. So I built up my cash savings. When I after going through the divorce, I didn’t have that cash savings. And I built that up and again, I kind of felt comfortable like, Hey, I hit that goal for that year, and I got a new apartment, that apartment had one bedroom. Not necessarily more happy in that apartment, but it was more expensive. And it seemed nicer. So at that point, it was a little more rent, and I wasn’t saving money and about a year had gone by and I said to myself, What am I what am I doing now? I mean, I had this surplus, and I was on a good path. So I for whatever reason started Googling. I figured it was taxes. I said I typed into Google, “single high earner how to save on taxes.” Okay, so real estate comes up. And I’d always been interested in homes. I love home remodeling and you know, watching a little bit too much HGTV at the time. But the next day, my friend came over to watch a football game. Oddly enough, he says my mom was thinking about selling the duplex. I had known him in college. And my ears perked up because why not? So, long story short, I fell ass backwards into owning a duplex.

Tim Ulbrich 13:58

Little house hack.

Mike Byers 13:59

Yeah. House hack. Yeah.

Tim Ulbrich 14:01

How did that one work out? Tell us about that is an investment property?

Mike Byers 14:06

I mean, it was it was a huge learning curve. So I said yes. I said I contacted his mom. We did the whole thing without an agent. It needed a lot of repairs and the whole thing flooded while we were in escrow. The pipes burst it was during winter the heat wasn’t on. So I had to jump into renovating and immediately kind of learning how to increase the value of the property. So I did that. And you know, I went from a studio apartment to half of a duplex even though it didn’t have air conditioning. It felt I mean, I felt amazing. I renovated it. It was nice. And I was just living in the duplex I was charging downstairs rent that mostly covered my mortgage. And it was shortly after that time when I discovered Mister Money Mustache. I’m sure a lot of people that you’ve talked to have started that or had that at some point in their journey. But that’s when things really started to go pretty quickly and I’d love to talk about that experience.

Tim Ulbrich 15:25

Yeah, and we’ll dive into that deeper and we’ll link in the show notes and Mister Money Mustache. For those that aren’t already familiar, I suspect many people are, great resource great blog will also link to other episodes, we talked about house hacking for those that that’s a new term. The idea is that you typically lots of different ways to house hack but you know, the most common we live in a duplex triplex or quad, you live in one unit, and you rent out the remaining units, obviously trying to generate income streams and hopefully cover a portion or majority of your mortgage payment in turn your what you think of often separately, your primary residence and then investment properties, bundle those together. And there’s some creative financing strategies of ways that you can, you can do that. And I want to come back in a little bit to talk more about real estate because I know it’s been such a big part of your plan. I do want to go back to the savings rate piece because I know you started with that $2,000 month goal. You shared with me in advance that eventually you’re pushing that up closer to $4000 to $5,000 a month. A lot of pharmacists hear these aggressive savings rates. And they’re like, how? Right, how? You know, you think of a typical pharmacists income, take home pay $7000 to $7500, maybe $8,000 a month, depending on what they do. You look at large fixed costs, like house, cars, student loan payments, daycare, childcare, other expenses. And we work with many pharmacists where there’s just not a whole lot of margin, at least in current expenses. So give us a little bit more of the behind the scenes of how you were able to actually allocate a large percentage of your income? What sacrifices did that require? And then where were you putting that money? I heard early on it was cash savings beyond the 401k. But was that in IRAs? Was that brokerage accounts? Where were you putting that money?

Mike Byers 17:13

As far as stocks and retirement accounts, it’s just 401k. The Roth and the traditional just, I was saving so much at the time, the income limits, and then the limit that you could put in just seem too small for me. So how do you save? I mean, you mentioned that the three biggest things housing, transportation, and whether or not you have kids, I guess your third one would be food? If you don’t have kids, that third one, if you do is day care. Yeah. So house hacking. That’s the big way to save on your housing costs. So at one point, my housing costs were zero, because the rent went up. And I was saving at that time, I had paid off the loan on my car, and I kept it. So a lot of folks will pay off one vehicle and buy in the next or keep buying new vehicles that are pretty, pretty frequent pace, but if you keep your vehicle eight, nine, ten years, when you get to that point, it’s paid off. You can save a lot of money. So I was saving probably in the realm of $5,000 a month. So that included a paid off vehicle. It included rent from downstairs, a little bit of overtime manager salary. And saving on food. I mean, just not going out to eat a lot. That was a big thing for me. I mean, you can play the game where you get pretty extreme. And it was too much for me. I mean, there was one point where I was calculating the cost of the extra food I would have to consume to walk to work versus the cost per mile of gas if I had driven so what I was doing with that $5,000 a month, I was putting it all in my checking account. Okay, fine. It was just building out pretty quickly. I called the mortgage company and I said, hey, this PMI insurance. I have, you know, a certain amount of equity at this point. Can we make that go away? And they said no. I said why? And they said, Well, this is an FHA loan.

Tim Ulbrich 19:26

Yeah, right. Did it. On my first home. Didn’t know that.

Mike Byers 19:30

Yeah, blame myself. I blame the mortgage seller, whatever. I was so angry by that. And I was saving so much money that I paid off. I think it was $100,000 loan balance relatively quickly, like within a year and a half. Just because I was mad about that. And I wanted to make $120 a month go away. So I was putting it back into the real estate.

Tim Ulbrich 19:55

Got it. Okay. You mentioned something really interesting. You talked about of extremes, right? And you see this sometimes in the FIRE community and and let’s, let’s say out there and everyone’s on their own journey, everyone’s situation is different. You know, everyone’s cost a living expenses are different family situation is different. So everyone has to figure out what is the journey and pathway that allows them to achieve the goals that they want to achieve. But those that are on this financial independence, retire early or retire optional journey, you know, there is what you call the potential for this frugal fatigue. Right. And I love that term, because it’s real. And there’s a time and season for it, for that grind. And there’s a fatigue that comes with that as well. And so, my question for you is, how did you combat this? When you recognize that? What did you do to say, Hey, this is real, and I’m achieving all these great goals, and I’m saving a lot per month. But this fatigue is real. How did you combat that fatigue?

Mike Byers 20:51

I mean, you have to be honest with yourself and say, What am I doing now? What is the result gonna be? I mean, if I’m saving so much that it’s driving me crazy. The result is you’re gonna go crazy. But for me, I would. For me, it was adventure. So when I got pretty fatigued with the daily saving, and it wasn’t like I was living this life where I was, you know, things were relatively scarce and I wasn’t having fun. But at time, like I bought an Airstream when you’re holding back so much, and you’re just kind of yearning for adventure, you see a commercial for the new Airstream. You just buy it. And you can adjust. I mean, just because you go down a path of a certain savings rate doesn’t mean you have to stay there, you can make adjustments. I ended up selling it a few years, a few years later. And the money that I lost, I guess you could say last was a great experience. So you just keep adjusting yourself and you have honest conversations with you or with your spouse if you’re married on okay. What are we saving? What experiences aren’t we having? Right? What is that going to result in in the future? Because you could have two different ends of the spectrum. You could have YOLO. And I know people like this and they’re happy. You only live once, they’re spending their whole paycheck. They’re not thinking too much about the future and holding back on some things. They’re just living life now. But there’s the other end of the spectrum, which is deferred gratification. Yep, either one of those two, seems a little extreme. And you could get screwed either way. So if you’re YOLO, and not saving anything, and leveraging all your salary and income to have fun today and you live to 100. I mean, you could be screwed. Sixty-five When you start to not have energy and ability to work, I mean, yep. But if you defer everything and you die at 50, you’re screwed as well. So you have to find your balance in the middle and continually be honest with yourself and have the conversations with your spouse on what the right balance is.

Tim Ulbrich 23:17

Ton of wisdom there, Mike. And there are several resources that are coming to mind that I feel like of what you shared. You’re kind of pulling from, you know, some different philosophies and putting it together. What we often say is, hey, we’ve got to figure out how we can save and invest for the future to take care of our future selves, but also live a rich life today. Both of those things can happen and be true. While that looks different for everyone. And, you know, I’m thinking of some of the resources that have influenced my journey. Rich Dad, Poor Dad, The Millionaire Next Door or Die with Zero by Bill Perkins.

Mike Byers 23:45

I just read that.

Tim Ulbrich 23:47

Bigger Pockets. Like, I kind of hear a little bit of pieces of these. And what I love is you’ve taken these teachings, and probably many others, and said, Hey, this is what is ideal for me and my journey. And I think the way you articulated that is beautiful, and I want to talk more about the real estate. So 2012 You buy the duplex sounds like that was a good move in the house hack. You weren’t a one and done real estate investor. 2019, you decide to do a deep dive deeper dive into real estate beyond that initial house hack, which ultimately, when we talk about current state would allow you to cut cut back your work altogether to replace that income, but initially go from that full time to less or full time 30 hours a week. Where did that motivation and drive come from? Do that deeper dive in real estate and tell us more about that second investment, the one that you you kicked off in 2019.

Mike Byers 24:41

So I had lived in the duplex for about five years 2013 to 2018. I had gotten out of a four year relationship at the time and I’m driving to visit my brother in Sioux Falls, South Dakota. It’s pretty long drive so I’m doing a lot of podcasts listening and I discover some things was about real estate. So again, I was kind of on the path. But I listened to some information on podcasts that said, well, you have another opportunity to continue down this path. I mean, I was sit still saving a bunch of money living there and earning a good salary. By the end of that trip, I decided that I wanted to buy another property. I wanted to continue, there was no, there was no reason not to grow this. And at that time, I felt like I had a little more tools and resources and experience to go down that road. So I bought another house, I was able to pay cash without a loan because of my savings rate over those last five years. And I lived in it, renovated it. I rented it out for a decent price. And I hit a certain number that I wanted to hit. And I thought I was the King of Real Estate in Pittsburgh. I bought another one. And before I was finished with that one, and ultimately ended up in another low point in my life where I just had too much going on. And I ended up selling that for a loss because it was just too overwhelming. But I, you know, these are the things you think about long car rides and long bike rides. It’s like what is the purpose of what I’m doing? And I had said to myself, I have this duplex, it has the opportunity to give me two rents. And I have the opportunity, because nothing’s really tying me down, to buy more real estate. And I think in order to do that, I need to cut back hours. So eventually, I asked to be cut down to 30. I got a really great store where I work three days a week, every fifth weekend. So that gave me the time and the freedom to eventually build more real estate. And the salary that I’ve lost over that amount of time, it’s, it’s really not a big deal. Because what you’re able to build with your time, or the freedom that you’re able to have is worth the cost.

Tim Ulbrich 27:17

In terms of your portfolio, you started with the duplex, you buy another one in 2019. Sounds like that goes well. The one after that not so much. You mentioned a low point, what what did you do to kind of pick yourself back up and say, Hey, maybe I’m not the king of real estate in Pittsburgh, but I also have something here to offer. And I think I’m on to something in terms of building some real assets here. How did you get out of that trough and really get yourself back in the game?

Tim Ulbrich 27:46

And then that portfolio, the current day portfolio you just mentioned, has gotten to the point where work is optional. So you went from 40 hours a week to 30 hours a week. And now that portfolio is generating income such that if you need to, want to work in the future great, you can or if you want to pick up extra hours, but you’re not in a position of needing that income.

Mike Byers 27:46

I mean, thank God, I met my wife at that time. Because she gave me the confidence and believed in me. And I’m the type of person that if someone believes I can do something I could, I could climb a mountain pretty easily. Amazing, amazing luck that I found such an amazing person. And she believed. She knew what I had done in the past with the single family home and the duplex and the skills that I have built and the knowledge that I had built during this time. And sometimes all you need is a partner that can believe in you and do it with you. So we basically went on a buying spree and use the equity in those two homes to buy four more homes and rent those out. And that’s what our portfolio looks like today. Four single families and a duplex plus our primary house.

Mike Byers 29:14

Exactly.

Tim Ulbrich 29:15

Okay. Yeah, man. That’s awesome. Congratulations on the journey all the work.

Mike Byers 29:20

Yeah. So that was a goal. And things change when you have kids. And we had two children born pretty close together. And we were coming towards the end of my wife’s maternity leave for our second child and we were deciding what to do and it was a decision for me to stay home and not work. And the investing in assets and growing those assets and having those assets give you a return to buy more is what allowed us to have a one income family.

Tim Ulbrich 29:58

And your boys are how old now?

Mike Byers 30:00

They’re one and two.

Tim Ulbrich 30:01

All right. All right. So you’ve got options for time and flexibility schedule with them. That’s cool. If we zoom out for a moment, and look at your pathway to becoming a seven figure pharmacist, and now looking at your asset base as a whole, not specific numbers, but just general percentages, if you were to break that down between, you know, more traditional, right 401k types of dollars versus the assets that you have in real estate, or potentially others that I’m not yet aware of, like, how is that net worth broken down?

Mike Byers 30:36

I would say 60 to 70% real estate. Probably 60% of real estate. And then the rest is in 401k.

Tim Ulbrich 30:46

Okay. Okay. And we haven’t even touched on obviously, a whole nother aspect of the real estate, you know, you’ve got your cash flow you’re generating now there’s future appreciation, there’s tax advantages, if anyone wants to dive into that deeper, Tax Free Wealth by Tom Wheelwright, great resource to kind of just open your eyes a little bit if, if that’s not something you’ve you’ve considered before.

