6 Financial Moves for Mid-Career Pharmacists

Are you a mid-career pharmacist who’s tackled some of the financial planning basics but is left wondering, “What’s next?”

You’re not alone!

Whether you’re feeling confident in your current trajectory or are wondering if you need a financial tune-up, we’ve got you covered with six financial moves to make as a mid-career pharmacist.

1. Recast the Vision of Your Financial Plan

This point in your pharmacy career (10-30 years after graduation) is the perfect time to reflect on financial (and personal!) goals you previously set, take note of where you currently are with those goals, and reset the vision of them if needed.
 
The truth is that this phase of life often brings a lot of transition. Depending on your age and when or if you had children, you may be beginning to think about them moving out of the house. Maybe you have elderly parents that you’re trying to prioritize or plan for their future care. Perhaps you’re beginning to think about retirement and are wondering if you’re on track. Or maybe you’re still in the thick of trying to take care of yourself prioritizing the needs of your children.
 
No matter what you’re facing, this is an opportunity to take a step back and look at the vision and the goals for your financial plan, how those goals changed over time, and reset your goals and how you’re going to fund them if needed.
 

2. Savings, Savings, Savings

This step of the checklist includes your emergency fund and taking a pulse on your retirement savings.

Let’s dig in. 

Emergency Funds

We recently released a podcast episode that took a deep dive into emergency funds, including how to determine if it’s adequately funded and optimized.

If you haven’t recently revisited your emergency fund and the reserves you have on hand, now is a good time to do so as there is a possibility that your needs have changed. 

For an emergency fund, what we’re looking for is three to six months of non-discretionary monthly expenses. These are expenses that have to be paid whether you are working or not, including mortgage or rent payments, utilities, insurance premiums, and food. After you add up all of your non-discretionary expenses, multiply that by three if you have two household incomes or by six if you have one household income. This gives you the number that you should have saved in your emergency fund. 

Typically for Your Financial Pharmacist planning clients, we see anywhere between $15,000-%50,000 that’s needed to be saved in an emergency fund. 

Retirement

Have you recently wondered if you’re on track for retirement? 

Pharmacists we talk to at this mid-career stage often feel like they are getting hit in every direction. 

Between kids’ expenses, kids’ college needs, retirement savings, caring for elderly parents, and paying off remaining debt, there are a lot of financial and personal priorities. Because of all of these different pressures, sometimes the retirement piece falls to the side or wasn’t a top priority for a while, and now, as you get to a point of being able to visualize retirement more, you may be wondering if your retirement savings are on track.

Check out these podcast episodes in our retirement series that dig into retirement savings, how to determine how much is enough for retirement, nest egg calculations, and how to build a retirement paycheck:

Don’t miss downloading this free guide: Retirement Roadblocks – Identifying and Managing 10 Common Risks

3. Social Security 

If you haven’t looked at ssa.gov to see what your social security statement or projected benefits look like, now is the time to do so. 

Having an understanding of your projected social security benefits at retirement and how that fits into your nest egg calculation and overall financial plan is crucial.

To learn more about social security and mistakes to avoid making as a pharmacist, take a listen to these podcast episodes: 

4. Estate Planning

Number four on our list of mid-career moves to consider making as a pharmacist is all about the estate plan. 

We dug into this in detail on YFP 310: Dusing Off the Estate Plan.

Unfortunately, estate planning is a part of the financial plan that’s often ignored or isn’t given enough attention. Doing a beneficiary check and ensuring that you have estate planning documents in place so that your dependents and family are protected is so important.

The reality is, getting these documents in place isn’t fun to think about and it’s so easy to push this task to the side. This is your call to action to either update, take a fresh look at your estate planning documents, or get them created. 

5. Conversations with Aging Parents

It’s not uncommon to see mid-career pharmacists entering a new stage of caring for their elderly parents. This is not only an emotional and time investment, but can also be a financial expense that you need to consider.

On top of that, knowing if your parents have the right estate planning documents in place or even having a deeper understanding and transparency of their financial situation can be valuable.

But how do you have these sometimes very hard and awkward conversations?

We had Cameron Huddleston, award-winning journalist and author of Mom and Dad, We Need to Talk, on YFP 321: Navigating Financial Conversations with Aging Parents. This one is a must-listen.

6. Insurance Check-Up

We often talk about term-life and long-term disability insurance at the front end of someone’s pharmacy career, but it’s important to re-evaluate these policies in your 30s, 40s, and 50s. 

For example, if you bought a 20-year term life policy in your early 20s or 30s and now you are in your 40s or 50s, does it still provide adequate coverage for your family if something were to happen to you? Do you need to supplement your policy in any way because your earnings have continued to climb?

Other items to consider is looking into long-term care insurance, especially in your 40s or 50s, and property and casualty insurance.

We dig into long-term care insurance in this podcast episode:

Conclusion

If you’re a mid-career pharmacist interested in how working with our team of CERTIFIED FINANCIAL PLANNERS™ at Your Financial Pharmacist can support you on your personal financial plan, which would touch on these six areas as well as many more, click here to learn more.

If you’re ready to take the next step, click here to book a free discovery call with our team.

9 Financial Questions Pharmacists Need to Answer During the COVID-19 Pandemic

The following post contains affiliate links through which Your Financial Pharmacist may receive compensation.

Updated 1/3/22

9 Financial Questions Pharmacists Need to Answer During the COVID-19 Pandemic

COVID-19 has had such a significant impact on the U.S. economy that an unprecedented $2 trillion stimulus package known as the Coronavirus Aid, Relief, and Economic Security or CARES Act was recently passed. From stimulus checks, suspended student loan payments, and the ability to tap into retirement accounts, it’s important to know how these changes can not only help you through a difficult time but also be advantageous even if your income hasn’t been affected.

In addition to the CARES Act, the Internal Revenue Service’s decision to extend the tax filing date presents some unique opportunities as well.

The following are some key questions you should be answering right now in the midst of the pandemic and with the recent federal legislative changes.

1. Do you have an adequate emergency fund?

If you suddenly lost your job and had no income, how many days could you survive financially? If you’re like many Americans, the answer is probably something like “not long.” According to a survey from Bankrate, only 40% of people would be able to cover an unexpected $1,000 emergency with savings.

During this pandemic, where many have suddenly found themselves without an income, it has unfortunately illuminated the above statistic as many are already turning to credit cards and even dipping into retirement accounts in order to keep their households running.

Although the textbook answer is to have 3-6 months of living expenses saved in an account that is liquid and is fairly easily accessible, should that still apply during this time? The answer is, it depends. How stable is your job? Does your household have multiple income streams? How much do you need to sleep well at night? Find an amount you are comfortable with and one that allows you to reduce your dependency on credit cards, loans, or other non-preferred options to bail you out.

If you are still employed but will likely lose your job soon then now is a great time to increase your emergency fund.

High yield savings accounts and money market accounts are great options to house your savings as they are not only safe but they offer an interest rate that’s usually significantly higher than a regular checking or savings account. I recently opened a money market account with CIT Bank that currently has a rate of 1.75%. You can check out my review about CIT Bank here.

2. What’s your game plan if your income drops?

One of my best friends is a dentist for a decent-sized office in a small midwest town. He has seen tremendous growth in the business since he started working there 6 years ago which has afforded him with an incredible salary in addition to monthly bonus checks. With always having a full schedule and a seemingly endless number of cases, it really came as a shock when he was told by the partners of the office that he wouldn’t be getting paid for at least the next two weeks and should apply for unemployment.

Millions of Americans across multiple sectors have lost their jobs or have been furloughed secondary to the outbreak of COVID-19. As stay-at-home orders in states and municipalities increase resulting in the closure of many non-essential businesses, the unemployment rate continues to climb and has been estimated to reach 32%.

While pharmacists have proven to be one of the most important and essential workers during this time (and even in higher demand currently as evidenced by CVS giving out raises and hiring thousands of employees), that, unfortunately, hasn’t been the case for everyone in the profession.

A number of pharmacists who work for hospital systems have had their hours cut or have been encouraged to take leave due to a low census or a suspension in elective surgeries and procedures that have been put on hold.

So what should you do if you already have had or anticipate a job loss or reduction in income?

First off, don’t panic!

It may only be a temporary situation and you could be right back to work as demand changes.

But if it turns out to be an extended or more permanent income hit, there are definitely options to help remedy the situation. This is obviously where having an emergency fund is critical but even if you don’t have a ton of cash saved or already have burned through it, consider these:

Explore employer benefits

Depending on your specific situation, you may be able to use your accrued leave to counteract any disruption in paychecks. Obviously, this would be a temporary solution but could be one of the easiest ways to ensure immediate cash flow.

Beyond that, if you are furloughed or laid off you may be eligible for unemployment benefits. While each state sets its own eligibility guidelines, some of the core requirements include being separated from your job through no fault of your own and you may have to meet a specific wage and time worked.

As of February of this year, the average unemployment check was $372/week according to the Bureau of Labor Statistics. You can check out your state’s requirements here. Under the CARES Act, self-employed, 1099 aka gig employees, and workers with a limited work history are also eligible for unemployment at this time. Beyond expanding eligibility, the act also increases the state’s benefit by $600/week (through July 31st, 2020) and there is an extension of 13 weeks of benefits.

The waiting period to receive benefits varies among states but is usually around one week. Many states are waiving this because of the current situation.

Re-evaluate your budget

What could you cut if you find yourself in a tough financial situation? Desperate times will force you to take a hard look at your spending and figure out what you can live without. Dave Ramsey frequently discusses something called the Four Walls whenever someone is having trouble paying the bills and trying to get by. They are food, utilities, shelter, and transportation. These are essentially the bare necessities you need to focus on first to protect yourself and your family.

If you have credit card debt, a car loan, or other non-government-backed loans that you are having difficulty paying, you should reach out to the servicer to see what your options are.

