YFP 382: Living & Leaving a Legacy with Joe Baker


Joe Baker, personal finance instructor, returns for inspiring conversation about purposeful living, the power of mentorship, and the enduring impact of a life well-lived.

Episode Summary

In this episode, we welcome back Joe Baker, MBA for his third appearance on the show. Joe first joined us in 2019 with his former student Blake Johnson, where they shared the inspiring story of their debt-free journey, highlighting the pivotal role Joe played in Blake’s success. In 2020, Joe returned to discuss his book, Baker’s Dirty Dozen Principles for Financial Independence, sharing his expert insights on achieving financial freedom.

This time, we’re shifting focus to explore the themes of living and leaving a legacy. Joe opens up about the lasting impact he hopes to make through his teaching, his book co-authored with his daughter, Lindsey, and his dedication to giving back. He shares the story behind his two endowed scholarships, demonstrating his commitment to supporting and uplifting his community. 

Join us for an inspiring conversation about purposeful living, the power of mentorship, and the enduring impact of a life well-lived.

About Today’s Guest

Joe Baker is an instructor at the University of Arkansas for Medical Sciences College of Pharmacy, where he has been teaching personal finance for over twenty-five years. He holds a Bachelor of Business Administration from Southern Arkansas University and a Master of Business Administration from the University of Central Arkansas. Joe retired in 2019 from Pharmacists Mutual Company, where he spent twenty-eight years providing insurance and financial services to pharmacists across Arkansas.

As part of his commitment to giving back to the community, Joe has endowed two scholarships. The first supports students from his hometown of Emerson, Arkansas, who are enrolled at Southern Arkansas University. The second scholarship benefits students at the University of Arkansas for Medical Sciences College of Pharmacy who attended Southern Arkansas University.

Joe has been a guest speaker for academic and corporate groups nationwide, promoting financial literacy. Most recently, he co-authored a book on personal finance with his daughter, Lindsey Baker, titled Baker’s Dirty Dozen Principles for Financial Independence. Published in December 2020, the book is filled with humor and stories from contributors, offering a lively and engaging introduction to personal finance. It was ranked the #1 book by “Financial Education For Everybody,” a partner of Amazon, in their Financial Literature Category, and was also recognized by GoBankingRates.com as one of the “10 Financial Books That Will Change Your Life (and Finances).”

Joe and his wife Brenda reside in Little Rock, Arkansas.

Key Points from the Episode

  • Joe Baker’s Introduction and Background [0:00]
  • Joe’s Career in Pharmacy and Teaching [5:23]
  • Impact of Financial Education and Personal Stories [9:03]
  • Teaching Methods and Student Engagement [21:33]
  • Writing and Publishing “Baker’s Dirty Dozen Principles for Financial Independence” [30:10]
  • Philanthropic Giving and Endowed Scholarships [37:44]
  • Final Thoughts and Encouragement [46:10]

Episode Highlights

“I didn’t even make six figures until I was 47 years old, and became debt free by age 50. And it’s amazing the money you can accumulate when you’re debt free. Then I became a millionaire, and then doubled that in just a few short years. And I don’t say that to brag. I just tell people I got a late start.” Joe Baker [4:06]

“It’s not how much you make, it’s how much you keep, but then I added to it, it’s not how much you keep, but it’s how much you give away.” Joe Baker [42:01]

“Giving back does not have to be a monetary situation. It could be being the best father, being the best husband, giving in those respects. It could be at your place of worship, giving of your time, your efforts, your leadership, your mentors. It doesn’t have to be financial. It can be any of those ways. It will make you feel good and it’ll be a win-win.” Joe Baker [45:41]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I welcome Joe Baker for his third appearance on the show. Joe first joined us in 2019 alongside his former student, Blake Johnson, where they shared an inspiring, Debt Free Journey that highlighted the incredible impact Joe had on Blake’s journey. Then, in 2020 Joe returned to discuss his book, Baker’s Dirty Dozen principles for Financial Independence. In this episode, we’re taking a new direction, focusing on the themes of living and leaving a legacy. Specifically, we discussed the profound legacy Joe is creating through his teaching, his book written alongside his daughter, Lindsey, and his philanthropic efforts, including endowing two scholarships that give back to his community. All right, let’s jump into my interview on living and leaving a legacy with Joe Baker. Joe, welcome to the show.

Joe Baker  00:54

Thank you, Tim.

Tim Ulbrich  00:56

This episode, I don’t know if you know this, this episode of officially makes you a three time guest on the YFP podcast. So we’re so glad to have you back.

Joe Baker  01:04

Nice. Great to be back.

Tim Ulbrich  01:06

So we’ll give our listeners some quick history. We had you first on back in 2019 along with a former student of yours, and you may remember Blake Johnson. This was on episode 82 Blake shared his Debt Free Journey and the impact that you had on his journey, which I think fits nicely into the topic of living and leaving a legacy today, and how you have taught and helped others. And then we had you back on Episode 177 when you launched your book Baker’s Dirty Dozen: Principles for Financial Independence. We’ll link to both of those episodes in the show notes. But Joe, for those that maybe didn’t catch those episodes and don’t know who Joe is. Give us a brief introduction.

Joe Baker  01:42

Okay, well, sounds good. I was actually raised in a very low class family down on the Arkansas, Louisiana line. And for those that don’t know me, I’ve told the story many times. We didn’t even have an indoor toilet till I was nine years old. So a lot of people just can’t even imagine that. So my financial journey had not really started then and I tell everyone, my financial journey didn’t really start until I was 30 years old. That’s when I got married and ended up marrying a math teacher who exposed me to the time value of money, and it was just like a light bulb went off. I said, Wow, I was even, even though I was a business major. I said, I did not know this.

Tim Ulbrich  02:31

How’s that for a wedding gift, by the way?

Joe Baker  02:33

You know, I came into the situation kind of like in the movie, Oh Brother, Where Art Thou? You know, I didn’t have much to offer, but she saw that I was bonafide and I had something to give. I had a TV and a VCR. You can Google that, Tim, and a bed without a headboard. So I came in and with a little credit card debt. So I was quite a catch financially, but there, there was potential there, and I was bonafide, and by knowing or seeing the time value of money, it was just like a light bulb went off, as I said earlier, and I said, I’m already starting in my 30s, and that’s why, when I’m teaching or speaking to groups, I said, don’t worry if you’re in your 30s or even in your 40s. Yes, you have to catch up, but you can make a difference financially. You know, I’ve outlined this in my book, and I’m pretty much an open book when I tell my story, I didn’t even make six figures until I was 47 years old, and became debt free by age 50. And it’s amazing, the money you can accumulate when you’re debt free and and obviously became a millionaire, and then doubled that in just a few short years. And I don’t say that to brag. I just tell people I’ve got, I got a late start. And I to my pharmacy audience, the students especially, I say, you know, you’re, you’re starting off making six figures, whereas I was at 47 so you know, it’s a great story to tell because of my background from day one, when I was born. So but that’s my financial journey and and everything that I’ve lived since birth is is been able to relate to people out there about, yes, you can do this. You know, if I could do it, is even though it was a little later than I wanted to but you can as well. 

Joe Baker  04:13

You shared with me once before, Joe, I don’t know if you remember this, but you said to me, quote, my biggest financial accomplishment came from marrying a high school math teacher.