Mike Byers 31:08

I mean, for our real estate specifically, I mean, if you think about it, there’s three, three or four different ways where you make money. So there’s cash flow, there’s appreciation, and there’s loan pay down. So what we shoot for with our properties is $1,500 a month. $500 is $400 or $500 is cash flow. $500 is being paid down by the tenant and then above $500, is appreciating, and when you multiply that by several properties, you get that automatic savings in those two parts, you get the automatic savings where the tenant is paying it down, and it’s appreciating in value. And then you can use the cash flow to reinvest or if it’s a different season of your life where you need to live on cash flow, you can do that you can take a break from work, you can take a sabbatical. And it’s it just provides you options. Right now, what I’m looking at is, what kind of options has what I’ve built in the past, giving me to live a great life with like I, like you mentioned the book Die with Zero, you get to 40 years old, and you start thinking, Okay, I have this money saved because I was diligent and being able to save, what does the next 10 years look like? Am I going to sacrifice weekends with my family and nights in order to have one or two extra million dollars? You know, maybe your kids and your spouse they want you home? So that you know you can you can live a different life with experiences. And that’s something that you think about when you turn a certain age and you start wondering how much more do I really need to be comfortable after 65. I don’t want to be self insuring myself if there’s a maybe there’s an insurance product or an annuity that you can buy, that would serve that same purpose.

Tim Ulbrich 33:11

And options is the word I hear. Flexibility is the word I hear. And it’s interesting when I polled our community about the idea of financial independence, whether or not they want to retire early. You know, some people love what they’re doing. Some people don’t like what they’re doing. Some people might want part time or to pivot. But the goal of financial independence, I think, is one that resonates with people as a whole. And when I asked that question, you know, what excites you? What motivates you around that concept of financial independence? It’s options. It’s flexibility. It’s being able to choose and to have choice in those things along the way, which I think your story is such a good example of that as well. Mike, when you look back on this journey, and one of the things I appreciate is in the transparency and the vulnerability. You know, we could look at the current state and say Mike is crushing it, and you’ve done incredibly well. But there’s been highs and there’s been lows along the way. And there’s been a lot of learning that’s happened. As you look back on that journey from net worth of zero to becoming, you know, well into a seven figure pharmacist, what lessons do you take away as you reflect back on that, that you can share with our listeners?

Mike Byers 34:20

I think a good lesson to learn is have honest conversations with yourself about the alternatives. So if you’re on the path, and you’re making and not saving, if you’re making a certain amount and you’re not saving a whole lot and you get to the point where maybe you’re thinking there’s something more I can do. Maybe I can save a little bit more or maybe I can make investments outside of my 401k, they’re gonna be a good return and give me cash. flow like real estate. Just have honest conversation about what the alternative is. Because sometimes the alternative is you get stuck for a long period of time in what you’re doing because you didn’t take those five years to save diligently, or to pursue something that you’re interested in as far as a side hustle or take that job. So I sit down, evaluate what you’re doing and what path you’re on. And where that’s gonna lead to 10, 20, 30 years down the road. Five or 10? Whatever.

Tim Ulbrich 35:44

Yeah, and I hear a lot of patience in your story. I hear a lot of, you know, seasons of sacrifice, but also seasons of perspective, and kind of reevaluating where am I going? What are we trying to do? I’m curious, as you look out, you mentioned this time window into the future, as you look out, where do you see your real estate portfolio going? You know, now that it’s gotten to a point of replacing your income, do you see yourself kind of staying put in this model where you’ve got a duplex and several single family homes? Do you see an expansion within that same investment category? Are you interested in, you know, commercial or short term rentals? Like, what? Where are you envisioning the future of the real estate portfolio?

Mike Byers 36:23

So I’m envisioning, I mean, my, my vision is to work on it three to four hours a day, from a coffee shop and manage the investments. So I wish I could give you a better answer. And part of stepping back from the pharmacy job and trying new things is this level of uncertainty and really uncomfortability like, things aren’t amazingly comfortable right now. I mean, I’ve really had to unwind some of the programming that 20 years of retail pharmacy put in me, so it’s tough, and I can’t tell you exactly where I want to be in this is a period where I am. But I mentioned the word sabbatical. So it’s, it’s a period of time where you’re not forced to work, where, you know, thank God, my wife is just so amazing and understanding. You can take the time to figure out your next path. And instead of working nights and weekends for the next 10 years to figure out how to have your kids experience and watch you live an amazing life. So that’s an evolving thing. And maybe we’ll catch up in five years, and I can tell you what it evolved to. I you really have to think about what your passion and purpose is. And sometimes you look at 100 jobs on on LinkedIn or Indeed, pharmacy/medical related and you just can’t see yourself doing that. So I’m trying to find my passion and purpose right now. And I really think it is in real estate, whether it’s rental real estate, commercial, vacation rental or flipping. I’m trying to figure that out.

Tim Ulbrich 38:19

And what excites me about that is I sense this is a season of, you know, some of that deep reflection and figuring out the next steps. You use the word sabbatical as well. But you know, another tip of the cap to the work that you’ve done, you’ve put yourself in a financial position, with the support of your family to be able to take the space to think and think strategically, right? And that’s an amazing opportunity, but it didn’t fall in your lap. You worked incredibly hard for that to happen. So congratulations, Mike on on the journey. I do look forward to following up and following your journey. Along the way. I know it’s been an inspiration to me, I’m sure it will to our listeners as well. So thank you so much for taking time to come on the show.

Tim Ulbrich 39:01

As we conclude this week’s podcast, an mportant reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archived newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please Is yourfinancialpharmacist.com/ disclaimer Thank you again for your support of the Your Financial Pharmacist Podcast Have a great rest of your week.

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YFP 358: Top 6 Financial Moves to Make as a Mid-Career Pharmacist

Posted on by YFP Media

YFP Co-Founder and Director of Financial Planning Tim Baker discusses six financial moves for mid-career pharmacists, including re-evaluating the vision for the financial plan.

Episode Summary

Tim Ulbrich is joined by YFP Co-Founder and Director of Financial Planning at YFP, Tim Baker to discuss various financial planning strategies for mid-career pharmacists, including resetting the vision for the financial plan, prioritizing retirement planning and emergency funds, and reevaluating, reviewing and updating insurance policies.

Regularly reviewing and adjusting these funds to account for the various life changes ensures that policies align with current financial goals and circumstances. Tim and Tim also address the importance of having those uncomfortable conversations, such as end-of-life care and inheritance to avoid potential legal and financial issues in the future.

About Today’s Guest

Tim Baker is the Co-Founder and Director of Financial Planning at Your Financial Pharmacist. Founded in 2015, YFP is a fee-only financial planning firm and connects with the YFP community of 12,000+ pharmacy professionals via the Your Financial Pharmacist Podcast podcast, blog, website resources and speaking engagements.

Tim attended the United States Military Academy majoring in International Relations and branching Armor. After his military career, he worked as a logistician with a major retailer and a construction company. After much deliberation, Tim decided to make a pivot in his career and joined a small independent financial planning firm in 2012. In 2016, he launched his own financial planning firm Script Financial and in 2019 merged with Your Financial Pharmacist. Tim now lives in Columbus, Ohio with his wife (Shay), three kids (Olivia, Liam and Zoe), and dog (Benji).

Key Points from the Episode

Financial moves for mid-career pharmacists, including resetting financial goals. [0:00]
Financial planning, goal setting, and prioritizing life ambitions. [3:54]
Emergency funds and savings goals, including rechecking amounts and locations. [9:17]
Emergency funds and retirement planning for mid-career pharmacists. [14:34]
Retirement planning and nest egg calculation. [16:46]
Social Security benefits and retirement planning for pharmacists. [22:43]
Updating estate plans for mid-career individuals. [29:13]
Financial planning for aging parents. [33:39]
Financial planning for mid-career pharmacists, including insurance checkups and estate planning. [37:48]
Insurance planning for pharmacists, including long-term care and property casualty assessments. [41:17]

Episode Highlights

“And I think the other thing is that things change. I think checking up on your financial plan is really, really important.” -Tim Baker [5:08]

“I think it’s really important to kind of recast the vision, recast the organization of your financial plan and go from there.” – Tim Baker [5:52]

“I think one of the things that I would challenge people who are mid-career, from a goal setting perspective is, are you doing the things that make you whole or that you’re passionate about?” – Tim Baker [6:28]

“So, you know, I think being critical and actually like slowing down and saying, is this what I want to do. And then using the resources, the time that you have, the dollars that you have, to kind of right that ship, and because again, we’re here for a very finite amount of time. And it goes by quickly, and it sounds very cliche, but it’s true.” – Tim Baker [8:08]

“I typically say that the estate plan is really important, really, for anybody, But particularly for people that have a spouse, a house, or mouths to feed. So if you have those things, and you don’t have documents in place, I think that that’s probably the biggest thing that we need to look at.” – Tim Baker [32:58]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week, Tim Baker joins us back on the mic to talk through six financial moves to make as a mid career pharmacist, we discussed the importance of resetting the vision for the financial plan, how to determine whether or not you’re on track for retirement, gaps to look for in your estate planning and insurance coverage, and much more. For more information and details on each one of these areas, go to yourfinancialpharmacist.com/midcareer. That’s one word again yourfinancialpharmacist.com/midcareer.

Tim Ulbrich 00:37

Before we jump into this week’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. Yes, you’ve worked hard to get where you are today. Yes, you’re earning a good income. But have you ever wondered, am I on track to retire? How do I prioritize and fund all of these competing financial goals that I have? How do I plan financially for big upcoming life events and changes such as moving, having a child, changing jobs, getting married or retiring? Or perhaps why am I not as far along financially at this point in my career as I thought I would be? The answer may be that your six figure income is not a financial plan. As a pharmacist, you have an incredible tool in your toolbox: your salary. But without a vision and a plan that good income will only go so far. That’s in part why we started Your Financial Pharmacist. At YFP, we support pharmacists at every stage of their careers to take control of their finances, reach their financial goals, and build wealth through comprehensive fee-only financial planning and tax planning. Our team of certified financial planners and our CPA works with pharmacists all across the country to help our clients set their future selves up for success while living their rich lives today. If you’re ready to learn more about how Your Financial Pharmacist can support you on your financial journey, visit your financialpharmacist.com/learn. Again, that’s your financial pharmacists.com/learn. Alright, let’s jump into today’s show.

Tim Ulbrich 02:05

Tim Baker, good to have you back on the show.

Tim Baker 02:07

Good to be back. Tim. How’s it going?

Tim Ulbrich 02:09

Good. It’s been a while official congrats on the baby. I know you’re off for a little while. But we’re glad to have you back on the mic.

Tim Baker 02:17

Yeah, thanks for thanks for hosting, it’s trying to get back in the swing of things with baby here. Sleep’s at a premium. So, it’s all good.

Tim Ulbrich 02:28

Well, this week, we’re talking about moves that mid-career pharmacists should be making things that they should be thinking about. And really whether someone is early in their journey, you know, these are things to be thinking ahead of or those that are actually in this season. Hopefully, this is more of a checklist type of episode where you can go through different parts of the financial plan, or perhaps tune up or look back at some of these items. Tim, it dawned on me though, as we’re preparing for this episode of like, that’s us mid-career, you know, it’s really that that phase where you start to feel like, Hey, we’ve kind of checked off some of those basic foundational items. But there’s this whole other set of issues and things that we need to be thinking about going into the future. So for better or for worse, here we are in the middle of our career, as well. And we’re excited to talk through these six moves that mid-career pharmacists should be making in each one of these we have covered at length, if not once, maybe twice, or three times on the episode before. So we’ll make sure to mention that when we get to these individual items and link to those things in the show notes as well. Tim, I think it makes sense that we start number one, really with the goals. You know, this is an opportunity, I think to reset the vision for the financial plan, there often is a lot of transition that can be happening at this phase, you know, this might be the time where people have kids are getting a little bit older, maybe beginning to think about them moving out of the house, we obviously have to be thinking about taking care of ourselves. Maybe we have elderly parents that we’re trying to prioritize as well. So just a lot of transition, I think an opportunity to take a step back and really look at the vision and the goals for the financial plan and how those have changed over time.