Many of the major car insurance companies such as Progressive, State Farm, Allstate, Geico, and others are offering a credit, discount, or payback during this time which could help with managing monthly bills. If you have already paid in full for several months you may actually be getting a credit.

Take advantage of government relief programs

While many landmark legislative moves were implemented through the CARES Act, one of the most unprecedented is the dissemination of economic impact payments aka “stimulus checks.” These checks will be automatically directly deposited into your checking account (assuming you have received direct deposit previously) linked to your most recent tax return sent out soon in amounts up to $1,200 with an additional $500 payments per qualifying child (<17 years old). You may experience a delay if you don’t have direct deposit set up and are expecting a paper check.

However, the rebates begin phasing out at an adjusted gross income of $75,000 for those filing as single and $150,000 for those married filing jointly, which will, unfortunately, exclude many pharmacists. This is based on your most recent tax return. You can check out this calculator to see how much if any you are eligible for.

There’s also a proposal for a COVID-19 HEROES Fund which would give essential workers premium or “hazard pay” of up to $25,000 and a $15,000 essential worker recruitment incentive to attract and secure needed workers. This is intended to be included in any future stimulus package. This could unlock some potential opportunities if passed.

If you own a home, your mortgage is likely one of your biggest monthly expenses. As a result of COVID-19, the Federal Housing Finance Agency has implemented relief in the form of forbearance for up to 12 months for loans owned by Fannie Mae or Freddie Mac, as well as the Federal Housing Administration (FHA).

You can reduce or suspend your payments for this time without any fees or penalties. However, you will have to pay back any missed payments at the end of the forbearance plan. This applies to owner-occupied properties in addition to investment properties. You can check more information on mortgage forbearance here. Even if your loan isn’t backed by one of the Enterprises, there are other private lenders who are currently offering relief as well.

If you currently rent and are going to struggle to make your payments, check with the landlord to see what options are available. Many states have issued a moratorium halting evictions temporarily. For more information, check out this Investopedia post: Renters: How to Get COVID-19 Rent Relief.

Tap into your retirement accounts as a last resort

You have probably been told to never take out money early from a retirement account because of penalties, taxes, and the fact that it stunts your opportunity for compound interest. While in most scenarios this general advice makes sense, when you are in an emergency, are desperate to pay your bills and have to make sure you are providing for your family, it could be an option. If you have non-retirement investment accounts you can liquidate, this could be obviously be considered as well.

Another provision under the CARES Act is that you can tap into a combination of employer-sponsored plans (401k, 403b, TSP) and IRAs up to $100,000 anytime in 2020 without paying the usual 10% penalty (if not yet 59 1/2) if you have been impacted by COVID-19. In addition, for IRA withdrawals you will have up to three years to pay any taxes incurred unless you are withdrawing Roth IRA contributions you previously made which wouldn’t have any tax consequences.

There’s also an option to put the money back over a three-year period.

For 401(k)s, you can borrow 100% of your vested balance up to $100,000 (up from $50,000) by September 27th (180 days within the signing of CARES act). Typically, you get five years to pay back a 401(k) loan before it gets treated as a distribution and becomes taxed. If you already have a 401(k) that you were supposed to finish repaying by December 31st, there’s a provision in the CARES Act that gives you an extra year to pay it back.

While not traditionally considered a “retirement account” but can be utilized in that way, a Health Savings Account (HSA) could be another option if you are in need of cash. If you have incurred health expenses that you have not reimbursed yourself for (even if the expenses occurred years prior) while the account was in place, you could make tax and penalty-free withdrawals.

Additionally, if you are at least age 62, you could opt to start collecting your social security benefits. However, this move will greatly lower your overall total realized benefit since delaying until full retirement age results in greater monthly payments.

Look for other positions and ways to make money as a pharmacist

If your change in income is not likely going to be temporary, figuring out how to get your cash flow back on track is the most important move you can make. Many of the other options are simply bandaids and will not be great long-term solutions. You obviously have the option of searching for another traditional pharmacist position and there could be a huge demand in certain areas depending on the trajectory of the pandemic.

Recently, joint policy recommendations by all of the major pharmacy organizations entitled Pharmacists as Front-Line Responders for COVID-19 Patient Care were released to combat the pandemic which could help open up more job opportunities. The recommendations include authorizing pharmacists to test for COVID-19, flu, strep, and others and initiate treatment and expand current state immunization laws to include all FDA-approved vaccines in addition to the forthcoming COVID-19 vaccine.

They also recommend allowing pharmacists with a valid license to operate across state lines, especially through telehealth. Other recommendations include being able to make therapeutic substitutions as drug shortages arise without a physician or other provider authorization.

Beyond working in the community as a front-line responder, there are a number of ways to earn income. One good potential option, especially during the pandemic, is to remotely complete comprehensive medication reviews (CMRs) through a platform such as Aspen RxHealth. Aspen RxHealth is a company with an app-based platform that connects pharmacists with patients on Medicare plans who are eligible for a Comprehensive Medication Review (CMR).

What’s cool about their technology is you call the patient directly from the app and then perform all of the necessary functions of the CMR directly within the app. There’s no paperwork and once complete, the patient gets a copy of the review and any recommendations you have.

They currently pay $40/CMR and then typically throw in bonuses and incentives to complete a certain amount within a week or on particular days. You also get to work on your own schedule as long as it’s within their recommended time frame of operation.

According to their FAQs, they accept pharmacists for specific states and geographical areas that are in need but they do not specifically mention where the current needs are.

Master meme generator, pharmacist, and host of RxRadio Richard Waithe recently discussed on Instagram (@richardwaithe) how most people have at least $1,000 worth of stuff in their home and shares some key tips on how to get started selling on eBay and other platforms.

If you want other ideas, check out this post 19 Ways to Make Extra Money as a Pharmacist in 2020. You can also check out the YFP podcast as we frequently have pharmacists on the show who talk about the side hustles they started and have grown.

 

ways to make money as a pharmacist

3. Do you need to change your investment strategy?

You probably haven’t been able to avoid seeing something related to the stock market tanking with headlines of “largest single-day point drop” or “worst quarter ever.” It’s true that we are seeing some of the biggest changes in the past decade.

On March 11, 2020, secondary to COVID-19, the Dow Jones Industrial Average entered a bear market for the first time in 11 years with the S&P 500 and NASDAQ entering the same territory the next day. If you looked at your retirement and other investment accounts that primarily housed equities, they are likely a lot less than what you remember seeing earlier in the year.

While there’s certainly a lot of fear and panic causing people to break open the glass and pull their investments off the shelf, this isn’t the first time this has happened. In fact, between 1926 and 2017 there have eight bear markets ranging in length from six months to 2.8 years. A bear market is when there is a decline of 20% or more in one of the major stock indices from its peak whereas a correction is a decline of 10%.

So how should this change your investment strategy?

If you have many working years left with time to be in the market, it may not really change anything. While the knee jerk reaction may be to bail and stop making investment contributions based on what everyone else is doing, staying the course could be your best move. But remember, the stock market will rise and fall. Over any 20 year period, the S&P 500 has always posted a positive return.

In addition, numerous studies have shown that beyond a select few, most people cannot consistently time the market and that’s where dollar-cost averaging can be key. The basic concept is that regardless of what’s currently happening in the market you contribute the same amount of money every month toward your asset allocation. By doing this, you will buy more shares when the market is down and fewer shares when the market is up.

So even if you haven’t started investing yet but have been meaning to, don’t let the current situation prevent you from getting started.

If you need help building your portfolio and putting together a solid investment strategy, you can book a free call with YFP Director of Business Development, Justin Woods, PharmD.

4. Do you need to update your estate plan or get one in place?

There’s no way to tiptoe around the current situation. We are in a pandemic and people are dying. Most deaths have occurred in those who are middle-aged or elderly and have underlying health conditions. However, there are also a number of cases of healthy 20-30-year-olds now being reported who have died.

Whether you are someone on the front line directly caring for those with COVID-19 or you’re practicing in a lower-risk environment, now is a good time to consider getting an estate plan in place.

I know that this is probably one of the last things on your financial to-do list but it’s something you don’t want to overlook. Having a will in place will ensure your property goes to whoever you decide, give you the ability to name an executor who will enforce your will, and name a guardian for your children if this applies. If you die without a will, this will be decided by probate court according to your state’s laws and regulations.

Along with a will, you want to have a living will which is also called a health care declaration or an advanced directive. This outlines how you would receive medical care and who you want to make decisions in the event that you are incapacitated. Depending on how complex your estate is, you may want to hire an attorney to help. Some employers offer this as part of your benefits package. You can also check out Thoughtful Wills, which is a law firm that specializes in estate planning available in multiple states and is endorsed by our financial planning team.

5. Are your life and disability insurance policies adequate?

Similar to estate planning, life and disability insurance are typically pretty low on the financial priority list. However, the reality is that if people are dependent on your income and you couldn’t financially survive if you become disabled, these are critical pieces of your financial plan. And they may be more important than ever if you are someone who is at high risk of being exposed to the virus.

Not everyone needs life insurance, but, if you have a family that depends on your income or someone would be responsible for your debt if you pass, you should have a policy in place. Even if you have a policy with your current employer, you may want to consider getting a private policy as well. Workplace policies are generally not portable and the death benefit may not be enough to cover your needs.

There are generally two major types of life insurance: term life insurance and permanent. Term is the way to go for most pharmacists because it’s less expensive and not flooded with fees.

The amount of coverage required will depend on your needs including existing debt, income support, and future expenses. Future expenses include things like funeral costs, childcare, and college tuition. Check out Episode 45 of the YFP podcast for more information on figuring out your life insurance needs. You can get a free quote in two minutes through PolicyGenius.

You put in a lot of time, energy, and effort to be able to become a pharmacist and make a good income. That’s why it’s so important to protect it. Disability insurance for pharmacists is really income insurance. It provides you with money in the event that you become disabled and are unable to work. Personally, I have known pharmacists that have been unfortunately out of work for months to years because of head trauma and autoimmune diseases.