Joe Baker  04:57

I did not know I told you that, but that. Is the truth. It’s amazing. I think that’s chapter two in my book. Make sure you and your significant other are on the same financial page. And that is so true. You know, of all the financial decisions out there, you know, marrying someone that that makes a world of difference. 

Tim Ulbrich  05:23

So you have a strong connection to the profession. Not not a pharmacist yourself, but you’ve been involved in the profession for many years. Tell our listeners more about your background and career that’s connected you to the profession of pharmacy.

Joe Baker  05:35

I really got introduced to pharmacy in 1991 when I went to work for Pharmacist Mutual Insurance, and I worked for them for 28 years as the Arkansas rep, and I tell you, the Arkansas pharmacist and pharmacists across the country that I’ve gotten to know the best class of people, I have just enjoyed it. I miss the day to day being with them, and I can’t imagine my life right now not being involved some way with pharmacy or or pharmacy students. So did that for 28 years, retired in 2019 but I have been teaching at University of Arkansas, College of Pharmacy for 25 years, a personal finance elective, and started that in the fall of 99 and that’s another thing I say each semester. I said, I don’t know if I can keep doing this. And that first day, if not, the first thing, second day, I said, this is great. I love it. And you’ve talked you know what it’s like? You get that immediate feedback. They’re like sponges, and that is part of my I know the topic today is giving back. Giving back is so easy for me in this respect, because it’s for selfish reasons. I feel good. I feel sometimes like I’m an entertainer on a cruise ship, because you never know what’s coming up. You’re interacting with the audience and, and I like to tell stories and and they laugh a lot, not because of the grade, but because we’re having a good time in there. And and try to make it fun So, and that’s what I tell the students. I said, you know, there’s no reason why we can’t make this fun. It is about money. But been doing that, and I did do for about four years at Harding, College of Pharmacy. That’s the other university in the state, but, but the drive was pretty tough to go back and forth there. But also speak to groups across the country and and I have two presentations. One is with Pharmacist Mutual. They still contract with me, or in a contract with them, to do risk management talks. Whenever I do a risk management talk, I try to talk the school into it. Let me do a financial talk as well. Dovetail it in together. And sometimes I go and just do the financial talk, and sometimes I do the just risk management talk, but I always try to give, if it’s a risk management only, some financial information, and by the way, I always ask two questions whenever I’m before any audience. One, have you ever heard of Pharmacist Mutual Insurance. And two, have you ever heard ofYour Financial Pharmacist? And I do that because there’s no other organization that I know that does what you guys do, and it makes my job a little bit easier for to bring home some points about finances, and that’s what I’ve been doing since retirement. I don’t I’m not making a whole lot of money, if any, in retirement, but I sure am having a blast. It has been fun to get with the pharmacy students on the road and teaching them in class. They’re just, they’re just a hoot.

Tim Ulbrich  08:59

Yeah, yeah, having a blast and having a massive impact. You know, you mentioned Hey for selfish reasons, and I know what you’re referring to, that feeling when you’re with a group and you see some of the light bulbs go off, the connections start to be made. People start to make some pivots and decisions, and momentum is built. And, you know, look, look no further than episode 82 where you and Blake were talking about his journey becoming debt free, the impact you had on his journey. And look at the great things Blake is doing in his own financial plan that allowed him, not not only through getting debt free, but allowed him to propel into real estate investing and be on a path towards financial independence and giving, I mean, talk about generational impact, and obviously his continuation of that with his family as well. So that’s one example. I know you’ve had a profound impact on Blair Thielemeyer. We’ve had her on the show several times, and hundreds and hundreds of others that I’ve never had the opportunity to interact with. So we’re going to get more into that in a little bit. I want to ask you, though, Joe, you may remember this moment back in 2019. You and I were sitting next to each other at FinCon, which is a conference for basically, financial nerds, right, bloggers and podcasters and authors, and you and I were sitting at a keynote next to each other, and the keynote was being delivered by Ramit Sethi. And Ramit Sethi, for those that know is as the author of the book, I Will Teach You To Be Rich. And at the time you you had your book, I think, in an early draft form, if I remember right. And from that keynote, you’re like, wait a minute, I need to pivot and rewrite chapter one. What jumped out to during that keynote that shifted your thinking, especially given that you had been down this road before, like there was something that really jumped off the page here in that moment. 

Joe Baker  10:43

Oh, it was. As they say, it was an aha moment. And it was because I was, I had the early draft going of my book, and it was going to be, I don’t say, pretty typical of other financial books or personal finance books, but it was along the line of, don’t do this, don’t do this, don’t do this. You know, if you, if you buy a Starbucks latte every day, instead of putting up money, you’re gonna this is gonna cost you that. Don’t do that, don’t do this. And it was pretty negative. And when, when Sethi said, you know, if you want to go out there, and I’m paraphrasing, but it’s pretty close, if you want to go out there and have a latte, have a latte.And a light bulb just went off, and I don’t know if you remember, I turned to you and I said, I have just changed the focus of several chapters in my book. I went from telling people don’t do this, don’t do that, but do what you want, but they are opportunity costs. Consequences for it. Whatever you do is like my Pappy used to always say, he says, Whatever floats your boat. He would say that all the time, and that’s what it is here. If you want to buy a new vehicle, that’s fine, but let’s look at the opportunity cost. Go in it with an open eye, because his brother, Dave Ramsey says, there, you know, the depreciation all that. But don’t be so focused on the negative. I can’t do this, I can’t do this, can’t do that. But I love Paula Pants said one time, says you can afford anything, you just can’t afford everything. And I love that quote, and I have used it from time to time, and that is so true, because you’re out there and you’re focused on things to buy and not buy, and that’s what I did in my book. And also in class, I’m I’m telling them, actually, I show them, I say, Well, if you don’t spend your money here, let’s look at the opportunity cost, and let’s go over here and see what that money can be spent for somewhere else. I’m not telling you what to spend the money on. It’s like my sister and brother in law, and hopefully they won’t hear this podcast, but they in 34 years, they’ve owned 31 new vehicles purchased, and there’s an opportunity cost there. Now they make plenty of money, and that’s there’s no problem, and they’re happy. They enjoy it, as my pappy says, Whatever floats your boat. So they’re okay with that, and I’m okay with it too, but there is an opportunity cost by buying new vehicles all the time, and they understand that. But who am I to tell someone they can or cannot buy something. I just want to point out the ramifications if you’re if you’re doing that and and it has been so ingrained in my mind I can afford just about anything, not everything, but just about anything. But I am so, still so stingy with money. It irks me when I spend any money, and that’s just because many years of being dogmatic and the way we spend money, but, but that’s okay,

Tim Ulbrich  14:12

And the concept of that keynote, which has stuck with me forever since we heard it as well, was, was what he was referring to there, he calls in his book money dials. You know, so find the things that actually matter to you in the financial plan. Not other people, but matter to you, and dial those up. Make make them a priority, but for the things that you don’t really care about, like, stop spending money on those things, right? His example that he gives is, for him, it’s convenience. Like he’s all about convenience and technology and investing in those but, you know, he lives in an apartment in New York City. He’s not focused on a car. Cars don’t really matter to him. Like, to your point, everyone’s out there to define what what those are, but there’s an opportunity cost, and there’s an opportunity cost on both sides. You know, this is something that. Has stayed with me since reading Die with Zero by Bill Perkins, that you know, there also is an opportunity cost of potentially over saving. Now, what does that mean? And what does that exactly look like? Obviously, that’s where we start to get in the details. But there’s a balance between today and tomorrow, and I think that’s what he was really getting at in that keynote. And as you articulated well so many books, it’s cut this. Cut that if you don’t go by the latte, and you compound it over 35 years, it could have been X 1000s of dollars. Well, of course, right? But the point he’s making is that for some people, they really enjoy the experience of the latte. So be it. For other people, they could care less. So stop sending money on the latte and direct it elsewhere. So yeah, that was a great moment. And I remember you revising the manuscript and then sending it to me, by the way, in a paper copy in a manila folder? 