Tim Baker 04:05

Yeah, I would package these, I would actually package this together with like, what is the balance sheet look like? And then what is the vision going forward? So you know, we kind of look at this, you know, when we work with clients as a get organized and kind of a goal setting, you know, as a one two punch, and this is typically where, Tim, when a pharmacist asked me a question of Hey, should I do X or Y? I say it depends. A lot of it depends on what is what is the financial picture look like for you? And then what does a wealthy life look like for you both today and in the future. And for everyone that’s going to be different. So, that to me is where that answer comes from. So yeah, like I think in prepping for this episode, Tim, I kind of learned you know, two things or realized two things that I think is really important to say out loud. One is just like a lot of stuff when I was looking at my you know, I was looking at my insurance stuff in my in my nest egg calculation, some of the things that we’ll talk about in this episode. It’s just a lot of moving pieces. And it’s a, and it’s changed a lot over the years. So that’s, that’s the first thing. And I think the other thing is, like, you know, this thing, things change, I think having, you know, checking up on this is really, really important. So, when we look at, like, the, when we look at the balance sheet, again, if you haven’t looked at your balance sheet in a long time, I think it’s really important, it’s not necessarily necessarily something that we feel in our day to day, yeah. But if you, you know, if you if you put your head down, and you’re working, and you’re raising a family or doing whatever you’re doing, and, you know, two or three years later go by, you can actually see the progress that, you know, has been made, right, so you can see, you know, how your assets, you know, been built up, how have you How have your liabilities been paid down? Or not, you know, do you have a different set of, you know, versus if it’s was it student loans in the past the past and now its a HELOC, or something like that. So I think it’s really important to kind of recast the vision recast the, you know, the organization of your financial plan and go from going from there. From the vision perspective, it’s, it’s laughable when you think about, you know, like, when I, you know, had these conversations with myself and my wife, you know, even three or four years ago, and then what that looks like today, like, like, and you don’t sense that, but like, when you when you actually look back, and you kind of memorialize, hey, in 2019 pre-pandemic, this is kind of our viewpoint, this is what we wanted to do. And then we look at that today, it’s vastly different. So I think, like, you know, one of the things that, that I would, you know, challenge people that are mid career, you know, from a goal setting perspective is, are you doing the things that, like, make you whole, or that you’re passionate about? You know, like, I was joking around with my team over the weekend that I kind of felt like an Uber driver, because I was driving to soccer practice and swim practice, soccer practice again, and swim practice again. Which is great, like, I love that I love you know, you know, you know, seeing my kids, you know, do well on their sports and their activities. But, you know, though conversation that I had with my wife over the weekend was like, are like, Are we are we good? Are we on like the track that we want to be on and kind of checking in with and sometimes that’s a check in with yourself, some that’s a check in with a spouse, sometimes it’s a check in with like, a close advisor, like a financial planner. And I think it’s really important to do that, because again, you can put your head down, and you know, live, you know, be living your life, but then, you know, you’re doing that vicariously through your kids or, or whatever, and not actually take the time to do the things that you’re passionate about. And sometimes, you know, again, your own goals. And ambitions are kind of taking a backseat to your kids, which is a it’s a natural thing. But at the end of the day, like there typically is enough to go around, like we can carve out time, we can carve out resources to do the things that you want to do whatever that is. So I think it’s really important, you know, as you are mid-career, and I think this is where, you know, people like to talk about, like a midlife crisis, because they kind of get caught in the rat race, and they’re like, this is not really the life that I want to live. So, you know, I think it’s that, you know, that self, you know, being being critical and actually like slowing down and saying, is this what I want to do. And then using the resources, you know, the time that you have, the dollars that you have, to kind of right that ship, and because, again, we’re here for a very finite amount of time. And it goes by quick, and it sounds very cliche, but it’s, it’s true. And I think you can I always talk about this, like, you know, that whole that sense of being on autopilot. I’ve worked at jobs where, you know, like, my commute to the office in the morning was in darkness, I would you know, I would drive there 30 minutes, I wouldn’t remember that drive, and then you back was in darkness, I would get in my car, and 30 minutes would go by and I’m home. And I don’t remember any of that. And that’s, that’s like an analogy for life is that if you’re not actually slowing down and think about is this what I want to do that’s important. So that’s just my life planning hat. You know, are we are we putting the first things first are we doing, you know, the things that we want to do and making sure that we’re, we have a plan and we’re being intentional for that.

Tim Ulbrich 09:16

I love the example you gave of you know how for you and Shay, your family, right short period of time, the goals can look very different, and why it’s so important to be looking at these regularly and talking about them together to have a third party, you know, kind of help, whether that’d be a plan or someone else. I was even thinking as you shared that, you know, for Jess and I, when you did the planning with the two of us how helpful it was when we would get together to flash up the goals to say, hey, yeah, a year, a year ago, you guys said this is important. Like, is it still important? If so, like, what what are we doing? What are we doing to kind of move this forward? And ultimately, like, where are the funds, right? If it requires funds to do that, and that’s so important. You know, you and I had a very similar season of life where, you know, to the point you gave of the weekend and being the Uber driver We’re like, the days and the months are flying by to really have that mechanism to stop, pause, slow down and remind ourselves of like, are we running the path? Are we running the race that we want to be running? And we’re not gonna get it right all the time, right balance in every season of life, but to have some built in mechanism to not just set those goals, but also to refresh and to look at those periodically.

Tim Baker 10:23

Yeah, absolutely.

Tim Ulbrich 10:24

All right, number two on our list is savings. And we’re gonna talk about a few different areas. Here. We’ll talk briefly about the emergency fund, and an opportunity to recheck where we’re at with that, we’ll briefly talk about retirement. Again, we’ve talked about all these at length, we’ll reference other episodes, and then we’ll touch on some kids college stuff as well. Tim, let’s start with the emergency fund and a recheck. I just talked on Episode 357, last week about five questions that we need to be asking ourselves related to the emergency fund. So make sure you go back and check out that episode. But I think this is one of those areas that where we set the emergency fund maybe early on in our career, and then we don’t think about, wow, a lot has changed, we really got to relook at is the amount that we have there sufficient? And how does this fit in with the rest of the plan?

Tim Baker 11:09

It’s one of those things where yeah, it’s kind of a forgotten, forgotten thing. And, you know, you know, what we really want to do is check in and make sure that you know, what’s in there is appropriate, and, you know, are there things that we can do to, you know, to, to improve it. So, you know, for for a emergency fund, what we’re looking for is three to six months of non discretionary monthly expenses. So these are expenses that are gonna go out the door, regardless of if we work or not. So things like, you know, a mortgage and insurance premiums and utilities and a food bill. So, unfortunately, we tend to get to that number, we have to actually look at spending data and understand like, what that looks like, and then, you know, we kind of look at, you know, what is what is discretionary? What are things that are non discretionary, and we add up all the non discretionary if we have, you know, two incomes, we multiply that by three, if we have one income, we multiply that by six for six months, and then and then that’s our number. For a lot of our clients. You know, it typically can be I think, in a, I would say, anywhere between 15 and $50,000 is what is what the number is, um, so I think like, you know, and this is something that that Shay, I looked at recently, and I think, for us, because of three kids and you know, daycare and all that kind of stuff, it’s, it’s crept up, and I’ve kind of tried to, you know, the interest that I that I accumulate in my high yield, or I do, I do a combination of a high yield savings account. And then like, a laddered CD that I do every quarter, like a year CD for every quarter. So I have a q1, q2, q3, q4 that I just renew, and I kind of let those ride and I’m actually adding more money, both to the high yield, and the, and the CDs as we go here. But I, the only reason I knew to do that was to actually look at the spending, and it’s kind of crept up, you know, just because of family of, you know, probably the last time I did it, we were a family of three, now we’re a family of five. So I think that’s important to do. And again, like, there are so many people that I talked to that they’re like, Okay, this brokerage account, this, this taxable investment account, that is my emergency fund, that is not an emergency fund, it’s, it’s, you know, if you’re investing in it, and you can see volatility, that’s not what we’re trying to do. So I think having you know, the right amount, and then the location is going to be really important. And to get the right amounts, typically, looking at the budget where you’re at today, and again, like I don’t look at the kids swim or, or soccer or other activities as a discretionary as a, that’s, that’s a discretionary thing. So if times get tough, we, you know, try to try to cut that. So I think even, you know, examining what is, you know, what should be in there and what shouldn’t, is important, but, you know, to me, it’s, it’s a little bit of nails on chalkboard, right Tim, because I don’t want to keep cash, I want to get that into the market and get work. And so I need enough to get us through a tough spot. But then also know that, you know, for me, I want to get money into mortgage and a lot of people typically, you know, later in mid career and beyond, they’ll they’ll start because they have an asset like the house, they’ll even use something like a HELOC as like an even deeper reserve. Yeah. So to have access to a HELOC, or something like that is going to be important that I’ve seen people use as a mechanism to, you know, to safely and I wouldn’t say cheaply because of where rates are, but somewhat cheaply access cash if needed, and not necessarily tie up a ton of money in a checking error, high yield savings account, I should say.

Tim Ulbrich 14:33

I like the hack that you mentioned. And yes, I do the same thing where you know, any any earnings on a high yield savings, we just kind of dumped back in the emergency letter, I let it ride right. And the idea being that’s going to help kind of keep pace at some level with inflation, maybe not fully, but to your point, it doesn’t cover those big jumps, right. So like now we’re a family of five instead of a family of three or, you know, we bought an investment property and we’ve got to be thinking about that or we moved homes and you know, mortgage payments went up and so those kind of big moves, where all of a sudden, you know, that emergency fund might go from that 15 to that 30, 35. Are we looking at that periodically.

Tim Baker 15:09

And for you, Tim is probably like your food bill, right? Oh, pre preteens? Like, like, that’s gonna that’s that’s like No, that’s no joke, you know like when you, even Olivia. Olivia is going to be 10 this year and she’s a swimmer. I mean, she eats I feel like as much as I do. And you know, when you when you think about that, that’s, that’s gonna move down quite a bit. So you know, it’s it definitely adds up. And at the end of the day, the emergency fund is there for that rainy day when, when when you need it and just making sure that’s properly funded is going to be important to kind of give you that peace of mind.

Tim Ulbrich 15:42

The second part of savings Tim, I want to touch on as we work through these six different moves for mid-career pharmacists is, you know, I think this is a natural time where we ask ourselves, Am I on track with retirement? Right? And, and this is a season where when we talk with pharmacists mid-career, you know, the visual I have is you’re getting hit in every direction, right? You maybe kids expenses, kids college has grown, we’ll talk about that a little bit. You’ve got this pressure facing you on retirement, you might be caring for elderly parents, you know, perhaps there’s debt still hanging around, we’re working through student loans or other things. There’s, there’s all these different pressures and headwinds, and naturally, that retirement piece made maybe wasn’t a top priority for a while. And all of a sudden, we get to this point where previously we couldn’t visualize retirement now we can start to and it’s like, Am I on track? And I know, we covered this in Episode 272. How much is enough? We’ll link to that in the show notes. So people can dig deeper, but just at a high level, you know, some some tips or some thoughts for folks that are asking this question of, Hey, am I on track? How much is enough? When it comes to retirement?

Tim Baker 16:45

This is such a, this is such a hard one. Because like, I’ll ask like prospective clients, like, Hey, do you feel like you’re on track to meet like your goal for retirement? And if you’re talking to someone in their 30s 40s 50s? I would say even in your 50s, it can be somewhat nebulous anytime it’s like a decade or more out. And typically, that the answer I get is like, you know, Tim, I really have no idea. Which is, I think, problematic, especially if we’re trying to, like, you know, build out a plan. So that’s obviously something that we can fix. But also, it’s kind of that default of like, well, like the 401k, you know, company or the 401k that I have, they have a calculator that says I’m on track. And I’m like, I just don’t know how they calculate that. And I almost feel like, all the compliance things that, Tim, that we have. So it’s almost like irresponsible, yeah, to, again, they’re looking at it very much from it, but people don’t necessarily know that, you know, it’s very much a vacuum. I think that like, the problem with like, Am I on track for retirement is that there’s so many variables that go into it, there’s so much time that goes into it, you know, and I always talked about this, like, when we, when I first started working as a financial planner, I remember working with my previous firm, and it’s like, you know, we would do financial planning by hand, and we would do a time value money calculation. And we would say, Hey, Tim, hey client, you know, your, your, your, what you need for retirement is $3.1 million. And we’d be like this exact number. And then we’ll kind of go on to like, the next thing, I’ll make sure you’re doing this. And it’s like, it just never connected. It was almost like this disassociated moving, because you’d like to look at like what the client had, which might be three or $400,000. And you’re like, I need to, like 10x this in 20 years, or 15 years. And there’s so many people that come back to me that when they start and then they’re like four or five years, they’re like, like, damn, Tim, like, actually, my assets I’ve actually grown like, I almost didn’t believe you. And it’s still hard to even to see that, you know, the progress to get to that, that millionaire level. But I think it’s really important. And so like, I took that, as a financial planner, I would look at the clients, like their eyes would kind of like gloss over because they’re like, that doesn’t mean anything to me. And I can’t we build up this nest egg calculator that basically goes through. And I did it recently for Shay and I, you know, what’s your current age? What’s your target? You know, so how many more years do you have left in the workforce? How long do you expect to live? Which is again, that’s one of the hardest, you know, that’s one of the risks in retirement is like longevity risk, like, are you gonna live really long or not? So again, that’s a little bit of a crapshoot. So we kind of make make some assumptions there. Social Security kind of has an idea of when they think that you’re gonna pass away, what your current retirement savings is with kind of think of it as your present value and your time value money. And then what your current calculate your current income is and then what that kind of projects into what you need for retirement. So we make some assumptions on how is your current assets actually invested? So for a lot of people that I see at least it’s in my opinion, too conservative, especially mid you know, if you follow the rules of thumb of, hey, if you’re, you know, if you’re 40 years old, you take 110 minus 40, your equity, equity amount should be 70%. And then the other 30 should be in bonds, I think that is wrong. But then we do some, you know, asset assumptions when you’re actually in retirement, so might be more conservative. And that kind of gets down to the total need. And then you have to factor in things like social security. So I pulled my Social Security, I think we’ll talk about that in a second. And then like, what does that mean, in terms of what do I need to actually save today? So it’s, it’s the idea here is to take this big number, whether it’s 3.1, 3.6, 2 million, 4 million, and actually break it down to a number that I can digest. So like, if you say, if I’m, if I’m the client, and I say, hey, you know, if I’m talking to a client, I’m like, Hey, you’re putting in 10%, for you to actually get on track to retire by 65. To live to 95, whatever that is, you need to go from 10% to 15%. Like, I can track to that. And also, you know, so that actually is a tangible thing, that’s a, that’s a digestible thing that I can do versus just saying, we need $3.1 and we kind of just are like, it’s a hope and a prayer, right. So it’s not, it’s not a perfect system. Because like, when I look at my own nest egg calculation, you know, I’m maxing out my 401. K. And let’s assume that I’m going to be doing that for the next 29 years, if I retire at 70, which, that’s a, I don’t know, I don’t know if that’s going to be the case. I’m hoping that’s the case. But so there’s, there’s, there’s some assumptions that we have to make to make, to make it kind of come to life. And I think the next level of this, Tim, was kind of going through some simulations. So if I were to, you know, if I were to, you know, take part of my portfolio and purchase x, or if I were to, you know, go and go down to part time, or, you know, do something else, you could actually run scenarios, if I, if I buy my Mountain House 10 years earlier, there’s some Monte Carlo analysis that will actually affect, you know, show you how it affects your success rate with your with your retirement. And I think that’s kind of the next level stuff. But for a lot of people, it’s where am I at? What are the things that I’m that I’m doing today? How can I tweak those things to get a better outcome, and that could be contribution rate, that could be my allocation, that can be a variety of things. So I think that’s important to kind of break down and really see, you know, because the more the longer that we wait to kind of effect change here, especially if it’s negative, the steeper that gets, right. So when you’re, when you’re early in your career, you know, a tweak here there can really have monumental changes, the closer you get to that retirement, just the the steeper that climb is and the harder it is to kind of meet goals. And that’s where you have to start, then potentially taking a haircut on lifestyle and retirement, or you know, the amount of time that you have to work etc.