What would happen if you were suddenly unable to work because of an accident or illness? How would you support yourself or your family?

Compared to other types of insurance, long-term disability insurance for pharmacists can be more expensive depending on your health status and coverage options. But can you afford not to have it? You may have a policy through your employer but many times they are not as robust a private policy and may not offer own-occupation coverage.

You can check out The Ultimate Guide to Disability Insurance for more information on things to look for in a policy and how to navigate all of the riders and other features.

 

life insurance for pharmacists, term life insurance, disability insurance for pharmacists

6. How does the situation affect your student loan strategy?

The student loan changes within the CARES Act can have a big impact on how pharmacists pay back their debt. While the legislature may not change your overall strategy it can temporarily affect some key decisions.

Here are the key provisions:

1. Payments for qualifying federal loans were originally suspended until September 30th, 2020 due to the CARES Act. However, per an executive order, this date has been extended to December 31, 2022. This suspension of payments should be done automatically by your servicer without having to make any requests. Qualifying loans include:

  • Direct Federal Loans (Direct Subsidized, Direct Unsubsidized, Direct Consolidation Loans)
  • Federal Family Education Loans (FFEL) and Perkins Loans owned by the Department of Education

2. FFEL and Perkins loans not owned by the Department of Education, Health Professions Loans, and private loans do not qualify.

3. No interest will accrue during this time.

4. All $0 payments made during these months in administrative forbearance will “count” toward the Public Service Loan Forgiveness (PSLF) program and those seeking forgiveness after 20-25 years through an income-driven payment plan.

5. Any wage garnishments or seizure of tax refunds for delinquent student loans will cease during the six-month period.

6. Employers can offer up to $5,250 to repay an employee’s student loan balance without counting as realized income. (If only this was mandatory, right?)

One important note on the suspension of payments is that your specific servicer may not have updated their system yet to reflect the change. Therefore, if you happen to make any payments starting March 13th prior to the update, these could be refunded through your servicer.

How these changes will affect you will depend mostly on whether you have loans that qualify for this temporary relief, what your overall strategy is, and also whether your income has been affected. Let’s look at considerations through the lens of your strategy.

PSLF

If you have already started the process for PSLF or plan to within this time frame then you basically get a few months of “free payments”. Remember, even though this is considered an administrative forbearance, these $0 amounts owed for the upcoming months still count toward your 120 payments. And since your overall goal is to pay the least amount of money you are legally obligated to, you should not try to manually make payments or pay your usual amount when you don’t have to. Be sure to keep good records as you want to make sure you get the credit.

Non-PSLF Forgiveness

You can get forgiveness if you make income-driven repayments over 20-25 years depending on your specific repayment plan regardless of your employer. However, unlike PSLF you do have to pay income taxes on any amount forgiven. Generally, this is a good strategy if you are not eligible for PSLF and have a very high debt to income ratio such as 2:1 or greater.

Similar to PSLF, these $0 payment months count toward the overall 240-300 payments you are required to make. While you could still make payments during this time which would lower your eventual “tax bomb”, you’re likely going to be better off putting your money in other investments or even a high yield savings account especially since whatever the estimated tax you determine today in 20-25 years will be in the context of future value.

Traditional contributions to your employer-sponsored plan (401k, 403b, TSP) and HSA contributions will lower your adjusted gross income which in turn will lower your income-driven student loan payments.

Non-Forgiveness

If you aren’t planning on going the forgiveness route, you generally have two options: pay off your loans through the federal loan system using any of the repayment plans and accelerate payoff depending on your situation or refinance to a private lender. While in general private lenders for the past several years have offered much better rates than those for federal loans you used for pharmacy school, they do not currently offer the same COVID-19 relief options.

Therefore, if you have direct federal student loans and were planning to refinance, you should probably hold off for now. While the 0% interest rate through May 1, 2022, is temporary for the time being, you are not going to get a 0% interest rate if you refinance. Once the time’s up for the administrative forbearance and assuming you are able to get lower rates, then make the move to refinance.

The other big question if you are in this camp is: Should you make payments even though you don’t have to?

Since no interest is accruing during this timeframe, any payments you do make will attack the principal and potentially accelerate your overall payoff date, that is once you’ve paid off any outstanding interest that accrued prior to March 13, 2020.

While making payments despite the forbearance is certainly not a bad option especially if you have had no changes to your income and you want to pay off your student loans ASAP, think about what else you could do with that money instead. Yes, buying a Kate Spade handbag is an option, but I was thinking something along the lines of eradicating credit card or any other high-interest outstanding debt, starting or building an emergency fund or even funding an IRA or another investment.

If you want more information on this, you can check out the Coronavirus and Forbearance Info for Students, Borrowers, and Parents section on the Federal StudentAid website.

What if your loans don’t qualify for suspension under the CARES Act?

For FFEL loans or other federal loans that don’t qualify, you may be able to do a Direct Consolidation Loan which could convert them to become eligible. However, you would have to consider the impact on the interest rate and any capitalized interest that may follow.

If you have private or refinanced loans or loans that don’t qualify, then nothing may change for you. If you, unfortunately, had a job loss or change in your income, you can reach out to your specific lender to see what options are available. Some may offer a temporary forbearance or the option for a reduction in payment.

If you are someone who has refinanced your loans and you have had no change to your income, then you should continue to shop for competitive rates. You’re not limited to refinancing one time and it’s not uncommon for another company to provide a better rate than what you refinanced to the first time. You can check out current rates and cash bonus opportunities through our partners below.

Advertising Disclosure

[wptb id="15454" not found ]

7. Should You Put Big Purchases on Hold?

In early March, my wife and I were in the initial phase of making an offer on a home as this was our next big financial goal after paying off our student loans. After a few rounds of negotiations, things with COVID-19 started to get worse and because there was uncertainty if our income would be affected at first, we ultimately decided to back out of the deal. Plus, we thought it would have been pretty stressful trying to move.

While the conservative approach would be to hold off buying homes, vehicles, investment properties, etc. until there is a more positive outlook and stash away cash instead, there may be opportunities to find deals during this time. For example, if your income has not been affected and seems pretty stable, you may have some pretty solid negotiating power trying to buy a home right now. This negotiating power isn’t just on the purchase price but also things like getting closing costs covered, getting a longer inspection period with the option to bail, and choosing an extended closing date.

The decision to hold off on big purchases really comes down to how comfortable you are with your current financial situation with regards to savings and also expected income.

8. How will the tax and retirement changes affect you?

On March 20, 2020, the IRS extended the deadline to file federal income taxes to July 15th, 2020 without any penalty with the ability to request an extension even beyond that. If you haven’t filed yet and are expecting a refund, then waiting may not be the best move if you are in need of cash right now. However, if you are expected to owe, then you get a few more months to save for the bill. Although most states that collect income tax have followed suit with the IRS extended filing date, you should check to check to confirm.

The deadline extension also gives you the opportunity to fund an IRA for 2019 until July 15th with the maximum contribution of $6,000 or $7,000 if you are 50 or older. Similarly, you have the ability to contribute to an HSA for 2019 with a max contribution of $3,500 if single or $7,000 if married. Remember, unlike a traditional IRA with income limits to get a tax deduction, contributions to an HSA will directly lower your AGI no matter what your income is. To contribute, you must have a high deductible health plan. A high deductible health plan can be a great option especially if you’re relatively healthy and rarely use health insurance as your premiums will generally be lower than traditional plans.

While the above considerations could persuade you to hold off on filing taxes right now, the other question that is coming up frequently is “How does this affect eligibility for the economic payments?” Since the IRS is currently in the process of directly depositing/mailing payments, they are determining eligibility and amount based on the most up to date tax filing. That means if you have yet to file for 2019, they will be basing eligibility on 2018 income.

For many pharmacists, this may not matter if income hasn’t changed drastically in the past two years, but those in transition years (such as student to new graduate, resident/fellow to new practitioner) may benefit from delaying filing if it means that you would get a larger payout. Full disclosure, this is totally a legal maneuver.

Another key provision of the CARES Act with regards to IRAs, is that Required Minimum Distributions (RMDs) are not required in 2020. So if you turned 70 1/2 before January 1, 2020, you are not required to take a distribution.

The CARES Act also added a new amendment to the Internal Revenue Code allowing taxpayers who do not itemize to deduct up to $300 for contributions made to a public charity and not a supporting organization or donor-advised fund. While this is not a huge amount, prior to this many people were not able to get any deduction and most people now take the standard deduction.

Something to keep on your radar is a bill called the Helping Emergency Responders Overcome Emergency Situations or HEROES Act 2020 introduced by Congressman Bill Huizenga that provides a four-month (with potential three-month extension) federal tax holiday for medical professionals that are providing care in counties that have at least one COVID-19 case. Originally, this did not include pharmacists so kudos to the legislative team at APhA for making it happen.

 

9. Do you need a coach or financial professional to help you during this time?

Managing all the aspects of a financial plan can be overwhelming by itself but with everything going on things can get even more complicated. That’s where having a good financial planner on your team can come in.

Having a good financial planner on your team can help coach you through uncertain financial times and give you some clarity and confidence when making important decisions.

While there are many types of financial planners and advisors out there, consider a Certified Financial Planner (CFP®). They have the most rigorous education requirements including thousands of hours of experience. Be sure they do comprehensive financial planning and not just investment management (unless that’s all your interested in). If you are interested in having a conversation with one of our certified financial planners, you can set up a free call to see if you would be a good fit.

Conclusion

The recent federal legislative changes enacted in response to COVID-19 will have a direct financial impact on millions of people. Most pharmacists have been able to keep employment and in some settings, particularly in the community, the demand has increased. Pharmacists, especially most who haven’t seen their income impacted, stand to benefit from the temporary student loan payment suspension without interest accrual, the extension to file taxes with the option to maximize 2019 IRA and HSA contributions, and potentially receive a federal tax holiday if the HEROES Act passes. There also may be additional financial incentives for those considered essential.