Joe Baker  15:47

Old school.

Tim Ulbrich  15:51

All right, so I want to talk about three areas around living and leaving a legacy that I think you just have role modeled incredibly well. And are three areas that I desire to follow in your path as well. And those three areas relate to living and leaving a legacy and teaching others. We’ll talk about that a little bit more. In the book that you wrote that will continue to endure and help others into the future, and then also through some of the philanthropic giving that you’ve done through some scholarships and other parts. So let’s take each one of those, one by one when it comes to teaching. You mentioned this a little bit in your introduction. You’ve been teaching personal finance since 1999 so going on 25 years now, which is incredible. What got you started in that journey when you began to teach? And obviously that would grow and evolve over time, but what was the initial step into saying, Hey, I feel like I’m at a place where not only can I implement this in my own financial plan, but I really feel like I can help others, especially others that are just getting started. 

Joe Baker  16:52

That’s a good question. You know, I was once a high school teacher, and I enjoyed it so much for the same reasons, and I would have been in an education even as of today if one of Chris, a friend of mine, who was Secretary of State of Arkansas, ran for Congress, and he asked me to work in his campaign. So I quit that job and and as strange as it goes, we lost in the runoff by two percentage points. So it changed everything, because I’d have been in Washington and all that, who knows, political junkie but, but because of the loss, gravitated out of that. But working at Pharmacist Mutual, I said, you know, there’s still something that I’d like to do, education wise, because when I was with with them, when I’d go out and work with pharmacists, I was always trying to teach. That was my idea of sales. You know, let me just teach you what some of the exposures are, and we’ll see if we can work out a solution for that. And then one time, I was at a registration at the University of Arkansas, College of Pharmacy, and I was just speaking with the dean, and the assistant dean told them about my love of teaching. And I don’t know who came up with it first, but someone said our students are making a lot of money when they get out back then, and, you know, late 90s, it was like 45,000 and they said, you know, they’re they really need some financial guidance. And I said, Well, let me see if I can put together something and, and that’s where we are today, after 25 years. And I will say it is the most popular elective, and I won’t say that’s because of me, but because of the material, because most people are not exposed to some of these tenants that we know in financial terms, like time, value, money, opportunity costs, Roth IRA, mutual funds, ETFs and all those things. And it has, it has just been a blessing to be able to teach the students. You mentioned Blake Johnson. You know, you never know this is almost like an evangelical feel to it. When you’re teaching about personal finance, you don’t know whose life you’re touching, you know, I didn’t even know you mentioned Blair earlier. I didn’t even know that I had any influence at all. Believe it or not, she was pretty quiet in class. But with Blake, you know, today, he’s not only highly financially successful in his own right, and I think he’s 36 maybe, but he is doing basically the same thing as being a facilitator at his church with Dave Ramsey’s course. So I look at that and say, you know, I like to think that I had something to do with that. And. So I see that and I and it gives me the feedback. You know, at least, I think I’m doing something good. And so forgot the actual question there, but, but that is part of my giving back is teaching. Obviously, I wouldn’t do it if, if it didn’t make me feel good, and, and a lot of this giving, and I’ll just say it right up front, Doctor House on the TV show House MD, I don’t know if you remember, he was pretty cynical. He made a statement one time. And I’ll paraphrase all  this giving and and helping others is just selfish in nature, or something like that. And I said, Well, that’s probably true, and it is true that it does make me feel good. If I set up a scholarship or teach or hand out a Starbucks card to somebody that’s doing great work that, you know, just some recognition, it does make me feel good. But why can’t there be a 50/50, win-win. You’re helping someone else. You’re helping yourself by feeling good. So, you know, what’s the downside here?

Tim Ulbrich  21:07

Yeah, I think both things can be true. I feel the same way, right? There can be an intrinsic value, you know? I think that’s probably a part of how we were wired and designed. But that can also have a benefit and impact on others that continue on to others as well. And I think that’s one of the cool things. As you share your story, when someone like Blair reaches out and references you as having an impact, you’re like, I had no idea, right, right? And you know, how many other students, how many students do you think you’ve reached and taught across those courses?

Joe Baker  21:36

Well, most years I’ve been teaching both semesters, and I kept up with it for a while. My classes are anywhere from 40 to 70 students. Most years were two semesters, and then you have hard I have no idea. But you know, if I only had three in a class, I would still teach the class, because I would feel that those three really want to be there. And if I can impact one person, whether it’s teaching a class or speaking at a conference, or just going on just any, any type of program, or just sitting down showing someone some of the numbers that I think it’s a job well done. Joe,

Tim Ulbrich  22:32

do you have a favorite activity within the course that you feel like really helps the students make a connection to a particular topic?

Joe Baker  22:39

Good question, and I use this when I’m speaking on their so called final exam. I don’t really give exams. I say, you know, attendance is crucial. That’s your grade, but your your lifetime, is your final exam. And and I don’t have to worry about you know, students being absent, because I say, any day that you’re missing could be worth a million dollars, and that usually has their attention. But on their official or unofficial final exam, I have them do one project. I say, Okay, you’re you’re p3 you’re graduating next year, in little over a year, you’re going to do what I’m about to tell you on this final exam. I give them a scenario. I say you’re making 120,000 a year with certain parameters. And it’s a a 401K practicum, okay? And I say, let’s go through this. You pick out how much you’re going to put into your 401 K, your contributions, the typical matching from your employer. Then you pick out whatever funds you want. I give them a selection, just like you would if you had a 401 K, enrollment at your employer. And then I say, okay, get that amount. We’re going to determine what your rate return would be. And I give them a little chart here. If you’re 75% stocks, you’re probably going to make eight to 9% but then I get all that information, and then I show I have them a financial calculator website, which I think you’ve seen. And I say, Okay, go through here and you tell me what you put in all this information, your age, how much you’re contributing, your rate of return, hypothetically you’re matching, and tell me what you’re going to have at age 60. And it is, it is an eye opener for them. And then I say, it’s, I said, this is open book, open neighbor. You talk to your neighbors, because if you’re doing an actual enrollment, you’re going to be asking for your co workers opinion, yeah, and they, I had one student said, yes, if I could just started one year earlier, I’d have an extra $2 million Dollars. And I said, mission accomplished, because all those are contributing factors as far as what you’re going to have one day. But I will say this, I have changed that somewhat. This last semester, I instituted something a little different. I say, Okay, you say, I can’t envision being at 60 or 65 and retiring. Why do I need to save all this money for something that I may not live to see, I may not be physically able to enjoy it? I said, Okay, well, fair enough that is, that’s a very fair question, because I am 69 as I stated earlier, half of my friends, relatives and acquaintances, I would say, are either gone or they’re not physically able to travel or do anything else. Now I said, I understand that, so let’s use time value of money and do something a little different. And this is probably off the subject today, but, but I think it’s significant. I said, Okay, we’re thinking that. Let’s just see if we can’t what would happen if we maxed out on your 401, K for just say, 10 years, 26 to 36 just like, kind of like what we did an example before, and then at age 36 after 10 years, then turn around and only contribute equal to your employer, match and see what it comes up to. And it’s still millions of dollars. And I said, you know, you’ve got all that extra money now, if you just sacrifice a little bit for 10 years. And then, yeah, I mean, it is, and we do that, I’m going to do that exercise now, because I know in a lot of their minds, it says, I don’t know if I just want to sacrifice my whole life. Yeah, and that is fair enough. And now that I’m at this age, I am seeing it where people have stayed up their whole life and what do they have it’s not able to enjoy it. So let’s, let’s use the time value of money and do something a little different. So anyway, that’s I’ve changed my MO a little bit, even in my talks, I’m using that as an example. I say, okay, you know, if you don’t want to do that your whole life, let’s, let’s do something else. 