Tim Ulbrich 22:43

What I love about the nest egg exercise is, you know, going through it for Jess and I, again, just a reminder, with all these things, we’re told it’s not a one and done, right. So if you do a nest egg when you’re, you know, 45, there’s assumptions, we’re building into all of these types of calculations, both in terms of the mathematical assumptions, but also what you want. And you know, you mentioned the different scenarios, and that can change and probably will change over time. So revisiting this periodically is so important, but it really moves I often hear people talking about retirement as like a hope, wish or dream, meaning like, I hope I can retire by 58, or 67, or whatever, or, you know, I would love if I could potentially work part time at some point in the future. And it’s like, hey, yes, those assumptions can change, many of them will change over time. But we can put a number to these into your point, let’s get it down to what do we need to be doing on a monthly basis, because these numbers do seem scary. And you can see, kind of the peace of mind that comes when you walk through these calculations with people when you start with those big numbers, three, four or 5 million. And then you get down to that monthly even if we don’t love the monthly number, when we factor in employer matches, other things, savings we already have. We’ll talk about social security here in a moment. It’s like, oh, okay, like, we can work with that, because we can put our arms around it and start to figure out, can we build that into the rest of the planet, a monthly basis. So, so important, especially for those who are mid-career listening. If you’ve done this before, you know, revisit this, you know, we’d love to have opportunity to work with you on the financial planning side, if you haven’t done it before need to revisit this as well. But something we definitely need to be updating. And looking at periodically. Let’s move to number three, which is really looking at our Social Security benefits and the projected benefits, which I think fits so well into the how much is enough calculation. And, you know, this is an opportunity to really look at our [email protected] to look at our statement, our projected benefits. I think a lot of people probably aren’t necessarily familiar with these tools that are out there. And to begin to figure out and build some assumptions of, hey, if I have social security benefits, what might those be? And then certainly we can project down if people are worried about the future of the benefit. I’m sure you’ll talk about that as well. But thoughts here on on kind of revisiting or looking at the social security piece?

Tim Baker 24:57

So if you go to ssa.gov Like if you have haven’t done this, I would encourage you, especially if you’re mid-career just to kind of see what your social security statement looks like. So to me, that’s really important to kind of get a sense of, and again, like, I think a lot of people, when they, when they think about security, it’s kind of an eyeroll of like, uh, that won’t be there, when I’m when I’m ready to retire, or it’s going to be greatly diminished. You know, I would, what I believe is that, you know, Social Security is one of those things where so many people rely on it to actually survive in, you know, it’s kind of a hand, um, you know, unfortunately, we’re kind of like a hand to mouth in terms of like, a lot of people don’t do a great job of saving themselves, especially, you know, no offense to Baby Boomers, where there was pensions and things like that pensions, and Social Security could go a long way, in terms of retirement, that day is done, you know, so when we moved away from pensions, and more to 401k, the onus has really shifted from the employer to the employee, to make sure that we’re doing what we need to do. And again, social security still there. But there’s lots of, you know, press about, you know, will be viable, and, you know, will it go bankrupt? My sense is that, you know, it will be there, Tim, when we retire it at 70. But it’s kind of one of those things where it’s, it’s unknown what that benefit would be, and again, maybe when we retire, you know, it’s not 70, it’s 75, or something like that, because of a variety of reasons. But the I think the big thing here is to pull your statement. And then when I look at mine, it actually shows me, you know, what my personalized monthly retirement benefits would be, if I started from age 62. So right now, my my benefits $2,076 or if I wait until age 70 and actually get the, you know, credits $3,777. The big thing with Social Security that doesn’t get enough play is that it’s inflation protected. So when we had that big jump into inflation the year before last, yeah, everyone’s payment went up, I think 8.9% or whatever it was your over a year, that’s huge. Because if you’re thinking about, you know, building a retirement paycheck, most of the things that you have, most of the income streams are not inflation protected. So every time, you know, we go through bouts of inflation, you’re you know, you know, the checks, the checks that you have running it coming in, are not going to account for the fact that, you know, your your grocery bill went from 100 bucks per month to $140, just because of where that’s at. So Social Security, you know, plays a part in that. So I think the big thing here is to try to check, you know, when you pull your statement, you can actually see your work year, and what your earnings tax for security were from, you know, I’m looking back from, like, 1991 to present day. So I think to make sure that that’s accurate, that’s, that’s going to be a big thing. And again, like, I think the sooner that you can kind of look at this and kind of get a sense of where you’re at. And then and then look at the you know, look at the the the retirement calculator that’s there, you know, if you if you retire early, versus if your full retirement age, you know, for us, it’s going to be 67. Or if you delay it out to age 70, which to me, I think a lot of people should really look at doing and if you have a plan, you know, before the kind of the knee jerk was like, get the money when you can get it, but that’s a that’s a mistake. And a lot of people are understanding now that it is a mistake. So doing a proper analysis. Again, it’s kind of a microcosm of your of your financial plan is, you know, inventory. So get organized in terms of what does the statement look like? What are the goals in retirement, and then how to properly deploy this, this inflation protected income stream, I think is going to be a big part. Now, for pharmacists, you know, your it might be 25%, 20% of your retirement paycheck, whereas, you know, the typical American it’s, it’s north of 50%. So but I think making sure that we’re positioning ourselves from, you know, to ensure that the income is correct. And then the basically the way that we collect the benefit is going to be in line with your overall retirement picture and financial plan.

Tim Ulbrich 29:13

And I think once we have that number, and again, we can adjust up or down, as you mentioned before as we’re running assumptions, but we can then build that into the nest egg calculation as well and see how that impacts where we’re at on a on a need for a monthly savings. Number four, Tim, on our list of six mid-career pharmacist moves to be considering would be the estate plan. We’ve talked about the estate plan in detail on the on the podcast episode 310. dusting off the estate plan. We’ll link to that in the show notes. But this time well, you and I were just talking about this last week. You know with your new baby in the house right there’s an opportunity to update documents we haven’t yet done our updates with with our youngest who soon to be five, so we’ve got to make sure his name is present, although he’s covered in language, but his actual name isn’t present in the documents. So I think again, and talk to us through why there’s an opportunity mid-career to really be updating these documents or perhaps for some even even establishing these for the first time.

Tim Baker 30:10

It’s probably, you know, I can say this being a ginger, but it’s probably the redheaded stepchild of like the financial plan. It’s, it’s ignored. And unless you’re military, a lot of the clients that are coming through the door really don’t have an estate plan in place. And one of the things that we implemented to kind of really combat this and really supercharge our ability to support clients is we have a an estate planning solution now that we, when we work with clients, if you don’t have a will, a living will, and well trust, if that’s needed, we can actually get those documents in place for whatever state that you live in country, which I think is awesome. So you know, it’s one thing to kind of, you know, say, Hey, Tim, this is what you need something to actually like, walk side by side with you and get the documents in place to make sure you’re covered. So I look at this really from a from from to, you know, to? Well, I would say it’s one big perspective, just change, right. So like, you know, if you think about, you know, maybe when you were, you know, early career to where you’re at now, for some people like could be different relationships, like there’s horror stories about people that are leaving money to like an ex. So I think it’s really important to kind of do a beneficiary check to make sure that the money is going to the right people, you know, Shay is going to be my primary beneficiary for like, a lot of the things that I have. But then right now, it’s like, Liam, my, my, my, or Olivia, my daughter, and Liam my son who are the contingent beneficiary, so if something were to happen to both, it likely would go to the kids, so like Zoe, or our newest baby has to kind of be in on that. Or it could be to like a trust, you know, a trust that is for the benefit of the kids, which is probably the better way to go with minor children. So to me, it’s more of again, looking at the the relationships, whether they’re, you know, out with the old in with the new, or, you know, brand new in terms of kids to make sure that the documents that you had in place clearly reflect your wishes today could even be things about, you know, bequesting, or, yeah, hey, I want to leave, you know, money to my alma mater, or to my cousin Fred, or things like that, that that’s a really reflects the things that you want to do. But also, you know, to, to ensure that from a protection perspective, you know, if you have dependents, they’re there, they’re taken care of, in a sense that, you know, if you were gone, or you can speak for yourself, the documents are that are in place, do that justice. So, for a lot of people mid career, it is adjusting what they have, or it could be it says that, that thing that’s been neglected that you’re like, I’m gonna get to it, I’m gonna get to, I’m gonna get to it, and you have it. You know, what, when I’m talking when I’m talking to prospective clients, and I bring up the fact that we can do this, that like, perks them up, because I know, it’s important. They know, it’s like, uh, I gotta find an attorney, or I gotta find some sort of solution. We got that covered. And to me that alone, I think, especially if you’re, you’re, if you’re a family, or if you you know, I typically say that the estate plan is really important, really, for anybody, particularly, particularly for people that have a spouse, a house, or mouths to feed, right. So if you have those things, and you don’t have documents in place, I think that that’s probably the biggest thing that we need to look at. You know, it’s important to get, you know, a plan for debt, it’s important to get your your nest egg and a plan for your assets and retirement planning. But this is really going to be important to shore up and make sure you’re good to go in the event that something were to happen to you. And again, it’s one of those things like, oh, that won’t happen to me, it will happen to somebody else. And then eventually, you’re going to be that that’s someone else. So not to be morbid, but you know, I think it’s important to cross those t’s and dot the i’s with regard to the state plan.

Tim Ulbrich 33:39

I mean, the reality is just like we’ll talk about in the final item number six on the insurance side, like it’s not fun to think about, right? So it’s easy, but been there myself, it’s easy to kind of drag your feet and let this be the call to action to either update, take a fresh look at those or get those documents created. Number five on our list of six mid-career pharmacists moves to make tip is probably one that a lot of people maybe aren’t thinking about, again, not necessary, the most comfortable thing to be doing would be some of the financial conversations with aging parents, you know, I think it’s common that we see mid-career pharmacists that are entering into a new stage of caring for elderly parents sometimes that, you know, could be a time investment that they need to factor in, that could be a financial investment. And for some, you know, that might be Hey, this is an expense that we need to be thinking about caring for our elderly parents or others. It might be, Hey, do they have the documents, the right documents in place that we just talked about? And do we have an awareness, understanding and transparency into that information? Which admittedly, is a very hard and awkward conversation to have no matter which way we’re looking at it. So thoughts here on some of the financial conversations with aging parents?

Tim Baker 34:44

So I think this can be both from an estate planning perspective, but also like a retirement perspective. So it’s very common for you know, our clients, you know, maybe who are you know, first generation immigrant that you know, they basically Say, Tim I am the retirement plan for my my parents. Right. So I think like building that into their into the our clients plan is gonna be really important because that’s, that’s part of their culture. That’s part of the goal. That’s I think that’s important. I think beyond that, you know, is more of the estate planning stuff. So I look at this as we have to, we have to secure our own estate plan. So our clients estate plan, but then what are the what are some of the things that can negatively affect, you know, and I’m talking negatively in terms of like financial, and maybe some of the legal and logistics, it could be the your parent, like elderly parents that don’t necessarily have a sound estate plan. So whether that’s, you know, we’ve talked about this, what’s the book “Mom and Dad, We Need to Talk” about some of those some of those conversations or some of those instances where, because of a lack of estate planning and foresight foresight, it’s negatively affecting the child’s plan or finances or time because they’re, they’re suing for conservativeship or you know, there, there’s just things that you’re don’t expect. So this is a tricky thing, because again, like I grew up in a household where we really talk about money that much, so it’s kind of a touchy subject. So how do you how do you go about having those conversations, and have, you know, have access to the detail that you need, but not being respectful, and not necessarily prying where you know, that it were, your parents made me feel uncomfortable, but they’re adult conversations that need to be had, because if you wait too long, then again, you’re you’re putting yourself in a position where you either can’t care or provide, you know, the support that you need to a parent, and it can ultimately, you know, negatively affect your own plan in terms of your, you know, financial resources, but also time. So, I think this is one of these things where, again, whether this is a family conversation around the holidays, or it’s a, an email or a letter, or it’s, Hey, this is a shared document, even give me passwords, and you know, I’m not going to access it until the time is needed to be able to do the things. But, you know, if something were to happen to your parents today, like, Do you know how to log into their different accounts? And what is the what’s the plan, and that can be a very uncomfortable conversation for some people, and for some people it’s not, like this, what it is, so I think, just to have that conversation, and understand where to go, what are the proper documents? What are the accounts? I think if you can do that before, you know, there’s capacity issues, or whatever, I think that’s gonna be really important. So that’s, that’s the big thing here.