In addition, it is an important time to evaluate if liquid savings is sufficient in an emergency fund, whether your life and disability policies are sufficient, and determine if your estate plan is up-to-date and in place. Also, consider working with a certified financial planner to help you put a plan together and coach you through important financial decisions.

Life Insurance for Pharmacists: The Ultimate Guide

Life Insurance for Pharmacists: The Ultimate Guide

The following is a guest post from Dr. Jeffrey Keimer. Dr. Keimer is a 2011 graduate of Albany College of Pharmacy and Health Sciences and pharmacy manager for a regional drugstore chain in Vermont. He and his wife Alex have been pursuing financial independence since 2016.

For the first 24 years of my life, the only people who really cared about my financial well-being were my parents. Sure, I had a business relationship with my bank; but outside of getting the account set up and telling me to use a bankbook to keep track of it, they (or anyone else in the financial services industry) didn’t really seem interested in me or my money. As I neared graduation though, something curious happened. Seemingly out of nowhere, my email inbox was chock full of requests to meet with people wanting to be my financial advisor.

“Well, well, well,” I thought. Now that I’m about to be a pharmacist and make some real money, I must be important! Right? So I met with a few of these people, and in retrospect, I said a lot of dumb things that didn’t do me any favors. I remember when one guy asked me what one of my major financial goals was, I told him I wanted to buy an Ariel Atom. Now if you don’t know what that is, that’s fine. It’s basically a street-legal go-kart that can go 0-60 faster than a Ferrari and can peel your face back like this:

#LifeGoals

Source: Top Gear (UK), BBC

 

Yeah, looking back on it, I deserved what I got in the end.

After deciding to take one of these people on as my “financial advisor” we had a couple of lunch meetings to discuss my financial situation. I laid my cards out on the table including all of my account balances and all my debts. You’d think we would’ve come up with a strategy for me to build some cash savings and address my student loans, but did we? Not really.

However, there was one aspect of my student loans that seemed to pique this person’s interest.

Was it the balance? No.

How about the monthly payments? Getting warmer…but no.

It was the fact that my parents co-signed them for me.

If for whatever reason I stopped making the minimum monthly payment on my loans, my parents were at risk of assuming that responsibility. A truly unacceptable situation. This, of course, prompted my advisor to ask the question:

“Do you have life insurance?”

“Well…no, I don’t.”

A Basic Overview of Life Insurance

Life insurance is one of those things that no one really wants but many people need. Like any type of insurance, you hate paying for it when you’re not using it, but it can keep the world from falling apart in those rare situations when you need it.

If you have to send in a claim for insurance on your car or your home, you’ll reap the benefits of that claim. However, you’ll never personally reap the benefits of a claim with life insurance because, well, you’ll be dead.

So why get one?

Two words: income protection.

Rarely do people shuffle off this mortal coil without leaving behind some baggage for others to sort out. At the very least, it costs money to put you in the ground; and unless you know a way to work your day job from beyond the grave or set aside a burial fund, someone else will need to foot that bill for you.

But what about the regular bills your income used to pay for? While you won’t be living in your house anymore, I’m sure your spouse and/or kids still want to. How’s the mortgage going to get paid when you’re not around?

As a pharmacist, there’s a very good chance you’re the breadwinner of the house and your income is essential for making household ends meet. But here’s the rub: if something were to happen to you, the financial hit to your household could be catastrophic. And we’re not talking about “no more trips to Disney this year” catastrophic, we’re talking about fast-track to living under a bridge in bankruptcy catastrophic.

But it doesn’t have to be that way and that’s where life insurance comes in.

With life insurance, the people you leave behind can get a cash payout in the event of your death that can act as a replacement for your income. And, if set up properly, a life insurance policy (or policies) can bulletproof your financial plan in the case of your untimely demise.

So how should a pharmacist go about getting a life insurance policy and how do you know which one to get?

At first glance, it seems like a daunting task. But thankfully, getting yourself insured doesn’t have to be complicated. The team at YFP is here to provide tools that can make the process simple and straightforward.

Before we get into that though, we need to talk some more about the types of policies that exist.

Huh?

Isn’t life insurance just…life insurance?

Yes, and no.

A life insurance policy can be incredibly simple or one of the most convoluted financial products in existence. What’s more, individual policy options can complicate things to the point where it’s questionable if the person selling you the policy even understands it. Yikes!

Fortunately for us, there are really only two types of policies: permanent and term. One is good for pharmacists, and one…not so much. First, let’s talk about permanent life insurance, because I’m not done with my story.

Permanent Life Insurance

At this point, the topic of life insurance came to dominate my meetings with my financial advisor and honestly, I found it kind of boring. While I knew I had a duty to protect my parents from my loans if anything happened to me, I was much more interested in what I could do to make money in the markets. After all, isn’t the point of working with a financial advisor is to get rich? Yeah, I was an easy mark.

Picking up on this, my advisor pitched me a solution.

“What if you could take the death benefits of a life insurance policy and combine them with an investment component? Not only could you protect the ones you love, you could also set yourself up for life in the process!”

That’s a win-win if I’ve ever heard one. Sign me up!

And thus, I was sold quite the bill of goods.

The type of policy my advisor sold me on belongs to a family of life insurance policies known as “Permanent Life Insurance.” Permanent policies are just as they say, permanent, and they go by a few different names:

  • Whole Life
  • Universal Life
  • Variable Life
  • Variable Universal Life (VUL)

When you take out the policy, the intent is that you hold it till the day you die, pay premiums on the policy till the day you die, and your heirs get the death benefit when you die. Sounds good, right? But wait, there’s more!

Remember when I said that these types of policies have benefits for you when you’re alive? This is where another part of the policy known as the “cash value” comes into play. In this part of the policy you have an account that exists outside of the death benefit. Depending on the specific policy, part of the premium gets added to this account and it will have either a set rate of return or exposure to the market. In addition, the funds inside can grow tax-free within the confines of policy and be protected from the claims of creditors depending on your state law.

What’s not to like?

A lot as it turns out.

And for most pharmacists, permanent life policies should be avoided like the plague.

But why?

Costs of Permanent Life Insurance

Above all else, these types of policies can be insanely expensive. Compared to the other type of life insurance you can get like term life insurance, you can spend on premiums in a month what you would spend in a year otherwise. How can that be? To answer that, let’s take a look at a snippet from the variable life policy sold to me when I was a new practitioner.

term life insurance

I know there’s a lot to digest there but let me distill it down to one word: fees.

While part of the premium goes into the cash value portion, a good chunk of the premium goes to paying additional fees that get layered into the policy. From sales commissions to general management fees, a lot of the money you pay into these policies doesn’t really go into the cost to insure you.

Oh, and these are just the fees that get taken out of the premiums, we haven’t even gotten to the investment side of things.

If you read my article on stocks, bonds, and funds on the YFP blog, you’ll know I’m no fan of investment fees and you shouldn’t be either. These are the fees that seem small when you first look at them, but over time can eat away a massive amount of your potential gains. The investment fees you’ll find within these policies (like the one above) are usually terrible compared to what you can invest in yourself.

Because of all these hidden costs and fees, permanent life policies are generally products designed to be sold. Sure, there are certain situations where they may offer a benefit, but those are usually limited to high net worth individuals and very well structured policies as part of estate trusts.

But for most pharmacists, especially the new practitioner who’s a HENRY (high earner, not rich yet – yes, that’s an actual industry term for you), the type of policy that gets hawked to you by the “financial advisor” down the street can be safely avoided.

You still probably need life insurance though. This brings us to the other form of life insurance; the one you should get. Term life insurance.

Advertising Disclosure

life insurance for pharmacists, term life insurance for pharmacists, pharmacist life insurance company, term life insurance quote

Term Life Insurance

Where permanent policies tend to be fraught with all sorts of riders and additional layers of complexity, a term policy is very simple to understand. It can be boiled down to two numbers: the death benefit and the term.

  • Death Benefit: The amount of money your heirs receive upon your death.
  • Term: This is the length of time that the policy is in effect.

How a term life insurance policy works is really simple.

If you die within the term window, your heirs collect. For example, if you take out a 30-year term policy on January 1st, 2020, and die at any point before January 1st, 2050, your heirs get to collect the death benefit. If you don’t die by that time, the policy simply terminates and the insurance company keeps all your premiums. That’s really all there is to it.

In addition to simplicity, the other main draw of term over permanent life insurance is the cost. Remember how I said that what you spend on a permanent policy in a month is similar to what you’d pay in a year for term? That’s not far from the truth! And, given the costs associated with investments within a permanent policy, it’s easy to see why the mantra “buy term and invest the rest” makes sense. You simply have a much better chance at building wealth when costs are low.

Here’s an example of how affordable a term life policy is. A 30-year-old woman who’s healthy that doesn’t smoke would only pay about $35 per month for a $1,000,000 policy with a 25-year term.

Costs of Term Life Insurance for Pharmacists

With a term policy, the cost to insure you typically comes down to a few factors.

Death Benefit Amount

A greater death benefit demands a greater premium. You don’t need to be an actuary to prove that one.

Term Length

As term length increases, so do the chances you’ll die within the term window. In order to cover that risk, you’ll pay a larger premium for a policy with the same death benefit over a longer-term.

Age

The younger you are, the less chance you’ll die soon and the lower your premium will be.

Sex

Sorry guys, but women tend to live longer than men and get the advantage here. Unless your state specifically disallows it, all else being equal, women can expect to pay lower premiums than men.

Personal Health

Most policies will require some sort of medical exam and/or documentation of your medical history as part of the underwriting process. Things that come up on your medical exam (bloodwork is usually done), evidence of pre-existing conditions, and most importantly your smoking habits can make your policy more expensive. In some cases where you have a serious medical condition, you might be uninsurable. If you are overweight or obese that can also increase the cost of a policy.