Tim Ulbrich  27:31

I think what you’re doing there, and I’m sure you’ve made this connection, is it’s an actual representation of what you shifted in your book with chapter one that we just talked about, right? It’s this balance we talk about so often on the show, between, hey, yes, we’ve got to save for the future. We want to be ready and prepared. We don’t want to be caught off guard, right? But we also got to figure out a way to enjoy and live a rich life today. Both things can be true and but both can be done if we’re planning advance. And Joe, there’s actually a name for this now called Coast fi. Coast FI, standing for financial independence. It’s a sub, it’s a subset of the FIRE movement. And the idea, the idea is aggressive savings early for a defined period of time, and then you’re coasting

Joe Baker  28:16

Just when I thought I’d come up with something new. I know. 

Tim Ulbrich  28:19

I did this unintentionally, actually, where I don’t know if I shared this with you before, but early in my academic career, just by nature of academic positions, you’re typically forced a large contribution in. So like when I was at my first university, I think we had to put in. It was like 13 or 14% it was a forced contribution, because we didn’t pay into Social Security and we were part of the state retirement plan, but they matched something crazy, 11 and a half, 12% so my hand was forced at a time where, admittedly, when I had other priorities, goals just getting started, like I don’t think I would have probably contributed At that same value, and then come 15 years later, when I left that work to work on the business. And obviously then that kind of shifts cash flow and everything is we’re getting started with the business. I kind of did that Coast fi without realizing and so I can attest it. It works. I mean, the math works out, and it’s early savings, and it’s time value of money. And so I think there is different models out there in which we can achieve this balance. Right? Balance. So I love that you’re you’re reframing that activity, and I think for your students, I’m guessing maybe one of the things that comes up is, hey, Joe, this is great. We’re going to make a good income. I get that, but Dot. Dot. Dot. We’re going to have $170,000 in student loans. Have you looked at home prices recently and interest rates? Right? There’s all these competing pressures that are out there. But I think the point that you’re highlighting so well and helping them see the numbers come to life is this isn’t massive savings rates we’re talking about, especially if you’re doing it consistently throughout your career. We’re not talking about living off of rice and beans for the rest of your career. Yeah. I mean, it really even at a 10 to 15 to 20% contribution rate consistently over your career, like the math is going to work out time, value of money. So great stuff that you’re doing there. Let’s shift gears and talk about the book. So the legacy and impact that you’ve had in writing your book, Baker’s Dirty Dozen Principles for Financial Independence. We’ll link it to that in the show notes, people can pick up a copy at bakersdirtydozen.com, or on Amazon. You wrote this book with your daughter, Lindsay Jordan Baker, talk to us about the reason for writing the book. You’ve been teaching for a period of time now, almost 20 years, and you finally get this point say, You know what, I think I’m gonna write a book. What was the reason for wanting to put the book together?

Joe Baker  30:41

For those 20 years, I’d had students and former students says, you know, because I tell a lot of stories in class, it’s kind of like Jesus, you know, used to tell stories that way you could remember them. Jesus and I’m, I’m referencing him. We’re just like that. But, but my stories aren’t in parables. I like to think that they know exactly what I’m saying, but I like to tell stories, and whenever I have former students that come back, they’ll say a couple of things. They’ll say, Yeah, I remember that story you told about golfing and hitting somebody, and made the financial point with that, then they’ll say something, or a lot of them would say, you should write a book, put that in there. And I, you know, I thought about, you know, that is just as a lot of work. I didn’t really explore it. And I remember where I was, and it involved you. I was, I was at the physical therapist, and she was working on my knee. I had fallen on Masada in Israel, and read my patella tendon. And it was after surgery, and she was working on my knee, and I got this text, and I don’t even know why I had my phone. I looked at I said, Hey, look at this Tim for Your Financial Pharmacist and you don’t know is wanting me to write a book. And I said, Okay, I might just do that. And, and that was because of you. So thank you for that.

Tim Ulbrich  32:17

Sounds like it was planned for a while. 

Joe Baker  32:18

It was, it was, and so I did that, but it was a long process. And how Lindsay, my daughter, got involved. She is, I mean, she’s off the creative chart. She knows how to write. She was my chat GPT before Chat GPT, I mean, I’d run everything by her and and so one particular Christmas she was home, she’s been an educator for most of her young adult life. And she said, Dad, why don’t you let me read your manuscript? Because it was about ready to go to the publisher. And I said, Yeah, okay, you can help me out. And she’s and and I said, Well, honey, why do you want to do it? Just to help? She says, No, I know you’re putting a lot of stories in there, and I want to make sure they’re, they’re politically correct. And she would go through them, and she’d she would laugh a lot, but she said, that’s funny, dad, but you can’t use it, so it’s out of here. And then she would say, okay, you know, I don’t understand this particular section, like, if it Roth IRA or whatever. And I said, Well, you know, I’m writing this for your your age group – you don’t understand it? She Says, I’m sorry. I don’t understand it. So we would go back and forth. I would explain it to her, then she explained it back to me, until we got it right and literally. And I don’t use literally too often, but we went paragraph by paragraph, and she went through the whole book with me and and she just, she changed so much that I had to list her as a co author, and it was just, it was an amazing transformation. And I will say, because of that, she had a mostly educational background, and I probably didn’t do a good enough job teaching about money and plus, parents have trouble or student, not students, but children have trouble really digesting anything from parents. It’s hard for that to work, but by her reading and understanding all that, it changed her financial life. I’d love you know, I can’t even keep up with how much she accumulated on her Roth IRA with her 403 B through work, through the years. She told me just yesterday, it was just crazy how much money she has accumulated and and I think it has, well, I don’t think I know it has a lot to do with the book and how she edited it, and she learned a lot. I. Because of that. So back to your question, the book is, I use the book a couple of ways, obviously, in class, but I also use it as a gift. I probably give away more books than I than I sell, I don’t know, but whenever I’m speaking, I use this door prizes, and it’s very well received, and it is. It’s opened a lot of doors. It gives somewhat of credibility. Someone they told me, once that’s what books will do, and it has been a good conversation piece. And like, one of the things I like to do is my my alma mater is sponsor, like a table for some students. And whenever I do that, like I’m going to be doing in a couple of weeks, I always bring a copy of my book and give it to each of them, and with a little inscription in there. So, you know, I don’t know how many lives it’s touched, but if it’s touched one life, it’s been worth it.