Tim Ulbrich 37:47

And that’s one of things I appreciate so much, Tim, about Cameron Huddleston book, you mentioned, “Mom and Dad, We Need to Talk” is, it does provide a nice kind of third party and she’s got some great suggestions in that book of specific questions to ask, how to ask them how to ignite the conversations. And, you know, I think having that third party resource, even if you’re referencing that of, hey, I read this book, and you know, got me thinking that we should have a conversation and, you know, likely it’s not gonna be everything addressed in one conversation, but it opens up the door. Sure, it’s gonna be uncomfortable, but for, as you mentioned, for some people, maybe not depending on how they grew up around money, but so important that we understand, you know, what, what is the potential financial impact, as you mentioned earlier, for some if that means caring financially for the parents. And even if that’s not the case, there’s just a lot to consider in the estate planning process that we want to make sure that we’re honoring the wishes and aware of what’s going on as well. So number six, our final item on the six moves to consider for financial moves for mid-career pharmacists, Tim, is an insurance checkup. Again, not the most exciting part of the plan to be thinking about here, I’m talking about term life insurance, long term disability, perhaps beginning to think about long term care insurance as well. I know we’ve talked about term life, long term disability, even long term care extensively on the show before. Is this an opportunity to reevaluate those policies, you know, I’m thinking of this situation just as one, where let’s say somebody in their early 30s, bought a 20 year term. Now they’re at the end of their late 40s. And they’re looking at that saying, hey, the terms coming up here in the next, you know, five, six years. So talk to us about how we might look at the insurance part of the plan here as a mid-career pharmacist.

Tim Baker 39:25

I think like, in the absence of like, a, like an actual insurance calculation, you know, a lot of people will use a rule of thumb for term insurance of like, 10 to 15 times income, which again, that could have changed over the years. If, you know, if you have a 20 year policy, and you bought it in early 20s or 30s and now you’re you know, 40s 50s, like, what does that look like, you know, going forward? So I think like, I think, you know, and I think the other thing, too, is are there other wrinkles in your financial plan, i.e., hey, if I were to pass away, one of the questions I would ask myself is like, do I want to be able to send like, do I want to do I want Shay to have to worry about the mortgage or paying for the kids education? Right. So maybe that’s something that, like, I built into my, my plan going forward, and I didn’t have that, you know, 10 years ago. But now I do. So like, the other thing, too, is like, you know, again, mid-career, if you’re, if you maybe bought a house and moved out of the house, and now rented it, like, what, what happens from an insurance perspective? Like, do you want that property to be paid off? So I think like, I think, yeah, there’s there’s this renewal period, potentially, like, what do you need? And again, maybe it’s not, you know, maybe maybe you buy a 10 year term policy to kind of bridge it maybe don’t need another 20? Year? Maybe you do. But I think there’s also things that you can, in a proper calculation, say, Okay, this is important to me, this is not important to me, and then reflect that in insurance. So, obviously, I think the the life insurance is going to be really important. For some people, even getting it in place, which people just like the estate plan will drag their feet on that long term disability again, that’s one of the things I’m not really worried about short term disability, I think without it, I would just plus up the emergency fund, but from a long term disability, you know, again, how is your income changed over the over the course of the years, you know, if you’re, if you get it through a group policy, that’s going to typically be a function of what you earn. But, you know, if you have your own policy, should you supplement that policy? Because your earnings have continued to climb? You know, does that make sense long term care, we typically, you know, the our thought here is that we want to, we want to support the client as much to age in place. So so much of the science or so much of the studies show that the longer that you can be in your own surroundings and age in your own home, whatever that looks like. So that typically means bringing in some help as you age, you know, that’s going to be important. So what can we do to buy a long term care policy to meet that minimum, and then again, different parts of the country, that’s going to be a different, different amount per month. But we typically want to look at this, believe it or not, in our late 40s, early 50s, because there’s a sweet spot of, you know, if you’re too early, it doesn’t make sense. If you’re too late, it doesn’t make sense in terms of the availability of the of the policies. So what does that look like? So, typically, late 40s, early 50s, is when we want to have that conversation. And again, a lot of people, they kind of just like security, they kind of blow this off, like this is not for me, but you know, I think more and more of of, you know, the the industry is trying to support clients as best they can, to, you know, age in their home residence, and you know, and do it versus going into a facility or something like that. So long term care is going to be really important. And then the last one, I would mention, Tim is property and casualty. So doing an assessment here, holistic plan, which is our tax tool, has this deliverable that we’re testing out now that looks at homeowner’s auto and an umbrella policy. And what it does is try to find gaps in coverage. And if you think about homeowners, if you haven’t dusted that off in a while, like what your home was, you know, if you bought a home at 35, and now you’re 40, over the last five years, your home has appreciated a lot. So are you underinsured in that regard? You know, do you have enough assets? Or is there is there a risk there that you should have an overarching umbrella insurance to cover risk if something were to happen, or if you were to get sued? So these are kind of, again, next level things to kind of consider and just doing a checkup from an insurance perspective, do you have the proper life, long term disability? Is Long Term Care something on the horizon? And then from a property and casualty perspective, are there risks there that we don’t know about that we should have kind of, you know, a circling back to make sure that the coverages that we that are currently in place are, you know, suitable for what you’re currently at in terms of, of risk?

Tim Ulbrich 43:53

Yeah, that’s a good call on on the property casualty just for the appreciation you know, is a good good reminder for me as you mentioned, I was thinking about we had a fire of a house in our neighborhood it’s probably been sitting now for over a year and a half note no movement on the home and all I can think of is it’s probably some type of insurance issue going on trying to work through the process but you know that that’s exactly the question that came to mind right of hey, you know, what, what is the replacement coverage that you have? What’s the timeline of that replacement and given the appreciation and the cost to rebuild a fresh look at those policies, you know, is certainly warranted.

Tim Baker 44:27

I mean, I just I just got a picture here from Shay- fire in the next neighborhood. Fire started in the garage with a lithium battery charger catching on fire. So this is like as as we’re recording here, this is the picture from Shay so like, this stuff is important. Again, if we haven’t dusted that off in a while you’re leaving yourself open, you know, to risk that we don’t and I think it’s a somewhat of an easy fix to mitigate that.

Tim Ulbrich 44:53

Well I hope all was good there. Thanks again for great, great stuff, Tim, as we look through these six mid-career for pharmacist moves. For more information and details on each of these as a reminder, go to yourfinancialpharmacist.com/midcareer. Again, midcareer is one word. And for those that are looking to work with one of our certified financial planners at YFP on your individual financial plan, which would certainly touch these six areas as well as many more, make sure to head on over to YFPplanning.com. Again, that’s yfpplanning.com. You can book a discovery call. We’d love to have the opportunity to talk with you to see whether or not our services are the right fit. Tim, thanks so much and we’ll catch up again here in the future.

Tim Baker 45:32

Thanks, Tim.

Tim Ulbrich 45:34

DISCLAIMER: As we conclude this week’s podcast and important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information in the podcast and corresponding materials should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist podcast. Have a great rest of your week.

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YFP 357: Emergency Fund Check-Up: Five Questions You Must Answer

Posted on by Tim U

Tim Ulbrich, PharmD (YFP Co-Founder & CEO) covers five questions that you should ask related to your emergency fund to determine whether or not it is adequately funded and optimized.

This episode is brought to you by First Horizon.

Episode Summary

This week we’re diving deep into a financial fundamental that often flies under the radar: the emergency fund, also known as the rainy day fund.

Saving for unexpected expenses isn’t easy. It requires discipline, patience, and a leap of faith to stash away money for something you can’t predict. Especially when other financial goals, like paying off debt or investing, are competing for your attention.

In this week’s episode, we explore why having an emergency fund is crucial. From unexpected medical bills to home repairs or sudden job loss, life throws curveballs when we least expect it. But having a well-stocked emergency fund isn’t just about having the dollars to cover these surprises; it’s about gaining peace of mind and confidence.

Join host, Tim Ulbrich, PharmD, as he covers 5 questions you should ask related to emergency fund to determine whether or not it is adequately funded and optimized. Remember, when life throws you a curveball, your emergency fund will be there to catch you.

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Episode Transcript

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YFP 356: Love and Money: How to Successfully Navigate your Finances with a Partner

Posted on by YFP Media

Tim Ulbrich, PharmD (YFP Co-Founder & CEO) digs into how to successfully navigate finances with your partner and shares 25 questions you can use to frame conversations around money.

This episode is brought to you by First Horizon.

Episode Summary

On this episode, we’re talking about love and money! Discussing finances with your spouse, partner or significant other can be tricky sometimes. Tim Ulbrich shares 25 financial discussion questions to help you navigate these important conversations along with a free resource you can download to help get you started. From reflecting on your “money classroom” and the way you were raised to understand money to how you feel about debt, savings, and other important goals, Tim guides you through these important conversations. There is no one-size-fits all to managing finances in a relationship – but sharing the same vision and goals with your partner can set you up for success. This episode is brought to you by First Horizon.

About Today’s Guest

Key Points from the Episode

Navigating finances with a partner, identifying money personalities, and setting goals. [0:00]
Financial planning for pharmacists, merging money personalities in relationships. [1:49]
Money personalities and setting financial goals. [5:50]
Financial goals, budgeting, and spending plan for couples. [10:39]
Financial goals, debt management, housing, transportation, and children’s education. [14:57]
Financial planning with a partner, including goals, investing, and retirement planning. [20:04]
Financial planning and management strategies for couples. [24:32]

Episode Highlights

“I think it’s really important that we spend time to reflect on and identify our money personality and how this does or does not match with our partner. For some of you that have been at this topic for a while, you know how emotional and how behavioral this whole topic of managing money can be. And so it’s important we spend time to reflect on and to get curious about what our money approach is.” – Tim Ulbrich [4:13]

“It’s really helpful that we reflect upon what is the approach that we have surrounding money? How might that have been influenced by the money classroom that we grew up in? The more we can understand that about ourselves, as well as our partner, and how we bring those characteristics into the relationship can be really helpful as we set a plan going forward.” – Tim Ulbrich [8:03]

“Is everything merged when it comes to the finances? Might we have some things separate? Some things merged? Of course, that’s an individual decision for everyone. But ultimately, on some level, we want to have a shared vision, even if some of those items might be separate.” – Tim Ulbrich [8:38]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody Tim Ulbrich and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week we’re talking love and money how to successfully navigate your finances with a significant other spouse or partner. Easier said than done right? During the show, I discuss how to identify with your money personality and how this does or does not match with your partner strategies for setting and achieving goals together 25 financial questions and discussions that every couple should have? Hang with me. I’ll give you a resource and a link to download those questions and advice from the YFP community on what has and has not worked for them in their own journey, navigating this important topic with their partner.

Tim Ulbrich 00:45

Now before we jump into this week’s episode, I have a hard truth for you to hear. Making a six figure income is not a financial plan. Yes, you’ve worked hard to get where you are today. Yes, you’re earning a good income. But have you ever wondered, Am I on track to retire? How do I prioritize and fund all these competing financial goals that I have? How do I plan financially for big upcoming life events and changes such as moving, having a baby, changing jobs, getting married or retiring? And perhaps why am I not as far along financially at this point in my career as I thought I would be? Well, maybe the answer is that your six figure income is not a financial plan. As a pharmacist, you have an incredible tool in your toolbox: that’s your salary. But without a vision and a plan that it good income will only go so far. That’s why we started Your Financial Pharmacist where YFP we support pharmacists at every stage of their careers to take control their finances, reach their financial goals, and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners works with pharmacists all across the United States and helps our clients set their future selves up for success while living a rich life today. If you’re ready to see how YFP can support you on your financial journey, you can learn more by visiting your financial pharmacist.com/learn again, that’s your financial pharmacist.com/learn. Alright, let’s hear from today’s sponsor First Horizon and then we’ll jump into the show.

Tim Ulbrich 02:16

Does saving 20% for a down payment on a home feel like an uphill battle? It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for a down payment on a home may take years. For several years now we’ve been partnering First Horizon who offers a professional home loan option AKA a doctor or pharmacist loan that requires a 3% downpayment for a single family home or townhome for first time homebuyers, has no PMI and offers a 30-year fixed rate mortgage on home loans up to $766,550 in most areas. The pharmacists home loan is available in all states except Alaska and Hawaii, and can be used to purchase condos as well. However, rates may be higher and a condo review has to be completed. To check out the requirements for First Horizon’s pharmacist home loan and to start the pre-approval process, visit yourfinancialpharmacist.com /home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

Tim Ulbrich 03:20

Hi there, Tim Ulbrich here flying solo this week as we talk about love and money: how to successfully navigate your finances with a partner. Now first things first, this is a heavy topic right? And I do not have all the answers. When it comes to our financial plan for Jess and I we have found the system- keyword system -that works best for us. But we are far from perfect. We’ve made our fair share of mistakes. We haven’t always been on the same page. And it certainly has required compromise and grace on both sides. So this is not a preach and teach episode. That would be very helpful. Rather, the intent is to give you some things to think about and conversation starters, to find the system that works best for you. Because at the end of the day, that’s going to be what matters most.

Now, before we jump into some of the tactical strategies, and some of the questions and conversation starters, I think it’s really important that we spend time to reflect on and identify our money personality and how this does or perhaps does not match with our partner. Right for some of you that have been at this topic for a while, you know how emotional and how behavioral this whole topic of managing money can be. And so it’s important we spend time to reflect on and to get curious about what is our money approach? What is our money, personality? What is our money classroom that we grew up in the household that we grow up in financially? And how does that perhaps shape how we manage our money today and ultimately how we merge two of those money personalities together as we try to work and get on the same page. So some questions to think about here as it relates to the money personality. Do you approach money in the same manner that you were raised? Have you reflected upon the money classroom that you grew up in? And maybe what worked and didn’t work? Was money in your household an open conversation? Was it a closed conversation? Was it stressful? Was it calm? What was the emotional tone surrounding money? Was there transparency around money? Or was it a taboo topic? What were the spending habits, what was said? And what were some of the unsaid lessons that you learned along the way? And how did all of this potentially contribute to the money personality and the habits that you employ today that you ultimately bring into your relationship? Right, good and bad. Probably true for all of us.