Family History

Usually not a make or break for the policy, but evidence of some hereditary conditions that crop up later in life can increase the cost to insure.

Recreational Activities

Do you enjoy base jumping? How about doing wheelies on the interstate at 100MPH on your new sports bike? If so, it should come as no surprise that the cost to insure against your “unexpected” death is more expensive.

#higherinsurancepremiums

Criminal History

Yes, blemishes on your legal record (speeding tickets included!) can make insurance more expensive.

Additional Riders

If you want bells and whistles on your policy such as the ability to collect ahead of time if diagnosed with a terminal illness, the policy is going to cost more.

While I know it seems like there are a lot of things that can make a term policy unaffordable, don’t worry. These factors go into the pricing of any life insurance policy, even the super expensive permanent policies. What makes term so much of a better deal though is that the simplicity of a term policy commoditizes these policies in the marketplace.

In other words, just like generic drugs, they get super cheap because a lot of companies compete in offering the same product. Unless you’re looking for a policy with a bunch of exotic riders on it, you can shop around to get a good deal. Nice!

What About Workplace Life Insurance?

Many of us nowadays can get life insurance coverage as a benefit through work. In fact, when you first started as a full-time pharmacist, you might’ve seen one of these benefits when filling out your new hire paperwork. In most cases, all you have to do is pick a death benefit and a set amount will get taken out of your paycheck. Simple right? While it may seem like a great idea to get insured this way, there are some good reasons you shouldn’t totally rely on workplace life insurance:

It’s non-portable.

When you leave your job, do you get to take your benefits with you? Nope. While there can be a grace period after you leave, by and large, that policy will be just as terminated as your employment.

It might not be enough.

Typically, the death benefits on workplace life insurance plans are limited. You’ll likely need more coverage than what your benefits allow.

It might be more expensive.

Since there’s rarely a medical exam associated with these policies, the premiums on them tend to be more expensive. If you’re young and otherwise healthy, you could be spending more than you should.

It might not be there for you.

You know what’s sad and sometimes happens when people become seriously ill? They’re forced to leave their jobs. If a serious illness were to result in your death, that workplace plan might not be there when you needed it most.

How Much Insurance Should You Get?

Good question!

Unfortunately, there’s no straight answer to that.

Oftentimes you’ll see the recommendation of 10-12x your annual income getting thrown about, but that doesn’t really take into consideration any of your personal situations. So how can you get a better idea?

Tim Ulbrich and Tim Baker tackled this question head-on in YFP Podcast Episode 44. In a nutshell, you need to make a projection of future income needs and use those projected needs to come up with a death benefit number. Huh? Don’t worry, it’s not as hard as it sounds.

Add these liabilities:

Debts: student loans, mortgages, and other debts

Future expenses: college tuition, burial, and other foreseeable expenses

Income support: How much you feel is enough to support the lifestyle enabled by your income for your loved ones, childcare support if applicable, dependent on the length of time you want to support (ie. 10, 20, or 30 years), include considerations for future inflation (ie. 3-4%/year), investment returns, and taxes.

Then, simply subtract the savings you have from the liabilities listed above and you’ll get a good estimate of what you’ll need for a policy. Want to get more into the weeds? Check out this handy calculator for estimating your coverage needs.

Now, does the number you come up with have to be exact? No! Chances are, things are going to change as life goes on. In the worst-case scenario, you can purchase an additional policy to layer on top of the one you just bought.

Speaking of which, getting additional policies to layer on each other is a legitimate life insurance strategy called “laddering.” As time goes on, most people’s need for life insurance will fluctuate. It might start out somewhat small, increase as a spouse and kids come into life, and then taper off again once the kids have left the nest. For this reason, many people choose to “ladder” multiple policies to accommodate this change in need.

If, at the end of the day, all this still seems daunting (don’t worry, it’s OK if it does), make sure to reach out to a professional that can help you put it all together. The team at YFP Planning is uniquely suited to your situation as a pharmacist and can help you build the best plan possible.

Where Should I Get Coverage and How to Do Get a Term Life Insurance Quote?

Remember how I mentioned that you can shop around for term policies and get a great deal?

YFP has partnered with Policygenius to help you do just that!

Policygenius allows you to compare and shop all of the top, A-rated life insurance companies on one, easy to use platform. Just answer a few questions to determine your coverage needs and you’ll get presented with a bunch of accurate term life insurance quotes to choose from. Plus, unlike other platforms, the information you provide stays private while you shop! That’s right, you won’t get bombarded with phone calls and emails as soon as you hit submit.

What if I Bought a Permanent Policy By Mistake?

Just because you made this bed doesn’t mean you have to lie in it. It is possible to get out of that permanent policy that was sold to you when you were a financial noob. But, and this is a big but, there’s probably going to be some pain. In all instances, you will be cashing out the policy and this will have one or a combination of the following consequences:

Loss of money

Typically in the first few years of the policy, the majority of the premiums you pay go toward sales commissions and fees, not the cash balance. Since you can only withdraw the cash balance, you may take a net loss on the difference between the cash balance and premiums paid. This was me when I finally got rid of mine. In the end, the VUL policy I took out ended up costing me several thousands of dollars lost to premiums.

In addition, there may be surrender charges on the policy. These charges are usually higher for the first few years of the policy and can eat up the entire cash balance in some cases.

Taxes

If you’ve had the policy for a long time and the cash value exceeds the total amount you’ve paid into the cash value through premiums (your cost basis), you’ll be required to pay taxes on the gains.

If that last one applies to you, there’s another strategy to get out of the policy without incurring a taxable event known as a 1035 exchange.

In this exchange, you basically exchange your permanent life policy for another insurance product such as an annuity. While annuities also get somewhat of a bad rap, there are annuities out there, such as variable annuities, that aren’t saddled with the types of fees annuities are famous for.

Finally, before you do anything with your old policy, make sure you have other life insurance! You should only cancel your permanent life insurance policy once your new policy is effective and fully replaces your old coverage.

Conclusion

Life insurance can be an incredibly important component of your financial plan.

From protecting your income and keeping your loved ones from living on the street to even help you sleep better at night, the benefits of having a life insurance policy are immense.

That said, there is a right way and a wrong way to do it. For most pharmacists, the right way is to buy term life and get the best deal on it by shopping around using a site such as Policygenius.

And, as always, if any part of this process seems confusing or you’re just looking to get a second opinion on what to do, make sure to book a call with the team at YFP Planning. You’ll be glad you did!

term life insurance, term life insurance for pharmacists, pharmacist insurance

 

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

6 Ways to Protect Your Cash Flow as a Pharmacist

6 Ways to Protect Your Cash Flow as a Pharmacist

The following post contains affiliate links through which YFP or its team members may receive compensation.

What would you do if your next paycheck wasn’t deposited?

How long could you survive if you just stopped getting paid?

If you’re a recent grad, new practitioner, or potentially even a seasoned pharmacist, the answers might look something like “use a credit card and not long.” This is especially true if you aren’t the only one who depends on your income.

Despite having a good income, it’s not that uncommon for pharmacists to live paycheck-to-paycheck. With massive student loan payments, living costs, lifestyle creep, and other priorities, unless you have substantial savings, having consistent cash flow is essential.

An emergency fund can only buy you so much time if something happens with your job. Therefore, protecting your primary means of income is key.

There are some moves you can make that can help reduce the interruption in your cash flow.

pharmacist network, side hustle, side hustle for pharmacists, make extra money as a pharmacist

1. Have a side hustle

The most obvious way to prevent any significant change in cash flow is to have multiple sources of income. Even if you feel your job or position is relatively secure, there’s always the potential it might not be there. Unfortunately, many community pharmacists have already experienced this with large numbers of brick and mortar stores closing and the decision to downsize pharmacist presence in large companies.

By having a second or multiple income streams, you will reduce the probability of not being able to pay your bills and living expenses even if one source of income becomes affected. This could be as simple as moonlighting at another pharmacy, writing a book, or even creating a legitimate business that makes six figures a year.

If you want some ideas, check out this post 19 Ways to Make Extra Money as a Pharmacist in 2020. You can also check out the YFP podcast as we frequently have pharmacists on the show who talk about side hustles they started.

2. Make yourself indispensable

How many people do you know that work just hard enough to keep from getting fired?

There’s no question that burnout and unfulfillment run rampant in our profession, but does that mean you shouldn’t work hard, take on new challenges, and embrace opportunities?

Make it difficult to get fired.

What can you do to stand out from everyone else? What skills and knowledge can you acquire that make you a linchpin in your company or organization?

I’m not just talking about board certifications and additional credentials, but rather demonstrating the ability to solve problems or reinvent existing systems and protocols that provide value and improve outcomes.

make more money as a pharmacist

I work in a primary care clinic with a focus on type 2 diabetes management. Most of the days are pretty full evaluating patients but I’m fortunate there are a few hours per week given to work on continuing education or to come up with ideas to improve patient care.

Taking full advantage of this time, I studied how to manage very complex diabetes patient cases such as those with suspected LADA, patients who need u-500, best practices for carb counting, and how to optimize the use of continuous glucose monitoring. This has enabled me to become a go-to resource when colleagues or other services encounter difficult cases.

In addition, I have created population management protocols to identify patients with diabetes who are not receiving guideline-directed medical therapy and those at high risk of hypoglycemia.

I then I took it a step further and created an action plan on how our team of pharmacists could intervene and set up appointments to directly impact these opportunities. Because we have been so successful, these practices have been discussed and utilized by other institutions within the organization.

None of these things I described were necessary or required of me in order to maintain good standing in my position. They were gaps and opportunities I identified that would not only improve our current practices but further my skills and value within in my role.

Even if you become a linchpin and still get let go, chances are you will be in a much better position to make a job transition and will be able to better articulate your value to prospective employers.

3. Have adequate disability insurance

With a six-figure income, you are going to have projected lifetime earnings in the millions. Besides losing your job, becoming disabled is one of the biggest potential disruptors in cash flow.