Tim Ulbrich  36:07

Yeah, absolutely. And one thing I love about the book is that the stories really make the content come to life, right? Makes it memorable, helps it stick throughout the book, you’ve got sections where it’s this is the short and sweet, your takeaway, or the nitty gritty on the topic, or your certain choice or recommendation in a given area. So I think it’s written in a way that really is engaging. Helps the material come to life. It sticks. I hope people pick up a copy again, Amazon or bakersdirtydozen.com It was ranked number one book on financial education for everybody by a partner from Amazon and their financial literature category also recognized by gobankingrates.com, is one of the 10 financial books that will change your life. So, great work, Joe.

Joe Baker  36:49

And it was a joy, because a little bit plug for the contributors, I have, think 33 contributors, I just, you know, send out text or email. Say if you’ve got a financial story to tell, especially if it’s funny, send it to me, because, like I said about stories, they resonate with people. If you can tell a story with a financial principle, you remember that and and so I do have a lot of contributors there that have helped me with the stories in the book and and it was fun to compile it. I didn’t want it to be just a book of principles. I wanted a story to go with it as well.

Tim Ulbrich  37:38

So we talked about living and leaving a legacy through your teaching, through the book, both both you and I need neither one of those. The motivation is money. And the third area that I want to talk about is really giving of money and how that has become a part of your financial plan, why that’s become a part of your financial plan? So tell us about your philanthropic giving. I know you’ve endowed a couple scholarships, which is a big deal. I presume you’ve been involved locally as well, in your community, in your church. Tell us more about your giving strategy and how you’ve landed on the areas that you’ve made giving a priority.

Joe Baker  38:13

Okay, it was another aha moment, but back, I think it was in 2016 2016 it was about five years before I retired from Pharmacist Mutual. I was coming back from a different Israel trip, and I’m sitting at the airport. You know, when you get back into a country, you’re catching up all your work emails and all that. And I had an email from my employer, Pharmacist Mutual, That stated, or said, we are no longer going to give arbitrarily, just a scholarships, $1,000 scholarship, to every pharmacy school in the country. We’re going to do something different. I was devastated. I said, Oh my gosh. Because you know, when you take away from something or an institution, it is a negative fact. And the guy sitting next to me, he’s a travel buddy, and I’ve known him through church, and he’s 25 years my junior, and he’s sitting there, and he’s and I read it to him, he knew I was distraught, and he says, Why don’t you do your own scholarship? And I said, Hmm, I hadn’t even thought about that. Why? Why can’t it be a Joe Baker/pharmacy scholarship? So that’s what I did. I established my own scholarship for the one for the University of Arkansas, College of Pharmacy that awards a scholarship to students that have graduated from my alma mater, and the other one is a scholarship from my alma mater. So. So it was kind of like a light bulb went off, and by him just saying, you know, why don’t you do your own so it is amazing. I’ve learned his name is Shane Lester. Put a plug in for him, but he’s been kind of my mentor, even though he’s 25 years younger than I am, because he goes around, he’s a mortgage broker in a Little Rock and he goes around with stacks of Starbucks cards, Starbucks gift cards. And when I don’t know a stewardess does something nice, or you see a janitor or some whatever, he’ll hand out that gift card. And I’ve incorporated that, and I don’t even know how many gift cards I’ve handed out one time at the cleaners, this lady always did, you know, treated me with the kindness and stuff I gave her a gift card one time. I thought she was gonna come, well she did, she came around the counter and gave me a hug. And I will say I’ve gotten a lot of discounts since then, but I wasn’t doing it to get anything in return. But see the joy on her face. But I’ll see maybe a janitor or especially at the school, the college. I’m on the Board of Governors for the foundation. And you know these students, or young people that are helping out and they do special things, you know, I like to hand them a gift card just to say, hey, you know, some we recognize what you’re doing and we appreciate it, or I appreciate it, and you’d be amazed. I’ve got a little quote in there. I’ve kind of hijacked to saying, you It’s not how much you make, it’s how much you keep, but then I added to it, it’s not how much you keep, but it’s how much you give away. So, you know, so I’ve been blessed with that, but I learned it from someone else. It didn’t, didn’t come from me, but, but it makes an impact. Yeah,

Tim Ulbrich  42:01

And for those that aren’t familiar with for how endowments work, if those are folks aren’t familiar with how endowment works, it’s a big deal because you know, essentially what you’re doing there is you’re giving a large lump sum of money upfront to then allow for an annual gift that will live on forever. 

Joe Baker  42:19

And you’re and I tell people, I say, Hey, if you endow a scholarship your name, even though they don’t really know you, your name will go down in time. And I know we’re running out of time. Can I say how I funded that? Because somebody might use this. One of the assignments I have in class, and I’ve been doing this since 2010 is I have the students pick out a stock for me to buy in class. I’ll say, I want a blue chip stock. I want a high dividend payer. I want a good PE right, you know, just all the things, and it gives them a little time to research and all that. And then I’ll take those and I say, Okay, I like this, and I’ll buy one or two each semester in class. And at one time, that portfolio got up to over $265,000 and I said, I should have started doing this in 99 because it was just riding the wave. And I know individual stocks has its, you know, owned risk.

Tim Ulbrich  43:19

So you’re just doing this in like, a brokerage account, right? 

Joe Baker  43:21

Yes, a brokerage account. It wasn’t through an IRA and but some of those individual stocks accumulate so much so this sounds like I’m cheating, but it but it wasn’t. Like on the University of Arkansas, College of Pharmacy, I donated three stocks that had appreciated so much that actually my cost basis was $6,000 and when I donated, the stocks were worth $26,500. So I got the blessings of 26,500 and the recognition of an endowed scholarship. But my cost basis was $6,000 plus I wasn’t faced with the capital gains increase. I did the same thing with with the other with my the other endowment, and each year now there’s a fundraiser at our school, the my alma mater, that you buy a table for $25 so I just pick out a stock and get however many shares I need and and donate it and, and whatever’s left over goes to my my scholarship. Now that doesn’t make me sound as great as as I once did, but reason I’m saying this somebody knows may not have thought about this, but if you ever want to make a contribution to an area, think about charitable when you’re doing charitable giving, maybe donating a stock. Yeah, but, but it was, it was, is pretty good, using the leverage. And I did, sure didn’t want to sell the stock. Pay capital gains, then donate the money.

Tim Ulbrich  45:00

I was gonna say, What a great example of a win, win, win. I think it highlights so well what we’ve been talking about, right? It’s it obviously led to an endowed scholarship that has a benefit to the person receiving it. It allowed for, you know, a tax efficient way of giving. And it all happened through an exercise in which you were teaching the students something all along the way. That’s pretty cool.