If you want some guidance on this, there’s a great resource, we’ll link to it in the show notes. The Money Couple has five different money personalities, they have a book and an assessment if you want to really dig in and go further on this topic. And they in that resource they referenced five money personalities, those five personalities are number one, the Security Seeker. Number two, is the Saver; number three is the Spender; number four is the Risk Taker; and number five is the Flyer. Now, anytime we do these assessments, right, we’re running a risk a little bit in terms of bucketing ourselves into one of these approaches, when often we may have a little bit of more than one of these. And that’s one of the things I like about this tool is they combine two of these, what they call a primary and a secondary to come up with your money profile. So for example, let’s say that you identify as a saver/security seeker. Okay, so just some quick definitions here a saver, pretty much their outlook is that as they share in their own resources, A penny saved is a penny earned. You make things happen by getting the best deal, right, you can often be someone that’s very thrifty. Characteristics of a saver would be someone who’s trustworthy organized with money, they also would have some real challenges potentially, including maybe obsessing over money, having a hard time letting go. And they would rarely spend compulsively, they really liked the plan. And they really liked that good deal. Now a Security Seeker, which here was the secondary personality, they have an outlook that better safe than sorry, right protection and security is the definition here. So these individuals make things happen by planning for the future. And they’re often very well prepared. So some defining characteristics here would be they can investigate things thoroughly do a lot of research challenges, of course, could be, you know, some of the potential and again, letting, letting go. And maybe finding that balance that we often talk about in the show of living the rich life along the way. Certainly also trustworthy with their finances, they want to make decisions by confirming that there’s a plan, right? So they’re not, they’re not gonna be very spontaneous, and they’re spending money like to have multiple options. This is just one example, one assessment. But it’s really helpful, again, that we get curious that we reflect upon what is the approach that we have surrounding money, how might that have been influenced by the money classroom that we grew up in, and the more we can understand that about ourselves, as well as our partner, and how we bring those characteristics into the relationship can be really helpful, as we then set a plan going forward.

Tim Ulbrich 08:27

So once we really think about some of those money, personalities, you know, I think it’s then that we want to really figure out how can we set and achieve goals together? Now we’re gonna get into a little bit about, you know, perhaps is it everything is merged when it comes to the finances? Might we have something separate? Some things merged, completely separate. Of course, that’s an individual decision for everyone. But ultimately, on some level, we want to have a shared vision, even if some of those items might be separate. And I think it’s so important, I’ve talked about this on the show before, that we start with the vision, and not necessarily start with the budget or the spending plan, right? Not start in the weeds, but really start on what is the dream that we have financially? What does success look like for us collectively as a unit? And can we agree upon that vision, that direction, that dream that we have for us financially, right? That’s a much, I say, easy but easier conversation than getting into the individual decisions. This is also the place where we really want to get all of those goals, all of those ideas out of our heads onto paper, we want to see what overlaps what doesn’t overlap. Obviously, there’s gonna be some compromise here along the way, but once we get them to be shifting from unsaid to said, right, so Jess can share her goals, I can share my goals, we can see what what is similar, what’s different, and then we can begin to start to compromise and prioritize those. That’s really where we can start to then begin to implement and execute on that vision. So for us, I’ve shared this before on the show, typically what we do is want once a year we’re looking at, hey, what does success look like for us over the next 12 months? Right? Keeping the bigger vision in mind? What does success look like for the next 12 months? And what are those things that we want to focus on spending? You know, so we’re looking at, hey, are we on track with savings goals for the future? And retirement planning? If not, what are some things that we want to surplus in the following year? What do some of the experiences look like for us in terms of vacations, home projects, things like that? What are the giving goals for the year right? These are the things that we need to begin to, again, get out of our heads onto paper so we can start to set a plan. Now, I think it’s really helpful here, especially if you have two individuals that are on completely different pages that this is really really where a third party can be very helpful. I know for Jess and I, our financial planner at YFP has been really helpful in getting us to have conversations not only together when we’re in the room with a financial planner, but also in between those meetings to make sure that this is an open conversation as we can possibly have. Now, I have some questions here that I think are good conversation starters. Right? I started the episode by saying this is not about telling you what you should do. This is really about helping to start conversations, stimulate some discussion so that you can figure out what the system is that works best for you. So I’ve organized these questions into different areas. And I have 25 of them, I’m just going to mention them briefly. And we have a one page resource that you can download for free that will have a list of these questions. You can go to yourfinancialpharmacist.com/25 – two five again, yourfinancialpharmacist.com/25.

Tim Ulbrich 11:43

Okay, so in the spirit of starting conversations, here are 25 financial discussions that I think are worth having. And let’s start with the first bucket, which is setting goals, budgeting and just the overall approach to managing the finances. So the first question is, have we discussed and agreed upon our short term, midterm and long term financial goals? Now you can define these differently, I think of short term goals is within the next 12 months, next year, mid-term, one to three years in long-term greater than three years. Obviously, you can determine the timeline that makes the most sense of you. And then furthermore, how can we best set, review and update these on a regular basis? So there’s that initial exercise, and then how often are we going to be reviewing these so that we can make sure we are able to implement those in the plan? Sounds simple, right. But everything starts with the vision and getting to some level of an agreement on the shared goals.

Second question here is have we developed and agreed upon monthly spending plan, budget, whatever you want to call it, that accounts for all of the income and all the expenses? And does this spending plan, budget, again, whatever you want to call it, does it represent and include the goals that we just worked through in the first question? Now, again, for some individuals, and I’ll share some data here in a little bit from our community, for some individuals, everything is merged. Some they have some separate, some is completely separate. So obviously, you have to work through this as it relates to how you treat the merging or lack thereof of the accounts. But do we have representation within our spending plan, approach, whatever that looks like lots of different ways to do that. So that the goals, there’s an actual plan to implement and achieve those goals.

Question number three, does one of us take more of the lead than the other when it comes to managing the finances? And if so, are both of us aware of our overall situation? How do we ultimately make sure that both parties are aware of the progress if one person is taking the lead. I have seen that that often, not always, often is the case where one person may take the lead. So if that’s the case, what’s the plan? What’s the strategy? What’s the structure so that both parties are aware of what’s going on? And the overall progress? Right, the overall situation?

Number four, I’ve alluded to this a couple times is the desire to merge all of our finances; to keep some separate, some merged; or to have everything completely separate. Now for Jess and I, we’ve made the decision that everything’s merged, I’m not here to tell you that you should do that, or that’s the only way. But really having that conversation of what’s best for us, is it all merge is a little bit of both, or is it everything that would be completely separate. Number five, do we need to check with one another before spending any money? If so, is it a certain amount? What’s the criteria for this? How do we determine this. Some, you know, couples might have a large purchase or something that would trigger hey, we need to have a discussion about this. So what are those criteria, if any exist when it comes to making some of those bigger purchases? So that’s the first group of questions around setting goals. budgeting and your overall approach.

Tim Ulbrich 15:01

The second group of questions is around debt management. Debt Management. So question number six here on our list of 25. is how much debt have we acquired thus far? Right? Do we know? Do we know the numbers? Is everyone aware of the debt that’s that’s accrued? And what will be our plan to pay off the debt? Do we both understand each other’s debt position and the feelings perhaps just as important, the feelings towards the debt? Right, for some people, I’ve talked about this on the show before for some people, there can be a significant aversion to debt? Others maybe that’s not the case. So if you have two individuals where you have opposite feelings on debt, that’s an important conversation to have. Are we treating this as our debt? Or is this separate debt? Right? When you think about things like credit card debt, student loans, car payments, or other things that especially may have been existing coming into the relationship. Number seven, again, on debt management, how comfortable are we with having debt? And I would encourage you to break this down further to different types of debt, right, including student loans, credit card, mortgages, car loans, etc. So not just a blanket debt good or bad, but how do we feel about different types of debt? And then final question on debt? Number eight on our list is do we view each other’s debt as our debt? Or is this your debt? Right? And how does that potentially approach how we pay that off? All right, third group of questions is around housing and transportation. So question nine on our list is how do we feel about renting property versus owning a home hot topic right now, given where the housing market is at, given where home prices are and where interest rates are at? And if we already own a home, are we okay with the current situation? Or is there potentially a desire to move? Right? Again, we want to get a lot of these questions and maybe things that we’re thinking about making sure we have an opportunity to discuss with one another. So if we don’t own a home already, how do we feel about renting versus owning a home? What’s that timeline? Like if we already own a home? Are we thinking we’re set? Or is there a potential or desire to move? Next question around housing transportation, number 10 on our list, if currently renting, and there’s a goal to own a home, do we agree on the location, on the purchase price, and the amount of downpayment that would be needed, right? That’s gonna have a big impact on the budget. And again, if things are separate, and not merge, how are we both contributing to that downpayment? And getting ready for that purchase? Number 11, as relates to transportation? Do we view our cars as a necessity? Is it a luxury where we lease? Are we gonna buy our cars? If we buy our cars? Are we paying them outright? Are we going to finance part of it? How do we view the transportation part of the plan? And again, let me pause here and reinforce what I was saying towards the beginning. I don’t really think there’s a right or wrong answer here. The goal is to really get you thinking about, hey, how do we feel individually? How do we feel collectively as a unit? You know, as I think about this question here on transportation, it reminds me of Ramit Sethi’s book, I Will Teach You To Be Rich. I’ve referenced that many times on the show before and one of the things he talks about he starts the book is this concept called Money Dials. And what he’s referring to there is identifying those things that derive the most significance and meaning for you as a part of the financial plan and have a plan to spend money, what he’s referring to is the dial, dial that up. And alternately for the things that you maybe don’t care as much about financially, dial that down, right. For some people, you know, transportation cars may be something that’s has significant value, and for other people, not so much.

Tim Ulbrich 18:35

Alright, next group of questions relates to kids, children. So number 12 on our list is how do we feel about one of the biggest expenses we often see in the financial plan – daycare? What’s our budget for this? And how does it fit in with other financial goals? Number 13, how do we feel about public versus private K through 12? education? You know, again, this might certainly link back to the home purchase and the location and and where you’re looking for home based on schools. And if it is private education is the goal, how will we plan for this and prioritize it with other financial goals? Number 14, again, in this area of children, how do we feel about paying for our kids college? This is a hot topic, right? You often see maybe people that are split on this. And how do we plan for this? Are we hoping to pay for it in its entirety? A partial amount? Are we banking on you know, scholarships or other funding other family to help taking on debt? What’s the plan for that? And then last question, as it relates to children, what ideas and strategies do we want to employ to teach our kids about managing money? Right? We started this episode talking about the money classroom we grew up in. And for those that have children in the home that you’re raising now, they’re obviously growing up in their own money classroom in your house. And so what strategies are we employing and how are we approaching teaching kids about money? What’s our philosophy about behind that, right. So this this gets to things like, you know, our philosophy around alarm allowances, and giving, and how we’re going to teach some of those lessons to our kids. And at what ages are they ready for those lessons?

All right, next group relates to saving, investing, and retirement planning. So question number 16, when it comes to the emergency fund, are we comfortable with three months? Right, your general rule of thumb recommendation three to six months of essential expenses? Are we comfortable with that? Three months, six months, something in between, something different? Have we discussed that? Again, are we on the same page with that?

Number 17, what financial goals are we trying to achieve by saving or investing? What does success look like, right? So we often talk about the importance of saving and investing for the future. But for what? What are we trying to achieve? And what does success look like? Number 18? What does retirement look like for both of us? Are there similarities? Are there differences? What’s the desired age? Right? What are the activities? What what are we working on? Which is the next question: what activities are we engaged in during retirement? What are we doing together? What are we doing separately? Right, beginning to envision so that we’re approaching that retirement phase with intentionality.

Next question, how much should we be saving and investing for retirement each month? And how do we balance and prioritizes with other goals? And then final question here on saving investing in retirement planning? What is our risk tolerance for investing? And again, if we have two different risk profiles? How are we approaching that as we’re saving, investing and planning for the future?

Final set of questions as a group, I’m just calling miscellaneous questions. Got four left on the list here. Number 22. How does each of us feel about giving? How much? How often?Where? How will we plan for this? And what priority? Are there certain things that we have to have achieved before we do this or not? Number 23: Do we plan to do the financial plan ourselves? Or are we looking to hire a professional to assist? Are we on the same page about this? If the goal is to hire someone, what are the criteria we’re going to use that will help us find the right fit? Who’s taking the lead in this conversation? What does that look like for us as a unit? When it comes to assisting family financially, whether that be caring for elderly parents, maybe that’s supporting a family member need or some other situation, how do we feel about this? Right? How do we feel about this financially, and the impact that it can have in other parts of our financial plan? And then finally, question number 25? How will we strike that balance between saving for the future and living a rich life today? What does it mean to us to be living that rich life today? And how are we prioritizing that in the financial plan?

So again, that’s 25 conversation starters, there’s a lot there, right, the different categories we talked about, you can download that list again, yourfinancialpharmacist.com/25. I hope you’ll reference that maybe print it off, and have some of those discussions with your partner. Next, I want to give some input not just from me, but from the YFP community on what has and has not worked for them in their own journey of navigate navigating this topic with their partner.