I know what you may be thinking, “As a pharmacist, something pretty bad would have to happen to me to not be able to work.” That may be true. After all, most pharmacists just require their cognitive faculties to be intact, and therefore accommodations could be made in the event of broken bones or limited mobility secondary to an accident.

Remember, you are not invincible!

The Social Security Administration predicts that more than 25% of today’s 20-year-old Americans will become disabled before the age of 67. However, almost 70% of those working in the private sector do not have disability insurance.

Beyond car accidents, think about insidious diseases like Parkinson’s disease, dementia, cancer, or MS. There are a lot of health-related scenarios that could occur at a young age and either force you out of the workplace or reduce the time you are able to work.

Disability insurance for pharmacists is really income insurance. It provides you with money in the event that you are unable to work because of an accident or illness.

Besides being able to afford typical bills such as food, mortgage, utilities, etc, think about your student loans. If you still have federal loans then you don’t have to worry because these are discharged in the event that you become permanently disabled. However, what about private loans? Or ones that you refinanced?

Therefore, unless you already have substantial wealth or have additional income streams and don’t require an income as a pharmacist to live, you need disability insurance.

Even if you have some coverage through your employer, consider an individual long term disability insurance policy. It doesn’t matter where you work or if you change jobs because it follows you and you don’t have to get another evaluation of your health status.

For a more detailed discussion on disability insurance, check out the post Disability Insurance: The Ultimate Guide for Pharmacists.

disability insurance for pharmacists

4. Be ready to make a move if needed

Motivational speaker Les Brown often says “It’s better to be prepared and not have an opportunity then to have an opportunity and not be prepared.”

What if you lost your job tomorrow? Would you be ready to start applying and submit an up-to-date polished CV? Would you be ready to interview?

It’s easy to submit your CV once and then just forget about it for years.

Brandon Dyson, pharmacist and co-owner of TL;DR Pharmacy, wrote about his experience with hiring a part-time employee at an outpatient oncology clinic. Within 6 days, he closed the posting after receiving 49 applications. Well, sort of 49. I say sort of because he mentions a number of applications were not filled out completely, were missing elements such as a cover letter, and clearly did not update their CV.

That is really unfortunate and inexcusable in our profession. Don’t eliminate yourself from the running right from the start by not following directions and being prepared. At the very least, have someone else you trust to review your application and contents if you are not 100% confident.

You can also check out Brandon’s post for more suggestions and tools for getting prepared for your next job.

5. Maintain your license in good standing

This one should go without saying: you can’t practice if you don’t have a license. Well, you can, you just may face fines or even felony charges. For most pharmacists, this means just doing the bare minimum continuing education and any other requirements.

However other situations that could affect your license and ability to practice include complaints made to your respective board of pharmacy or malpractice suits.

You know mistakes can happen. If you work for an employer, they likely offer some protection if you’re functioning within your scope of practice. However, their main concern is protecting the organization, not you.

Besides actual damages, liability or malpractice insurance can help cover litigation costs, costs for representation for board of pharmacy hearings, and lost wages. The latter is particularly important especially if you’re involved in a complicated suit that lasts months and your employer is not assisting.

Coverage is relatively inexpensive (~$12-$20/month). Proliability, Pharmacist Mutual, and HPSO offer policies for pharmacists up to $1 million in liability coverage per incident and $3 million aggregate limit.

6. Grow your pharmacy network

I was recently on LinkedIn and saw firsthand the power of and the difference between having a strong network and having a bunch of weak connections that someone blasts information to.

Whenever someone asks to connect with me, I always ask for the reason they reached out. It’s a great ice breaker and also helps to find some common ground. But what is surprising to me is that the first thing some pharmacists say to me is “I’m looking for a job and trying to expand my network.”

Now there’s nothing wrong with that, but there is usually no attempt to learn more about me, what I do, or how I may even be able to help them. In other words, the primary intention was what they could from me.

pharmacist network, pharmacy network

These are usually the same people that literally blast their CV on a LinkedIn post multiple times per day expecting to get results. Contrast that to someone who is well connected and within hours of them explaining their situation and intention to seek other employment already has multiple leads. That’s why it’s important to make it more about relationships than it is about connections.

Brandon Dyson nicely sums this up: “If you just joined a group and you start asking everyone for favors, you come across as self-serving and desperate. But if you’re already a part of that community, people will go out of their way to help you.”

Whether it’s through LinkedIn, professional organizations at the national, state, and local levels, Facebook groups, or other channels, you should be building your pharmacy network now. Not when you are in a dire position and urgently seeking a job but before you’re actually in need.

I also highly recommend checking out podcast episode 116: Transforming Your Life and Career Through Networking where bestselling author David Burkus shares the science of networking and discovering your hidden networks.

Conclusion

One of your greatest financial assets as a pharmacist is your ability to generate an income. Unless you already have substantial wealth or have multiple streams of income, you’re probably going to be in a tough spot if the next paycheck wasn’t there. Changes in the job market have resulted in less security and many pharmacists have already experienced being laid off or had their hours cut.

Protecting your cash flow is essential to not only paying your monthly bills but also making progress on your savings and long-term financial goals. The key ways to do this include creating multiple streams of income, protecting your existing main income source, and preparing yourself to make a job transition to reduce the time of interrupted cash flow.

Current Student Loan Refinance Offers

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

Disability Insurance for Pharmacists – The Ultimate Guide

Disability Insurance for Pharmacists – The Ultimate Guide

The following post contains affiliate links through which YFP or its team members may receive compensation.

I had received another email at work one morning indicating that “Julie” was not going to be in and that coverage would be needed. I knew this wasn’t planned otherwise her clinic would have been closed in advance. I didn’t know her that well so I had no idea the reason she was out but wondered what was going on and if something bad had happened.

A few weeks later it was revealed at a meeting that Julie would not be coming back to work and the reason why. You see, Julie had been struggling with rheumatoid arthritis for a long time and for many years was able to manage her disease and work full-time without any issues. Unfortunately, and unbeknownst to most of her co-workers, her disease had been progressing over the past couple of years causing tremendous pain and stiffness that became so bad that she had to drop to part-time and eventually stop working altogether.

Since she was relatively young and likely expected to work several more years, I had often wondered if she was going to be ok financially. How was she going to be able to support herself and her family without an income?

What is Disability Insurance?

One of the greatest financial assets you have as a pharmacist is your ability to generate an income. Think about how long it took you to get to that point of becoming licensed. Six years? Eight years? Maybe more with residency or fellowship? Think about the energy, the focus, the sacrifices you made. What if that income was suddenly taken away?

Remember, you are going to have projected lifetime earnings in the millions.

Disability insurance is really income insurance. It provides you with money in the event that you are unable to work because of an accident or illness.

In the example below, let’s say a 25-year-old pharmacist wants a policy for approximately 60% of his or her income (~126,000) . A monthly (or annual) premium is paid and if a disability occurs at age 35, that pharmacist would receive $6,250 per month until age 65 when the coverage ends. We will discuss some of these specifics a little later on.

long term disability insurance for pharmacists, pharmacist disability insurance

Do Pharmacists Really Need Disability Insurance?

I know what you may be thinking, “As a pharmacist, something pretty bad would have to happen to me to not be able to work.” That may be true. After all, most pharmacists just require their cognitive faculties to be intact, and therefore accommodations could be made in the event of broken bones or limited mobility secondary to an accident. Right? Remember, you are not invincible!

The Social Security Administration predicts that more than 25% of today’s 20-year-old Americans will become disabled before the age of 67. However, almost 70% of those working in the private sector do not have disability insurance. Beyond car accidents, think about potential insidious diseases like Parkinson’s disease, dementia, cancer, or MS. There a lot of health-related scenarios that could occur at a young age and either force you out of the workplace or reduce the time you are able to work.

Besides being able to afford typical bills such as food, mortgage, utilities, etc, think about your student loans. If you still have federal loans then you don’t have to worry because these are discharged in the event that you become permanently disabled. However, what about private loans? Or ones that you refinanced?

Depending on the company, you may still be on the hook for making payments. We have partnered with a number of refinance companies and some such as Commonbond, Earnest, and Sofi will discharge the loan balance similar to the Department of Education.

Therefore, unless you already have substantial wealth or have additional income streams and don’t require an income as a pharmacist to live, you need disability insurance.

Types of Disability Insurance for Pharmacists

Disability insurance is typically classified as short-term or long-term based on the length of the policy. Although not always the case, short-term disability policies are typically up to 5 years and tend to provide you with a monthly benefit very quickly from the time a claim is made. Many times these are offered by your employer or through a pharmacy association.

If you have many working years ahead, then you really should consider a long-term disability insurance policy. Most of these policies can be in force up until age 65-70, which can ensure you will have income until you are eligible to claim social security or other retirement benefits. The time to which benefits are paid once a claim is made is known as the elimination period which will typically be longer (30-180 days) for a long-term disability policy.

This often brings up the question of whether one needs both a short-term and long-term policy. If you have a good emergency fund and sick leave that can cover the elimination period for a long-term disability policy, then this may negate the need for any short-term policy. Now if your employer offers you short-term at no or very low cost then definitely don’t pass on the benefit.

For the rest of the post, we are going to focus on breaking down the components of long-term disability insurance for pharmacists.

disability insurance for pharmacists

How Premiums Are Determined

I will be honest with you. Disability insurance is not cheap, especially when compared to term life insurance. Before we get into some typical premiums you can expect to pay, let’s break down all of the things that can impact what you will actually pay. And just brace yourself, because there are a lot! The first time I received some quotes, my head was spinning because of all the features and factors they display.

via GIPHY

Coverage Amount

This is one of the biggest determinants of how much you will pay for your long-term policy. How much you need depends on your current income, your savings, and how much you need to maintain a desired lifestyle in the event you can no longer work. A general rule is to consider 60% of your gross income as this should be pretty close to your take-home pay after taxes. If you pay your premiums out of pocket, and not through your employer, your benefits will be tax-free. Typically most companies will have a max of somewhere of 60-70% of gross income.