Joe Baker  45:22

And they got an A too!

Tim Ulbrich  45:24

That’s right, that’s right! Awesome. This is great, Joe. I just love your heart for teaching, for giving. I think that is a thread of everything that you do. I know you’ve inspired me in my own journey and the work that we do at YFP as well. So thank you so much for taking time to come on the show. 

Joe Baker  45:41

Can I say one other thing? 

Tim Ulbrich  45:43

Yeah, absolutely.

Joe Baker  45:45

Giving back does not have to be a monetary situation. It could be being the best father, being the best husband, giving in those respects. It could be at your place of worship, giving of your time, your efforts, your leadership, your mentors. So it doesn’t have to be financial. It can be any of those ways. And once again, it will make you feel good, and it’ll be a win/win.

Tim Ulbrich  46:19

Yeah, I think the posture that you’re sharing there is one, one of a giving heart, right? That can be done in many different areas. So I love that. And thanks again, Joe for coming on the show. We appreciate it.

Joe Baker  46:28

Yes, thank you, Tim.

Tim Ulbrich  46:32

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

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YFP 378: 10 Questions for Early Retirement


Tim Baker, CFP® tackles 10 questions for those considering early retirement from sources of income, handling market volatility, health insurance options and more.

Episode Summary

This week, Tim Baker, CFP®, RLP®, RICP® and Tim Ulbrich, PharmD tackle 10 questions for those considering early retirement. They discuss sources of income in retirement, handling market volatility when no longer working, health insurance coverage options, timing to draw on Social Security, and much more.

About Today’s Guest

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

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

Key Points from the Episode

  • Early Retirement Goals and Challenges [0:00]
  • Defining Early Retirement [6:02]
  • Questions to Consider for Early Retirement [8:42]
  • Replacing Pharmacist Paychecks [17:41]
  • Health Insurance Coverage [24:17]
  • Dependents and Social Security Timing [31:08]
  • Inflation and Tax Planning [34:57]
  • Partner and Spouse Alignment [37:20]
  • Long-Term Care Planning [39:56]
  • Conclusion and Resources [44:58]

Episode Highlights

“I think there’s this misconception, or this illusion of control that we have over our retirement age. I think around 40% of people retire earlier than expected. It’s usually due to a medical issue with themselves or a family member, or could be something like a layoff. There is this illusion of control. Now, there are things that you can do to help with that. But a lot of the time we don’t have that.” – Tim Baker [4:59]

“Define retirement. I think for a variety of reasons this question is important, because for a lot of people, we think that retirement is the destination, but it’s really just the next chapter in the journey, right?” -Tim Baker [10:32]

“I think it is really important when we talk about this question: are we accounting for inflation? I think the best way to do that in a retirement setting is, as much of your dollars can come from Social Security as possible is great. But then also taking intelligent risk in the market, where the market is kind of performing in a way that kind of keeps pace or outpaces inflation is what we want.” – Tim Baker [36:25]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, Tim Baker and I are tackling 10 questions regarding early retirement. We discuss sources of income in retirement, handling market volatility when no longer working, health insurance coverage options, timing to draw on Social Security and much more. And to supplement this week’s episode, we have a free resource for you to download: Retirement Roadblocks: Identifying and Managing 10 Common Risks. Because here’s the reality, when planning for retirement or early retirement, as we’ll discuss on today’s show, so so much attention is given to the accumulation phase, growing your assets. But what doesn’t get a lot of press is how to turn those assets into a retirement paycheck. And when building a plan to deploy your assets during retirement, it’s important to consider various risks to either mitigate or avoid altogether, and that’s what this free resource and guide is all about. It’s available for you to download at yourfinancialpharmacist.com/retirement risks. Again, yourfinancialpharmacist.com/retirementrisks.

Tim Ulbrich  01:11

 Now, before we get started with the show, I want to let you know about our next YFP webinar coming up on October 7, at 9pm Eastern: Aliquot Investing: Small investments in Big Real Estate Investing. This free webinar led by YFP Real Estate Investing podcast co-hosts Nate Hedrick and David Bright explores how syndications fit into a well rounded real estate investment strategy, especially for busy pharmacists who don’t have time to source, vet and manage real estate investments. In this webinar, David and Nate will be joined by Alex Cartwright, PhD, and economist who has also led syndication projects, including one in which both David and Nate have invested themselves. You learn more about this webinar and register at yourfinancialpharmacist.com/syndication. Again, yourfinancialpharmacist.com/syndication. 

Tim Ulbrich  01:59

All right, let’s get started with today’s show. Tim Baker, welcome back to the show.

Tim Baker  02:06

Yeah, good to be back. How’s it going, Tim?

Tim Ulbrich  02:07

It is going well. I’m excited. This week we’re talking about early retirement, which is something that I keep hearing more and more pharmacists expressing as a goal. And so Tim, I’m curious to hear from you before we get into the details of our discussion, is that something you’re hearing a lot of as you talk with pharmacists that are engaging with us to learn more about our services? Is early retirement coming up as a frequent goal? And what do you suppose might be driving some of that?

Tim Baker  02:37

Yeah, I think, I think for a lot of people, there’s a there’s this notion of, like, I’ll never be able to retire, you know, and a lot of it’s because of the student debt burden. I do hear on, you know, refrain of, I want to get to a point where I work because I want to, not because I need to. I only, I hear that almost verbatim a couple times a month from a prospective client. So the the notion of early retirement, I don’t, I don’t want to say it’s kind of in the forefront. Obviously, we do, you know, work with a lot of people that are interested in kind of the FIRE movement and what that looks like. But I think that there’s this shroud, maybe, of student debt, that it’s like, how do I even overcome this? And, you know, in a way that puts me in a place to retire, let alone retire early. So I think those that don’t have that, or have kind of navigated a plan for the loans. I think there’s a little bit more of like, sunny skies, but I wouldn’t say there’s a lot of people that are saying, like, I need to retire by, you know, this age. I think that that’s kind of few and far between. 

Tim Ulbrich  03:50

And for those that aren’t familiar with the FIRE term, we’ve talked about it on the show before, financial independence, retire early. Lots of resources out there that folks can learn more more about that. But I’m glad you mentioned, Tim the work because I want to not have to. That’s something I hear a lot as well. And, you know, I think for some people, they love the work that they do, and it brings them a ton of value. It brings them a sense of purpose and meaning. Perhaps others, you know, maybe early retirement is, hey, I want to get out of the stressful environment that I’m working in, and I don’t necessarily love the work that I do, but regardless of those desires, that work because I want to not have to is a thread that I think often comes out and within that I typically will hear, hey, I want to have flexibility. I want to have options. So, you know, maybe I get to a point that, hey, I’d like to work part time, or maybe something happens, you know, health wise, or with a family member, or something unexpected, or pursuing a passion project or hobby, whatever would be, the reason that their financial plan is in a position that, whether it’s something they can see or not see at this moment, that they have options if they need those options in the future.

Tim Baker  04:59

Yeah, I think there’s this, this misconception, or, like, this illusion of control that we have over our retirement age, which is, and I think it’s something like 40% I don’t have that stat in front of me, but I think it’s like 40% of people retire earlier than expected. It’s usually due to a medical issue with themselves or a family member, or could be something like a layoff, that type of thing. So there is this illusion of, like, I have control now, there are things that you can do to help with that, and to, you know, to build, you know, whether there’s something like really to consult in that you have that flexibility, or things like that that gives you a little bit more control. But a lot of the time we don’t have that. And that’s kind of an illusion that we think we have.