So I recently posted a poll on LinkedIn asking the following question, that for those that are working with a significant other spouse or partner on their finances, which of the following best describes your situation: is everything merged or all the finances merged? Are some things merged something separate? Or is nothing merged? In essence, everything is separate. And what we saw from that data was just shy of 50%- 49% responded that all of the finances were merged. 42% responded that some were merged and some are separate. And 10% responded that nothing was merged, and that everything was separate in their accounts. Now, some of the comments and advice that I thought were helpful to pass on and again, some some different perspectives here. Kelly had this to say lots of systems can work. But it all starts with transparency. It’s not uncommon for one person in the household to do the bill pay, and thus see more of the transactions. Periodic money dates can help facilitate conversation. A favorite topic in our house is identifying mutual goals and where we want to prioritize funding for the year, sometimes their goals are not aligned. And that is important conversation, as well. So Kelly, comes transparency. Having that open conversation having those periodic money does it dates and sometimes those goals aren’t aligned, and important conversation to get on the same page. Tracy said that we have a joint household account, where we contribute an equal amount each month to cover our household expenses, and some minor rainy day savings. We tossed around percentage based on income but landed on equal flat dollar amount. We also have separate personal spending accounts for ourselves, so we don’t feel like we have to justify personal spending to one another. We’ve divvied up who contributes and covers what to each savings bucket and who does the insurance via their paycheck all this to say after typing this that our marriage is basically a business. I thought that was some humor to add in there as well. Cassidy said my husband, I follow the 50-30-20 budgeting process right now. We have a joint account where 50% of our income goes towards household expenses and joint purchases, a joint high yield savings where we both contribute 20% of our paycheck for larger goals. And then 30% goes in our fun money personal checking accounts. So far it’s working great ensures that we’re both contributing an equitable portion of our income.

Final one that came in is someone shared just got married in summer of 2023. My husband wanted to keep our finances separate, except for one joint checking to pay utilities out of. This came from seeing his parents get divorced about six years ago and had always fought about money. He did not want that to be us. So going into the marriage, we plan to keep our own savings. I that’s a great example before I go further with this one of how that upbringing, right, how that money classroom can impact how we approach our money today. She goes on to say that we’re now nine months married, and we’re getting ready to buy a house with the need to pay the mortgage, we’re rethinking finances and will likely be combining more of our money. He prefers a separate checking account for each item, such as utilities and mortgage, we still plan to keep the money we had pre-marriage as our own stock savings, mutual funds, etc. We have a joint credit card for joint expenses and groceries that’s worked well. We still have separate credit cards. Being upfront about money has been so important to us. We’ve had several long conversations about money, pre-marriage, and within the last few months to get us set up for success. So it sounds like here, there’s even some transition, as they’re getting ready to purchase a home. They’ve been married now just shy of a year, maybe perhaps more that’s moving into the joint accounts, but a system that they’re still working through.

So I appreciate all of those that contributed providing different ideas. So again, the spirit of this right is to identify that system that works best for you. Right works best for you and your partner, really accounting where we started with reflecting on and getting curious about what is the money mindset? What’s the money personality approach that I have? And do I have a good understanding of that for me, as well as my partner? Really coming up then with those shared goals? That vision we talked about? What does success look like in the short, mid and long term, and then beginning to work through those individual areas of the financial plan.

Tim Ulbrich 27:19

Well, certainly last but not least, as many of you know, we have a team of Certified Financial Planners at Your Financial Pharmacist that we offer fee-only financial planning and tax planning, we work with pharmacists all across the country. And certainly we’d love to have the opportunity to work with you. And we’d love to have an opportunity to talk more to see whether or not the services are a good fit. You can learn more about our fee-only financial planning services again at yourfinancialpharmacist.com/learn. Again, that’s your financial pharmacist.com/learn. I think, as I mentioned a couple times that third party, right, that third party can be so helpful to facilitate some of these conversations and to begin to execute on the different aspects of the financial plan. Well, thanks so much for listening, and have a great rest of your week.

Tim Ulbrich 28:05

Before we wrap up today’s show, I want to again, thank this week’s sponsor of the Your Financial Pharmacist Podcast, First Horizon. We’re glad to have found a solution for pharmacists that are unable to save 20% for a down payment on a home. A lot of pharmacists and the YFP community have taken advantage of First Horizon’s pharmacist home loan, which requires a 3% downpayment for a single family home or townhome for first time homebuyers and has no PMI on a 30 year fixed rate mortgage. To learn more about the requirements for First Horizon’s pharmacist home loan, and to get started with the pre approval process, you can visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacist.com/home-loan.

Tim Ulbrich 28:51

As we conclude this week’s podcast and important reminder that the content on this show is provided you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. Information to the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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YFP 355: 5 Financial Moves to Make After Graduation

Posted on by YFP Media

Sponsored by YFP+, YFP Co-Founder Tim Ulbrich shares five key elements for building a strong financial foundation after graduation.

Episode Summary

On this episode sponsored by YFP+, host Tim Ulbrich outlines five key elements for building a strong financial foundation. Whether you are a pharmacy student looking ahead, a soon to be 2024 graduate, or a resident, fellow, or new practitioner trying to find solid financial footing, Tim shares what it means to build a strong financial foundation, no matter where you are in your career.

With the average pharmacist facing staggering student loan debt and often lacking financial knowledge, Tim shares practical strategies to help pharmacists to begin to navigate debt management, investing, insurance coverage and retirement planning.

About Today’s Guest

Key Points from the Episode

Financial moves after graduation, including debt management and investing. [0:00]
Financial planning for pharmacists, including student loan debt and income management. [3:52]
Financial planning for pharmacists, including assessing current financial state and setting long-term goals. [8:28]
Proactive budgeting to prioritize financial goals. [13:50]
Investing early and often for financial success. [18:24]
Investing for pharmacists, including retirement accounts and tax-advantaged savings. [23:39]

Episode Highlights

“Without a plan, pharmacists certainly may be income rich, but net-worth poor.” – Tim Ulbrich [6:48]

“I saw firsthand how good decisions early in the career could certainly accelerate the financial plan, as I now look back nearly 18 years as well as how some of those bad decisions had a lingering effect in our financial plan. That’s part of the reason why I’m so passionate about teaching this topic to pharmacists at all stages of their career.” – Tim Ulbrich [8:08]

“At the end of the day, money is a tool. And we’ve really got to strike this balance between making sure that we’re taking care of our future selves, making sure that we’re putting this foundation in place today, and also living a rich life along the way.” – Tim Ulbrich [12:21]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich 00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast for each week we strive to inspire and encourage you on your path towards achieving financial freedom. On today’s episode, I’ll be covering five financial moves to make after graduation. Whether you’re a student looking ahead, a soon to be 2024, grad, or resident fellow or new practitioner trying to find solid financial footing, this episode is for you. We’ll be talking all about what it means to build a strong financial foundation, including practical strategies that you can implement in your own plan.

Before we jump into today’s show, I have two exciting announcements. First up, make sure to sign up for our next YFP webinar on Thursday, April 25 at 8:30pm Eastern, where pharmacist and real estate agent, Nate Hedrick, The Real Estate RPh, co-host of the YFP Real Estate Investing Podcast, will be presenting on your checklist for buying a home in 2024. During this free webinar, Nate will walk you through how to know if you’re ready to buy a home. We’ll discuss the current state of the housing market and give valuable insights into the home buying process. You learn more and register at yourfinancialpharmacist.com/webinar again, yourfinancialpharmacist.com/webinar.

Second announcement last year we launched a nonprofit YFP Gives that aims to empower a community pharmacist to give to alleviate the indebtedness of the PharmD students and graduates, to help enhance the financial literacy within our profession, and to support other pharmacist-led philanthropic organizations and efforts. We’re thrilled to announce that our first round of the YFP Gives scholarships is now live! We’ll be giving out three $1,000 scholarships and applications are due on April, 30 2024. For those eligible for the scholarship include PharmD students and new practitioners within five years of graduation. You can learn more and apply at yfpgives.org/cholarship. Again, yfpgives.org/scholarship.

Alright, let’s hear more about our new online community YFP Plus, and then we’ll jump into today’s episode.

Do you ever feel like you’re trying to figure out this money stuff all on your own and aren’t sure where to turn? Maybe you’re overwhelmed with determining how to tackle your student loan repayment. Or perhaps you’re living paycheck to paycheck despite making a six figure income. Maybe you have a negative net worth and aren’t sure how to climb out of debt or make progress on your financial goals. Trust me, I’ve been there. When I finished my residency, I was starting at $200,000 of student loan debt and confused about how to best navigate the transition to new practitioner. I had a great income, but was living paycheck to paycheck and felt trapped. The good news is that you don’t have to continue feeling that way. At Your Financial Pharmacist, we want pharmacists to have the education, resources, and support they need to get a plan in place so they can stop feeling overwhelmed and they can use their six-figure income in the best way possible. That’s why we created YFP Plus an online membership community that empowers pharmacists to gain the knowledge and skills necessary to take control of their financial well being. Inside YFP Plus you have access to exclusive on demand courses. Like the prescription for student loan success, you have access to the right capital financial planning tool so you can track your debt assets and net worth to view your financial progress. You’ll have access to exclusive live events, monthly themes and challenges, a space to ask questions to YFP financial planning and tax professionals, and a community of like minded pharmacists on a similar financial journey as you. If you’re ready to get started inside YFP Plus to take control of your finances, visit yourfinancialpharmacists.com/membership. And if you sign up today, you’ll get a 30 day free trial. Again, that’s yourfinancialpharmacist.com/membership.

Hi there, Tim Ulbrich here welcome to this week’s episode of the YFP podcast. Excited to be talking about this very important financial transition, whether it’s going from student to new practitioner or resident or fellow to new practitioner, critical five year window, where we need to really be thinking about how we can best optimize the financial plan and get on some solid financial footing. So in the next several weeks, we’re about 12,000 pharmacy students that are going to be awarded the doctor of pharmacy degree joining them of course in the workforce will be those completing postgraduate training, whether that be residents, fellows, graduate students, and these graduates on average are gonna make about $120-$130,000 a year of course, depending on where they live in the area of employment they choose. And if we assume that they work a 40-year period with an average raise cost of living about one to 3% they’re going to earn approximately six to $9 million throughout their careers. Let me say that again: about six to $9 million of gross income throughout their careers.

Now if we assumed that about 30% of that income would be eaten up by federal income tax, FICA tax, which is Medicare and Social Security, state income tax, health insurance premiums, and a small contribution to an employer sponsored retirement plan, that leaves about four to $6 million of take home pay. So again, we start with about six to $9 million of gross income, we’re left with about four to $6 million of take home pay. Now I know that’s imperfect math, right? There’s a lot of assumptions that are in there, but just Just stay with me for a moment. We can debate how far a six figure income does or doesn’t go. But let’s agree that a pharmacist income on average, is about $50,000 above the average household income in the United States.

So if we look at the average household income in the United States, it’s about $75,000 per year, it was the average pharmacist’s income according to the Bureau of Labor Statistics, that’s about $130,000 per year, right. So by all intensive purposes, pharmacists make a good income. And if it’s managed wisely, it should be more than enough. So what’s the problem? Well, I’ve talked with hundreds of pharmacists who make a great income but feel like they aren’t progressing financially. They feel stuck. And yes, student loan debt is a big contributor, but it’s certainly not the sole culprit. And I know that because we recently had three-plus years worth of a pause on federal loan payments starting back at the beginning of the pandemic, and those feelings of making a high income, but not progressing financially didn’t go away during that time period. The main reason I see pharmacists experiencing financial stress is the omission of having an intentional plan in place that includes clear goals, and a system that prioritize and funds those goals on a monthly basis. It’s proactive, intentional planning. Without a plan, pharmacists certainly may be income rich, but net-worth poor.

That’s really what today’s episode is all about. It’s about having an intentional plan, and building a strong financial foundation early in one’s career. Now, I know the importance of this because I lived it.

So as many of you know, I graduated from pharmacy school in 2008. I did a year residency, in 2009. Came out of residency entered an academic position. And I remember vividly having that feeling of, wait a minute, I make a good income, but I don’t feel like I’m progressing financially. And the main reason for my journey for our journey as a family is that early on, we were navigating through a sizable amount of student loan debt, a little over $200,000 of student loan debt. And we would eventually get that paid off in the fall of 2015. That was a big milestone for our journey, certainly one that I’m excited about and excited and teaching others about as well.

However, we made that journey more difficult than it needed to be. I didn’t understand terms like Public Service Loan Forgiveness, there wasn’t great information out there. We paid more interest than we had to in the journey. We perhaps, weren’t looking at how other parts of the financial plan fit together while we are also pursuing that debt repayment. And because of that, I saw firsthand how good decisions early in the career could certainly accelerate the financial plan, as I now look back nearly 18 years as well as how some of those bad decisions had a lingering effect in our financial plan. That’s part of the reason why I’m so passionate about teaching this topic to pharmacists at all stages of their career. Here, we’re of course talking about those that are making that transition. Now let’s talk about what I mean by having a strong financial foundation.

So through my own experience, and in teaching 1000s of other pharmacists on this topic, I’ve come to appreciate really five key elements that are critical to building a strong financial foundation. Now let’s be clear, this is not five things that once we check the list, this is the finish line, right? Think of this as literally the first couple blocks that we’re putting in place on the foundation of our financial plan so that we can grow and thrive in the long term and do so with confidence. So let’s talk through what these five areas are.

Number one is completing a financial vitals check. So I believe the starting point is to complete an honest self assessment of where you are today with your personal finances as a pharmacist, right. no need for judgment, no need for shame. Where are we today? Because before we can implement a plan, right, we have to have a good idea of our progress made thus far and what are some of those opportunities that we could potentially improve upon.

So here are just a handful of questions to really help you consider areas of the financial plan that might require your attention. Number one, do I have an emergency fund in place, approximately three to six months worth of essential expenses? Number two, do I have any revolving high interest rate credit card debt, right? I’m not talking about the credit card charges that you pay off each month but that revolving debt that’s accruing. Perhaps 20-25% interest. Number three, do I have an optimize student loan repayment strategy? Critical as we look at many new practitioners and the average debt load that folks are carrying, this is often a key piece of the financial puzzle that we have to put in place, and then build around it. Do I have sufficient own occupation, long-term disability insurance that covers about 60% of my income in the event that I’m unable to work as a pharmacist? A few more questions. Do I have sufficient term life insurance to care for loved ones who depend on my income? If that’s applicable. Do I have adequate professional liability insurance? And do I know my retirement number? Have I thought about, certainly far away, but what is that number that we’re shooting for in the future? Am I on track? If not, how much should I be saving each month to ultimately achieve that goal? We have a lot of information, and resources in each one of these areas available at yourfinancialpharmacist.com.