If you are a government employee, you probably won’t be able to get a policy for 60% of your gross income. The reason is that there are benefits available to you in the event you are disabled. You will have to check your agency and see what you are entitled to. If you are a FERS (Federal Employee Retirement System) employee, which includes all VA pharmacists, check www.opm.com for more information. This is the reason you are asked on your initial application or quote whether you are a government employee.

Benefit Period

How long do you want to receive benefits in the event you become disabled? This will be a key question to answer and what you choose will have a large impact on what you pay. Assuming you have many working years left and have no substantial savings and will depend on earning an income, then you should probably consider choosing a benefit period up until around age 65. But depending on your situation, you may not need something in place until then and could consider a shorter period.

The way most quotes with long-term policies is that they will show you the cost of 5 years, 10 years, and then age 65, 67, or 70 or something similar to that as you can see in the example below.

long term disability insurance for pharmacists

Elimination Period

As mentioned above, the elimination period or waiting period is the time between when a claim is filed and when you actually start receiving benefits. This is typically 30-365 days. As you can see in the example above, the longer the elimination period, the cheaper your premiums will be. If you have an adequate emergency fund and have built up some paid time off, you may be able to opt for a longer period.

Payment Frequency

Like car and life insurance, you can often shave some money off your premium if you pay annually or biannually. It may not be significant savings, but every little bit helps. You can see the example below of how payment frequency can make an impact.

long term disability quote

Age / Health History

Similar to life insurance, your premium will be determined in part by your age and how healthy you are. Your weight, smoking status, past medical history, history of DUI, and any past suspensions of your professional license will also be considered.

Occupation

Most insurance companies have 5-6 occupation classes that are stratified based on the risk of injury with day-to-day activities. Pharmacists and other white-collar professionals are generally in the highest class which has a lower cost of coverage compared to other classes.

Riders

Have you ever tried to purchase a car and notice they always try to upsell you with all the bells and whistles? Long-term disability insurance policies are filled with them! That’s what makes them so complicated. It’s not like term life insurance where you just put in your info and then choose an amount and time frame for the policy to be active. Instead, these policies are jam-packed with extra benefits and features. Some, depending on the policy, are baked in and include all of these benefits while others don’t have them included. This is something to pay close attention to when you are evaluating policies and getting quotes. In addition, because the definitions are not universal, some companies may define riders slightly differently than others.

Let’s break down some of the common ones you will probably see:

Own Occupation

What if you suffered from a disability that affected your critical thinking skills and prevented you from working as a pharmacist, but you could still work in another profession likely at a lower pay? Unless you have a true own occupation rider, you may not get the full benefit or possibly no benefit at all.

This is one of the major distinctions between many workplace offerings and what you can get on your own. Some policies offer own occupation coverage but only for a couple of years. After that point, if you can perform other work, your benefits may cease. This is probably the most important feature you want in a policy and want it to be in force for the whole term of the policy.

Non-cancelable

This rider prevents your insurance company from canceling the policy (unless you aren’t paying your premiums). With a non-cancelable plan, you have the right to renew the policy every year without any increases in the premium or reduction in benefits.

Guaranteed Renewable

Having this in place means that the insurer is obligated to continue providing coverage unchanged as long as the premiums are paid. However, unlike the non-cancelable rider, premiums could go up over time.

Future Purchase Option

You can buy more coverage in the future if your income goes up with this rider. Remember, disability insurance is paid out as a percentage of your income, so you would want this to be increased as your income goes up, unless your expenses stay the same and inflation is non-existent. This rider is also known as benefit increase and may be particularly important when your income is lower initially such as during residency.

Cost of Living

Often referred to as COLA (cost of living adjustment), this rider helps protect your benefits to be protected against inflation over time. The key thing to remember here is that the adjustment for any cost of living does not begin until the disability occurs.

Partial Disability or Residual Benefit

If you become disabled, you may not be able to work full-time or your usual hours, but maybe you can still work part-time. Many policies have this rider in place so that if you experience any reduction in pay because of a disability, you can get a percentage of your benefits.

Waiver of Premium

In the event you become disabled and you start to receive benefits, who would want to continue paying for the policy during that time? That is exactly what this rider does. It eliminates the need to continue paying premiums during the period you are receiving benefits.

Student Loan Rider

This allows you to purchase additional coverage to pay student loan balances while on the claim. Remember, this won’t be necessary if you have federal loans as they will be discharged in the event of permanent disability. Where this could be a consideration is if you are with a student loan lender that does not offer this protection.

Is your head spinning yet after all this jargon? Believe it or not, there are even more options and features that exist that I didn’t even get into! Again, because some companies bake some of these riders into policies and others require you to pay an additional amount in premiums, you have to look at everything when trying to compare multiple quotes.

via GIPHY

How Much Will it Cost?

Remember how I said disability insurance wasn’t cheap? As you can tell by the estimated monthly premiums in the chart below, I wasn’t lying. If you are a female who graduates as a pharmacist at a traditional age of 25 and is relatively healthy, you can expect to pay about $2,112 per year assuming you want a benefit of 60% of your gross income with the additional features mentioned.

You can see that premiums for women are much higher than they are for men. Sorry ladies! This is because companies set their rates based on their claims experience and they have found that they are more likely to pay for claims for their women policyholders.

disability insurance for pharmacists, long term disability insurance quote

So what can you do to cut down these costs? As mentioned there are a lot of features you can add or leave off and obviously, the fewer add ons the less you will potentially have to pay. Another thing to consider is maybe you don’t need a benefit of 60% of your income. Your lifestyle may not require that much and perhaps you could live just fine off 40%.

Remember, you can also extend the elimination period and make annual payments to also help cope with the costs. Also, if your employer offers some benefits, you might consider this as well when determining your needs.

The other thing to consider is that if you are not in the best shape and are overweight or have uncontrolled hypertension, becoming healthier prior to submitting your application could also be to your benefit.

I know this can seem like very expensive insurance to have in place and you may not feel like you can afford it. But can you really afford to not have it? Are you willing to take the gamble? Remember, if anything happens to you, how are you going to pay your bills and potentially support those who depend on your income?

What if My Employer Offers Long-Term Disability Insurance?

As I mentioned a few times, it is possible you have some form of this benefit through your job. Besides the coverage amount, benefit duration, and whether they offer true own occupation coverage, one of the biggest things to consider is the portability of the policy. If you were to leave to take another job, would the policy go with you? Remember, if you are in excellent health and leave your job after 5 years, your new employer may not offer it and you could be paying a lot more in premiums simply because of your age.

That’s the major advantage of an individual long-term disability insurance policy. It doesn’t matter where you work or if you change jobs because it follows you and you don’t have to get another evaluation of your health status.

disability insurance for pharmacists

How Do You Purchase?

There are many reputable companies out there that offer quality coverage with the features I talked about. However, it can take a lot of time and energy to get multiple quotes and your phone could be ringing off the hook with offers and reps trying to get your info. That’s why Your Financial Pharmacist has partnered with Policygenius, an online independent broker that helps you get a long-term disability insurance quote from multiple companies for the coverage that’s right for you.

They have a very user-friendly interface and their team helps you through the entire process. You can even get an estimate without entering any of your personal information.

Check out the video below where I walk you through their interface and how quickly you can get an estimate.

 

Conclusion

Unless you already have substantial wealth or are very close to retirement, long-term disability insurance should be an important part of your financial plan. Although it can be pretty expensive, remember all of the time and effort it took to get to where you are today. In addition, if you are married, have a significant other, or have children, you have to consider how they are affected by your ability to earn an income. No one is invincible and there are so many things that can happen that you can’t predict. Using an online broker such as Policygenius allows you to get multiple quotes from reputable companies and can save you time through the entire process.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]

Recent Posts

[pt_view id=”f651872qnv”]

 

5 Key Financial Moves To Make With A New Baby

5 Key Financial Moves to Make with a New Baby

The following is a guest post by Karen Berger, PharmD. Karen is a pharmacist and medical writer in Fair Lawn, NJ. Her husband has been trying unsuccessfully to put her on a budget for many years.

This post contains affiliate links through which Your Financial Pharmacist may receive compensation

In an earlier post, we talked about how to prepare financially when expecting. Once your little one makes his or her big appearance, though, the financial planning is not over – it has just begun. Continue to work on those important financial moves we talked about earlier, and start to incorporate these additional tips.

Nothing can prepare you for life with a baby. Whether this is your first or fifth baby, the first few months are exhausting. You walk around on a few hours of sleep every night – getting more than four hours of sleep in a row is cause for celebration. You might not remember the last time you showered or sat down for an uninterrupted meal. Although it is the last thing on your mind, financial planning for new parents is key to ensuring a strong financial position for the upcoming years.

1. Start Saving For College

With the average cost of college for 2017-2018 at $20,770 for in-state public schools and $46,950 for nonprofit private schools (including tuition, fees, and room and board), and prices increasing every year, it is never too early to start saving for college. Don’t forget to multiply these numbers by six (years), the average length of time students take to earn a bachelor’s degree, and also by the number of children you have.

Having a monthly savings goal is a fantastic way to help your children pay for college. NerdWallet estimates that saving $500 a month, per child, earning 5%, should be adequate for you to cover $50,000 of college costs per year for four years once your child turns 18. Obviously if you’re planning to pick up the tab for potential graduate or professional school, you’re going to need to save a lot more. You can find calculator tools online to tweak the numbers to your personal situation. Often, saving for college will involve a combination of several of the strategies below:

529 College savings plan: The 529 is the most popular savings plan geared toward education; there are two types. The first type is the 529 investment savings account. With this plan, you invest with the same risk/return profile of other stock investments. Check your own state for tax breaks or matching funding before looking into 529 plans offered by other states.