Tim Ulbrich  05:44

Since we’re going to use the term early retirement throughout the episode that that implies that there’s an accepted norm, maybe, of what retirement means. So when you hear early retirement, that term and throughout the discussion today, what? What are we referring to? What assumptions are we making? What defines early retirement?

Tim Baker  06:01

Yeah, to your point, Tim, I don’t know if there is an accepted, like, when we say early retirement, this is the age that we’re talking about. Yeah, if you look at it from like, Social Security, early retirement, as defined by Social Security as 62. So there’s really, there’s really a couple ages related to Social Security. It’s your early retirements at 62, your full retirement age, which is different for a lot of people. Most people, it’s going to be 67 and then you have delayed retirement a that’s typically 70. So early retirement in the Social Security system is 62 and you can’t collect the benefit before that. The age that I think of like if you were to say, hey, I want to retire early. The age that I think of is 59 and a half years old. So why do I think of 59 and a half years old? The reason for that is all those retirement accounts, a 401K, an IRA or Roth IRA, they they’ll have basically guidelines to say if you take money out before 59 and a half years old, you’ll be, you know, penalized. Unless there’s, there’s exceptions to that, but you’ll be penalized by 10%. So that’s typically the the age that I’ll use. So like, if you were to say, Hey Tim, I want, you know, I want to retire early, and I would say, Well, what is that? If you say 55 then between 55 and 59 and a half years old, we have to figure out an income stream that’s probably not going to come out of your 401K or, you know your other retirement accounts. So that’s what I typically will use in my brain. I think you know, if you talk to people in the fire community and you say 50-59 and a half? That’s probably not early retirement for them. So those are kind of the few, the few dates, or the few ages that jump out to me when we have this discussion. But I think for all intents and purposes, it’s 59 and a half for me. 

Tim Ulbrich  07:55

I think the same thing. And I agree. I think some of the FIRE enthusiasts, although there’s many different flavors of FIRE, right? But the FIRE enthusiasts, a lot of people might think a early retirement, you know, late 30s, early 40s, right? Type of ages that you typically see. But I think 59 and a half, for the reason you mentioned is, is what often comes up. The other one 62. You mentioned social security. When could I draw Social Security? 65 Medicare, that often comes up. You know, we’ll talk about health insurance. So the point being is, as we say all the time on the show, we’ve got to have intentionality on like, what’s the goal? What’s the purpose? Why is this a goal? If it’s a goal for you, and then we can start to plan around that, like, what does that mean to you? You know, is it 59? Is it 54 and for what reason? And then what does that mean in terms of various savings accounts? So let’s jump in. We’re going to talk about 10 questions that we think are important questions to consider for folks that are thinking about early retirement. And that could be someone listening and says, Hey, I know I want to early retire and I’ve set that date. Or it could be folks that are just thinking about this as something that they’re they’re curious about and want to learn more. As we go through these 10 questions, the intent is not that we’re going to cover each one of these areas in a significant amount of depth. We’ll reference other resources that we have on each one of these topics as we go throughout but really to introduce the question and get you thinking about these different areas as it relates to early retirement. So Tim, the first question that I think is important for folks to consider is, Will I work at all during retirement? Right? And as obvious as that sounds, I think if, if people are thinking of very traditional retirement, it’s, hey, we work for 30, 40, years, and then we don’t work at all. But for others, it may be that we work part time. And pharmacists, I think, are in a unique position where they have more of the opportunity to work part time, work as a contractor, versus other professions out there. So why is this question, will I work at all during retirement so important?

Tim Baker  09:52

And I think, like, if we’re defining early retirement, I think you can even define like retirement. I think so many people, in a traditional sense, they. Think of retirement as, you know, you punch the clock the last time, and then the next day, you’re sitting on a beach or you’re up somewhere, and that’s it, right? And, you know, a lot of people, especially in the fire movement, when they talk about, you know, financially independent, retire early, I think the retire, I think that’s what rubs people the wrong way, is because they overlay that traditional picture of retirement into that paradigm. And a lot of people are saying like, Well, we are still working, we’re just working our on our own terms, right? So I think for, I think for a variety of reasons, like this question is important, because I think for a lot of people, we think that retirement is the destination, but it’s really just the next chapter in the journey, right? And so much of our, for a lot of people, so much of our identity is wrapped up into our role as a pharmacist or whatever we’re doing, and once that like is gone, that can be jarring for a lot of people. So it’s not just a monetary thing. So to me, I think this is where some life planning really gets in, gets you know, it would be really important is, you know, okay, if we don’t have to work, we truly don’t have to work. What are we doing? You know, are we volunteering? Are we taking care of grandkids? Are we getting into hobbies? Are we traveling? You know, there’s a lot of stats that say, if you work, the longer that you work, the more you know, the better your retirement will be. In terms of, like, the financial planning part of it, because you’re just delaying a lot of the things that work, you know, for you, whether that’s health insurance or whether that’s income, things like that. But it’s also like, you know, your social circles are often connected to your work in a lot of ways, like if that goes away. So to me, this is really important to kind of, I think, look at it both from a dollars and cents perspective, Tim, but also like the social aspect of who are you post, you know, full time pharmacist, you know, and looking in the mirror and doing some deep digging of, like, what does what does this actually look like? So I think it’s an important question to ask. 

Tim Ulbrich  12:14

I agree, and I’m glad you mentioned, you know, what does this look like? But how I be spending my time? It’s actually not one of the other questions we had. So we’ll kind of knock both of those out, knock both of those out together. But this is one of those things that we, myself included, we have this idea of what retirement might look like. That could be how our parents have gone through that phase, or grandparents, maybe what we see on commercials, whatever. But taking it to the next step of, what does a day look like? I’ve heard people go through this exercise. You mentioned the life plan, which I thought was great, and having some clarity there, but going through the exercise of actually, like mapping out for a month, like, what would I be doing on a Monday at 11 o’clock, right? On a Tuesday at four o’clock? And you know, not that you have to get that granular per se, but the idea is a good one, that right now you think about the percentage of your schedule that is occupied by work, and especially, I think about folks, Tim, in our phase of life where it’s work, and young kids like, that’s a big chunk of our time, right? And if you fast forward to a date and time where we’re not working, and the kids out of the house, Whoa, that is a big gap of time. So what are we doing with that time? What are the goals you mentioned? You know, is it travel? Is it volunteering? Is it spending time with with the grandkids? Like, what does that rich life look like in retirement? And the second layer I would add to that, Tim, is, if there’s a partner, spouse, significant other involved, like, what does that look like for the individual and then for the we. You know, Jess and I were joking recently that, like we love spending time together, but we also have individual things that we love to do. And I very much see in retirement that we’ll have things that we want to do together, whether that be volunteering or traveling or other things, and then we’ll have other things where it’s like, she’s doing her thing, I’m doing my thing. So, yeah, I think that discussion of, what does this look like for I and what does this look like for we as well?