We certainly have talked through many of these topics at length on the podcasts and the blog, so make sure to check out those resources. Furthermore, if you if you want to go through some of this in more detail yourself, we have a really neat tool available called the YFP Financial Fitness Test. We’ll link to that in the show notes. It’s a really fun interactive quiz that will take you through essentially conducting a vital check in and help identify some areas that you perhaps can improve upon, and that you might want to implement as you look at setting goals for the future. So that’s step number one, completing a vitals check

Number two. Step number two is setting the vision setting the vision. So after we reflect on the current state, right, the current situation, the Financial Vitals Check. It’s time to really establish a vision for the future. Now, this is the area where I think it’s really helpful that we let ourselves dream a little bit right, we just perhaps bogged ourselves down and kind of looking at the current state and the reality, maybe that didn’t bring the greatest feelings of joy. And so this is our opportunity to really let ourselves dream a little bit. Spending time reflecting on questions like what does it mean to be living your rich life? What brings you the most joy? As it relates to the financial plan? Are there experiences such as traveling, giving spending time with family and friends or something else? Right, at the end of the day, money is a tool. And we’ve really got to strike this balance between making sure that we’re taking care of our future selves, making sure that we’re putting this foundation in place today, and also living a rich life along the way.

One more final question to reflect upon, if you were to find yourself in a position where you were financially independent, the find that you are no longer required to work. How would you be spending your time perhaps for some of you? The answer is, hey, exactly like I am is great. Right? This is meant to help us identify what are those things that derive and give us the greatest significance, and meaning in our lives. And for every person, this certainly can look different. So that’s number two. Step number two, letting ourselves dream setting the vision, before we start to chart the path forward. Alright, step number three, is to develop the spending plan to develop the budget to develop the system that’s going to help us bring this vision to reality. Right. So in step number one, we identified what are some of the opportunities, what are some of areas that we might want to focus on. Step number two is really about the vision of where we want to go.

Step number three, is now about making that come to life. Now, while one spending plan method, budgeting method, whatever you want to call, it will never be right for everyone, I really believe that the zero-based budget is a great place to start, especially for those early in their career, those that are looking to get back on track. Reason being is that with a zero-based budget, you give every dollar you earn a job before the month begins. This is a proactive planning process. Now, I’m not suggesting this as a method that you stay with forever. This certainly can feel onerous at times. But as we’re looking at defining how we’re spending our income, making sure that we’re allocating income towards our goals, and that we have a good track on what that income is and how it’s being spent. This system is really going to help us shine a light on that. So the goal is again, we’re doing this proactively is to spend your paycheck essentially down on paper to zero, and to ensure that your financial goals can be funded rather than hoping you have money leftover at the end of the month.

Okay, so for example, let’s say that after step one, which again, step number one was completing the vitals check, and step number two is really setting that vision. Let’s say you identify three goals that you want to focus on over the next year, just as one example. Let’s say goal number one is to save $500 per month for an emergency fund, and up until it’s fully funded at $25,000. Let’s say that you want to save $300 per month in a Roth IRA to supplement your retirement savings. And finally, is the third goal. Let’s say that you want to save $300 a month and a travel account to fund one trip per year. Okay, so in that vision setting, you determine that travel was a was an item that was really important. So in this case, with these three goals, right, we have some money set aside in earmark for the emergency fund some for retirement savings in a Roth IRA, some in a travel account, when you go to work the budget through the budgeting process, you want to have those three areas represented just like any other expense, so that you prioritize these before the month begins.

Again, we’re working proactively really important, rather than hoping we’ve got something leftover at the end of the month. So just like we account for a mortgage, or rent payment, or utility payment, or a car payment, right, we want to think about our goals in the same sense, and making sure that we’re building our plan accordingly to prioritize and fund those goals. In my experience, and in talking with others, so much of the stress, so much of the feelings of overwhelmed and confused around the financial plan comes from having all of these competing priorities swirling in our minds, without necessarily a plan for how we’re actually going to achieve them. Right. And so what we need to do, and what we’re trying to do here in step number three is get those ideas out of our head onto paper. So we can list them down, we can prioritize them, and we can start to put a plan in place to actually achieve those goals and to see the progress.

Now, sometimes we realize that, hey, in this season, or in this moment, we’re not necessarily going to get to all of those goals. That’s certainly normal. But at least we have an expectation of what’s happening. And we’ve been intentional with proactively planning how we’re going to work through those different goals. Now, if you’re ready to try this out yourself, we’ve got a free budgeting template you can download, we’ll take you through this process that I’m referring to here. You can download that at yourfinancialpharmacist.com/budget, we’ll link to that in the show notes as well. Again, your financialpharmacist.com/budget. Alright, that’s step number three, developing the spending plan.

Step number four, is automating your plan. Now I’ve talked about this several times on the podcast, and I’ve referenced that this has really been one of the most transformational things that Jess and I, over the last 15-16 years since I graduated, have really evolved into that has had a significant impact on our own plan. So once we do the work in steps one through three, right. Once we’re able to complete that vitals check to identify what are some of those gaps, what their progress once we’re able to set the vision once we implement the spending plan. Now it’s time that we make sure we execute, right we actually achieve these goals. And that’s really what automation is all about. I

n his book I Will Teach You To Be Rich , Ramit Sethi says that automating your money will be the single most profitable system that you ever built. And I agree automation is so apparent, so effective, so easy to implement, yet vastly under utilized. It involves essentially scheduling the transfer of funds to the predefined goals, right? We just talked about that in the previous steps and doing so confidently knowing that we’ve already accounted for these in the budget, right, because we were proactively planning during that process. Sure, it takes a bit of time to set up. But once it’s set up, it provides a long term return on your time benefit. And perhaps equally, if not more important peace of mind knowing that you’ve thought about prioritize and have a plan working for you to fund your goals. Right. I just mentioned a couple moments ago that so much of the feelings of stress and confusion, overwhelmed come from that uncertainty come from the unknown. So this step is all about bringing it into the known and executing on the plan that we set.

Tim Ulbrich 18:54

So in terms of operationalizing this, one example certainly not the only way, my wife Jess and I, we have a high yield savings account. We use Ally Online Bank for all of our accounts. And inside of that high yield savings account, we essentially have several different buckets. And those buckets are named according to the goals that we’re working on. Right. So one bucket, for example, is an emergency fund. Another bucket might be for a vacation that we have earmarked, you know this summer or next year, one bucket is for the next car purchase one bucket might be for something related to the boys’ education or to the activities that they’re involved in. So all of that rolls up into one high yield savings account. So it’s liquid, it’s accessible, we can get it we can move it to our checking account if we need it. However, the key there is it’s earmarked and defined for the goals that we’re trying to achieve. Now. Just like I said, a little bit of a go, you know, this may not be a forever system that you have to develop. We have found it to be something that’s beneficial ongoing because it’s a visual reminder. It’s the visual aspect of hey, we set those goals, here are the actual buckets, right named for the goal that we worked on. And it allows Jess and I, I’d have some really good conversations. And of course, transparency into the system that we’re working on. This system it took us about 15 minutes to get set up. And again, you could just as easily achieve it through perhaps your own bank that you already have, or through tracking these in a simple spreadsheet. So, as I mentioned, the buckets are simply a visual representation, it really is just sitting in one high yield savings accounts. And it’s then earmarked to these different buckets. So that’s step number four is automating the plan.

Step number five, again, as we’re on this journey, towards building a strong financial foundation, is investing early and often. Investing early and often. Now, Albert Einstein is credited with saying whether he said it or not, compound interest is the eighth wonder of the world. He who understands it earns it, he who doesn’t, pays it. Right, regardless of whether he actually said it’s really good advice, the time value of money is real. And the earlier you save, the less aggressive you’re going to have to be. Now easier said than done, right? Considering many competing priorities that new practitioners are facing. And I remember well, in my journey after graduating 2008, not only was it the student loans that were staring us in the face, right, it was a potential home purchase, it was the emergency fund, it was building up some additional reserves, and of course wanting to enjoy some things as well during that transition. So there’s a lot of things that are coming at you in this season of life. And shortly thereafter, we would start our family and certainly new expenses that would be there as well.

Now let’s take a look at an example of how powerful early investing can be. Okay, early investing. So if we assume and you can run your own numbers using a number of calculators, we have several on the YFP site as well. But if we assume a pharmacist is making, let’s say, $126,000 per year, if we assume that their incomes gonna go up on average, about 2% per year could be a cost of living adjustment could be a performance adjustment, a combination of both, we’re gonna assume that they’re going to put away 15% of their income. And we’ll assume that there’s an average annual rate of return on that investment of 6%. Now, we know the markets don’t work like that in terms of a clean 6% every year. But for the sake of the calculation, we’ll go with that we’ll assume no match from the employer, and that they have a planned retirement age of 60. Okay, so pretty normal situation. So I’m gonna make an average pharmacists salary that’s putting away about 15% of the year and they want to retire at the age of 60. Now, what we see is that if they start at the age of 25, saving 15% of their income with these assumptions, when they get to the age of 60, the math tells us they’re gonna have about $2.6 million. Now, is that enough is a whole another question, right, we’ve talked about that. On the show before we’ve done an episode on how much is enough, we’ll link to that in the show notes as well. So 25, if they start, we’ve got $2.6 million at the age of 60, a coordinator these assumptions now if we wait to the age of 30, right, because of student loans, because life’s expensive, there’s a lot of things going on that 2.6 turns in $1.8 million. An $800,000 difference already. If we wait to 35, we’re down to $1.2 million. If we wait to 40, we’re down to $800,000. Right. So that’s the power of time value of money. That’s what Albert Einstein was talking about with compound interest in really the value of investing as early as we can, knowing that the earlier we invest, perhaps the less aggressive we’ll have to be the later we invest, the more that we’re going to have to do to catch up.

So naturally, then the question is, well, where do I save? Right? And that depends, of course, there’s lots of different options. Everyone’s investing journey is going to look a little bit different. We have to really assess what’s the risk tolerance, what’s the risk capacity, what are the goals, but many pharmacists are going to be focused early on, especially in their career on tax advantage, retirement accounts, tax advantaged savings accounts. So these would be employer sponsored accounts like a 401k or a 403B offered through your employer. Of course, as the name suggests, there’s both Roth and traditional versions of those anytime you hear traditional thing pre tax, anytime you hear Roth and post taxt. There would also be opportunities to save and something like an IRA stands for individual. So these are not through your employer. Again, there’s a Traditional and Roth version of those. Lower contribution limit in 2024 $7,000 versus in the employer sponsored accounts $23,000. And then the other one I typically think of in this bucket would be an HSA or health savings accounts, which again, we’ve talked about on the show at length before we’ll link to those episodes in the show notes as well. So those are the five foundation and steps and I would encourage you with each one of those to learn a little bit more. Right and as I think about and zoom out here for a moment we think about being on this financial journey throughout your career. Right. So important. Remember, here we’re talking about laying the early bricks of the foundation. Again, this is not the finish line where we start to check these boxes off, but rather, it’s that strong foundation upon which we can then build and hopefully build wealth throughout our career and live confidently knowing that we’ve done some of the hard work early on. So just a quick recap, step number one, we talked about completing that vitals, check the self assessment. Step number two, we talked about setting that vision step number three, developing the spending plan. Step number four, automating that plan, right, that was all about the execution. And then step number five is investing early and often.

So let me wrap up by sharing some advice that I got from the YFP community. I recently reached out to the YFP community to say hey, what are some of the things what are some of the things that you think would be helpful as you reflect back on your journey, going from student to new practitioner student to resident to fellow to a new practitioner that you wish you would have either learned or you wish you would have followed that advice and let me just share you a handful of those response.

One person in the life he can be said it’s worth it to learn how to budget early even on a resident salary you can save.

Another person said there’s one financial hack I wish someone had whispered in my ear my own graduation, house hacking with a high value short term, or midterm rental model. We’ve talked about house hacking on the show before referring there to essentially living in a unit can be a single unit duplex, triplex quad and then renting out a portion of a single family house or if you have multiple units renting out other units.

Another person in the YFP community said I wish I would have learned about the different student loan payment options and how to lower my taxes as a W2 employee.

Another person share this advice don’t put off paying your loans if you’re not going down to forgiveness pathway, tackle them head on, and get them done with. Financial life only gets crazier down the road with the addition of a spouse and kids. Looking back, I wish I would have lived as a student resident lifestyle for two years or more and paid extra to knock out those loans early. And then finally, someone else said if you do income based repayment for your student loans, don’t do forbearance during residency, your payments will be low, and you’ll be finished a year earlier.

So just a few pieces of advice from those in the YFP community that I’ve made that transition. I hope you enjoyed this episode. Thank you so much for listening on a regular basis. Again, we have several of these topics we talked about before we’ll link those into the show notes. And I hope you have a great rest of your week. Take care.

[DISCLAIMER]As we conclude this week’s podcast an important reminder that the content on this show is provided to you for informational purposes only and is not intended to provide and should not be relied on for investment or any other advice. information in the podcast and corresponding material should not be construed as a solicitation or offer to buy or sell any investment or related financial products. We urge listeners to consult with a financial advisor with respect to any investment. Furthermore, the information contained in our archive newsletters, blog posts and podcasts is not updated and may not be accurate at the time you listen to it on the podcast. Opinions and analyses expressed herein are solely those of Your Financial Pharmacist unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward looking statements, which are not intended to be guaranteed of future events. Actual results could differ materially from those anticipated in the forward looking statements. For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the orphanage pharmacists podcast. Have a great rest of your week.

[END]

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