The second type is the 529 prepaid tuition plan. This method locks in tuition costs and avoids the yearly increase in tuition. Paying for 6 semesters now, at today’s cost, will pay for 6 semesters in the future, even if the costs are higher at that time. These plans are starting to have more restrictions.

Pros of the 529 include: high contribution rates (plans typically allow up to $300,000 in lifetime total contribution), the ability to change beneficiaries, and the benefit of tax-free growth. Also, if the parent is the account holder, the 529 is considered a parental asset and it will have a minimal impact on financial aid as compared to other education savings options.

On the other hand, there are a few cons of the 529. It is strictly to be used for education, so if your child does not go to college, the money may be unavailable for other purposes. However, depending on the plan, you may be able to change the beneficiary or pay tax and a 10% penalty on the growth of assets. There is also the inherent stock market risk.

Savings Accounts & Other Low-Yield Options: Savings accounts are flexible, but provide little in the way of interest. Using a regular checking/savings account with the intent to save for college may backfire, as money may be tapped into and not replaced. Not only that, but because of inflation which is typically around 2-3% per year, you may actually be losing money keeping it parked here. Certificates of Deposit (CD) and US Savings Bonds are other options, but these are mostly out of favor due to low interest rates. Sometimes, a very conservative contributor may favor this option.

Roth IRA: A Roth IRA can be used as a combination retirement account and educational savings account. It allows you to invest with after-tax dollars while the earnings grow tax-free. Although this is typically used as a retirement account with a penalty for early withdrawals on any growth before 59 ½, if used for higher education, distributions can be taken tax- free and penalty-free. The biggest downside to this is that it could significantly reduce your overall retirement projections. In addition, the distribution must be made in the same year that the qualified expenses are paid. Another item to note is this distribution is considered to be income to the student and could reduce eligibility for need-based financial aid.

Coverdell Education Savings Account (ESA): This is like a smaller version of a 529: it offers tax-free withdrawals, and you can invest in the market. However, one of the biggest advantages is that you will have a lot more investment options to choose from, since you won’t be limited to what’s available to what a specific 529 plan offers. Contributions are limited to $2,000 per year, and until the beneficiary turns 18. ESA’s may offer more flexibility, and qualified expenses may include educational expenses from Kindergarten all the way through graduate school (529 plans also now allow up to $10,000 per year to pay for private elementary and post secondary school tuition).

Important to note with a Education Savings Account is that income limits apply, and depending on your salary/combined salary, you may not be able to participate. Currently, the income limit for a maximum contribution is $190,000 for a married couple filing joint returns, and contributions phase out at $220,000 in 2018/2019. The limit is $110,000 for those not filing a joint return.

If you are indeed eligible to contribute to an ESA, the cool thing is that you don’t have to choose between an ESA and a 529 – you can do both!

Trusts: These are structured as UTMA or UGMA. Assets are transferred to the child’s account and invested on his/her behalf until the child reaches the “age of trust determination,” which is between 18-21, depending on the state. As soon as the beneficiary becomes an adult, he/she can use the money however he/she wishes. As a custodial account, these assets are considered to be assets of the child/student and are included in calculating financial aid. These funds will stay in the custodian’s taxable estate until the child reaches the age of trust determination.

2. Make A Will

This is the happiest time of your life – who wants to think about something depressing like a will? Although it seems sad, a will is a very necessary part of life. Just think about the recent, unexpected passing of 90210 and Riverdale star Luke Perry from a stroke at the young age of 52. That was a major wake-up call for many people to get their affairs in order.

In your will, you will clearly and concisely state your wishes for the distribution of your assets after death, and appoint guardians for your children if both parents pass away. You will designate an executor, who will ensure the provisions of the will are carried out.

You can either hire an attorney to create your will or do it yourself. I would recommend hiring an attorney if you can afford to do so. The attorney handles all of the intricate details, making sure nothing is left out and can keep a copy on file. Attorneys may charge a flat fee or hourly rate, with an average cost of $300-$1000 for an uncomplicated will, or up to $10,000 if you have complex assets and an estate, or the need to establish a trust.

Many companies offer a very affordable legal plan for employees, where you contribute a small amount per paycheck for legal representation by participating attorneys. At the time, my husband and I were able to do both our will and closing on our house, and we did not have to pay anything above the regular paycheck contribution.

If you would rather create a will yourself, you can use an online program or software to make a will for less than $100. Requirements for witnesses or other specifications vary by state.

Another thing you need to do that falls under the “no fun, but necessary” category, that goes along with your will, is to create a living will, or advanced directive. This lets you set the terms for healthcare providers about the kind of health care you want or do not want to receive, in the event that you are unable to speak or make decisions for yourself. The living will sets forth your wishes on resuscitation, quality of life, and end of life treatment. The Durable Power of Attorney for Healthcare is a designated, trusted person who will make medical decisions for you in an emergency situation, in cases where the living will may not provide a clear answer. This person is there to fill in gaps that are not clarified by your living will, and cannot contradict your living will.

term life insurance, term life insurance for pharmacists

3. Obtain or Update Life Insurance

Now is the time to get a life insurance policy, if you do not have one already. Life insurance ensures that your beneficiaries (spouse, children) are financially taken care of if you die.

There are two types of life insurance:

  • Term Life Insurance: This type of life insurance offers coverage for a specified period of time. It is less expensive than whole life insurance and has a predetermined guaranteed death benefit. Your premiums will increase at preset time intervals, such as every 10 years.
  • Permanent Life Insurance: A number of policies such as whole life, cash value, and universal life, fall under this umbrella. This type of insurance has a death benefit that never expires as long as you pay your premium. In addition, there is typically a saving/investing plan baked in, which is one of the benefits that agents use frequently as a marketing tactic. The rates of return vary, depending on the policy, and they are generally filled with many different kinds of fees. Plus, these policies are often much more expensive than term policies. Because of these issues, the YFP team recommends that most people should keep their savings and investments separate and go for a term life insurance policy.

Once you determine the term (usually 10-30 years) that works best for you, you need to decide the amount of coverage. Financial experts often recommend that your death benefit be 6 to 12 times your annual salary. However, this may not be enough and a number of factors will come into play, including what you can afford, homeownership, and number of dependents. For a more tactical approach, you can check out this calculator.

long term disability insurance

4. Obtain or Update Disability Insurance

Would you be able to support yourself and your family, pay bills, and achieve your financial goals if you became disabled and couldn’t work anymore? If your answer is no, then you need disability insurance.

Do you know your most valuable asset? Surprisingly, it is not a material possession such as your house, but it is the ability to earn a living. Disability insurance pays a portion of your regular income if you are unable to work for an extended period of time due to illness or injury.

Although it seems unlikely, more than 1 in 4 20-year olds will have a disability for 90 days or more by age 67. Often, people think of worst-case scenarios and assume that they are immune, but something as “minor” as a back injury can put an otherwise healthy person on disability.

There are two types of disability insurance – short-term and long-term coverage. Both replace part of your monthly salary up to a certain amount, such as $10,000, during a disability. Some long-term policies also may pay for additional services, such as training to return to work.

Short-term disability replaces 60-70% of your salary, and pays out for several months up to one year, depending on the policy. It has a shorter waiting period, about 2 weeks, between the time of disability and the time when payments are made to you.

Long-term disability policies typically can replace up to 40-60% of your salary. With long-term disability insurance, benefits end when the disability ends. If the disability continues, benefits end either after a certain number of years or at age of retirement. There is a longer waiting period, usually 90 days, between the time of disability and the time when payments are made

Disability insurance can get pretty complex as there are a number of riders and definitions that vary between companies. Besides your age, occupation, term, benefit amount, and waiting period, these riders will play a huge part in the cost of your policy. To get a better understanding of these and what to expect, you can check out this free guide.

How do you sign up for disability insurance? First, look at your workplace. Often, employers include coverage and contribute towards the premium. Even if your employer does not pay towards your coverage, you can often buy your own coverage through the employer’s insurance broker at a discounted group rate. You can also check with professional pharmacist associations. Another way is to buy an individual plan through a broker or directly through an insurance company. Your Financial Pharmacist offers a helpful service through Policygenius that shops multiple companies to find you the best disability insurance policy.

disability insurance, disability insurance for pharmacists

5. Start or Continue Contributing Toward Retirement

Although retirement may seem far away, and college savings for your children may be at the front of your mind, it is an inevitable event that requires planning. I always remember Suze Orman telling callers on her radio show, “You can take out loans for college but you can’t take out loans for retirement.” The sooner you start saving, the longer your money has to grow. Be sure to contribute to your company’s 401(k) plan, and if your company has a match, try to at least contribute that much since it’s basically free money. The maximum 401(k) contribution limit for 2019 is $19,000 unless you’re over 50 in which you can add an additional $6,000.

Even If your company does not offer a 401(k), or you are self-employed, you can open up an IRA (individual retirement account). For 2019, your total contributions to all of your IRA’s cannot exceed $6,000 if you are under 50 years old, or $7,000 if you are age 50 or older.

Besides an IRA or 401(k), a Health Savings Account (HSA) is another great way to save for retirement as it has triple tax benefits. It lowers your taxable income, grows tax-free, and can be distributed tax-free if used for qualified medical expenses. Despite its name, your contributions do not have to sit in a simple savings account, but can actually be invested aggressively. In order to get access to an HSA, you have to have a high deductible health plan (HDHP).

These financial moves to make with a new baby may not be the most exciting things to do and they can come with a high cost, but they will help you sleep better at night, knowing that you are taking care of your family. Now, here’s to hoping your new bundle of joy sleeps through the night!

Financial planning for a baby, and in general, life events, can be overwhelming. Often it is best to bring in an experienced financial planner to help you plan and prepare. If you are looking for some extra help, you can click here to book a free call with the YFP Planning financial planning team.

Current Student Loan Refinance Offers

Advertising Disclosure

[wptb id="15454" not found ]