Tim Baker  14:06

Well, especially in retirement, as you age, like, one of the things that you know, often doesn’t get talked about, and it’s a risk in retirement is loss of spouse, and a lot of it’s it comes from the perspective of, like, loss of a social security check and things like that. But what about like, you know, I look at my parents, love my parents, but my dad doesn’t have his own interest, like, he just kind of does what my mom wants to do. So like, if he were to lose my mom, like, like, what happens, you know? And so I think, like, that’s, that’s a big thing. And, yeah, in the, in the life planning, we go through an exercise called ideal schedule. So you go through and you say, Okay, what’s the ideal day, from the moment you wake up, from the moment that you, you know, put your head on the pillow, then what’s the ideal week? So Monday through Sunday, like, what are we doing? And then it goes out to the ideal year. Like, are you spending, you know, the summertime up North, or are you, you know, are you visiting family, those types of things? And I think that for a lot of people, you know, they realize how much of their day is tied into work, and then once, once that’s gone, like, what happens? So, yeah, those are the exercises. I mean, we’ve talked about, like, the three questions, and I think those are all, you know, important things to kind of reference back to and revisit, especially as you’re going through the next, like, phase of your life. But I think really put pen to paper and I’ve talked about this, I think with you. I don’t know if I’ve ever talked about on the podcast, but like, when I did my sabbatical, I had a month off where I did not touch work, and I kind of had a little bit of like, what am I doing? Like, like, how am I gonna, like, fill the day, which sounds crazy, but like it was a struggle for me, and like I wanted to make the best use of the time, but I also felt like I had some constraints here and there, but like that, that little window was, like, important for me to kind of put myself in someone’s shoes who’s kind of going through that transition. And it sounds silly, but it’s it’s not.

Tim Ulbrich  14:34

That’s a good point, though. I’ve actually heard people talk about, I’m thinking back to the interview that I did on episode 291 with Dave Zgarrick, who is has made that transition in retirement. And he talked about redefining retirement, really thinking about as like a half time to kind of reassess where are we going. Why are we going here? What does this look like? But I think some of those break periods, you know, you mentioned the sabbatical, other people talk about mini retirements. I think it’d be really helpful to having some of these experiences where we get a feel for what this might look like. And you know what? What are some of the ahas of how I do want to spend my time, or what the gaps are in time? I mean, joking aside, we’re just in a phase of life, both of us right now, we’re really sun up to sundown. You know, it’s work, kids, that’s the schedule. 

Tim Baker  16:08

I made the comment like, hey, we haven’t, like, Shay and our kids haven’t really hung out with you and Jess and your boys in a while. And I think I would just look at our schedule and it’s like, soccer, football, swim, soccer, football, swim. Like, it’s just, it’s just so many things that are going on, but eventually that’s going to go away, right to your point, like, that’s, that’s going to be in our rearview mirror. And that’s why, I think, like, even, even couples, sometimes, because they’re so in their, you know, in their kids, you know, activities in their lives that they almost forget about each other. You know, spouses and that can be, you know, I think there is a pretty high level of, you know, divorce and things like that as you, as you age, because you kind of lose that connection with your spouse. And I think that’s important to make sure that you’re continuing to kindle so all these things kind of play into it.

Tim Ulbrich  17:38

So that’s our first two questions, will I work at all during retirement? How I be spending my time? The third question, Tim is, how will I replace my pharmacist paycheck? Again, seems like an obvious question, but for decades, we have a an employer that’s paying us on a monthly basis. And if we were to stop work altogether, again, that may or may not happen, but if we’re to stop working, we’ve got to make our own paycheck at this point. So we’ve talked about this on the show show before. We’ll link to that in the show notes. But thoughts on this question of, how will I replace my pharmacist paycheck?

Tim Baker  18:10

Yeah, I don’t really think, I don’t really think a lot changes here. I think what, what is, what does change in terms of, like, the sources, I think what does change is kind of like, where in early retirement? Where do they come like, where does the money come from? So, you know, if we’re retiring at 55 the the sources of your income is probably going to be from part time employment. It could be from your traditional portfolio, but from, like, a brokerage account that doesn’t have the 59 and a half, you know, 10% penalty, which you have to build, right? So lot of people, they’re really set on, you know, they’re 401, K and their Roth IRA and things like that, which is really important. But the third bucket, so that we have the pre, pre tax after tax. The third bucket is the taxable, which is going to be in an early retirement bucket. So I would say probably those are the two big things for most people. Would be part time employment, and then, like a brokerage account, or like traditional savings. If you’re in the real estate, it could be rental income or liquidation of like a rental property. But then as you age, you know, the things that kind of get the green light are Social Security. You know, if you decide to collect that at 62 or you wait to 67 or even later to 70, and then getting into, once you’re past 59 and a half, you know, the traditional portfolio where you don’t get that 10% haircut, you know, you can start, you know, distributing from a 401K, IRA, etc. There are other things out there, like annuities. It could be, it could be a pension. You know, if you have a company or government pension, which we know aren’t necessarily, you know, a thing that a lot of people have, but that’s typically based on an age that you can, you know, get to that. It could be, you know, tapping into the value of your home, things like reverse mortgages, which get a nasty reputation, or selling a business, or could be cash value life insurance. But I would say the heavy hitters here, especially early on, it’s going to be part time employment. It’s going to be things like a brokerage account savings, and then, you know, potentially, you know, real estate, things like that. 

Tim Ulbrich  20:08

And as you mentioned, especially with the brokerage account, especially with real estate, there’s planning that has to be done there, right, for us to be able to accrue those savings, to tap into those in early retirement. So, you know, early planning, of course, really important here, and when we talk about priority of investing, this is always the one asterisk, right? Hey, if you’re if you’re thinking about early retirement, you know this sequence changes when we think about more the traditional buckets, like the 401K, 403B’s, IRAs, etc, because of that 59 and a half restraint that you mentioned earlier. Tim, number four on our list is, hey, what if there’s a market downturn early on in my early retirement? So I’ve decided to retire early. You know, let’s say there’s a market downturn and we experience some of that volatility, that that can be disruptive to the nest egg. Always a problem, but maybe more of a problem here if we’ve got a longer runway of years that we need those funds in retirement.

Tim Baker  21:06

Yeah. So what we’re talking about here is sequence risk, or sequence of returns risk, which, which is the potential negative impact that the order of your returns, your investment returns, on your portfolio due to the market, is heightened, especially in the withdrawal phase. So if you take and I’ll run through this, I know we don’t have a ton of time, but I wanted to kind of, I feel like we’ve talked about sequence risk, but I haven’t really talked through, like a scenario. So I actually did a scenario where we have one where it’s favorable returns, so like double digit returns, like the second that you retire. And then one that is like negative returns. So, and then what does the, what does the outcome look like at the end of I did it for like a 10 year period. So if you look at, if we start with a million dollars, and you have an annual withdrawal of 50,000, which is 5% and we have a, you know, we’re doing this over 10 years. If we go into the first year of favorable the favorable scenario, the first year, we get a 15% return, 12% return, 8% return, even taking out 50, you know, and over the 10 years, it’s like 4.7% in aggregate, a return. At the end of the 10 years, you’re gonna have $1.2 million. So early on we’ve got, you know, the first, you know, three years, you know, 30 some odd percent. If we look at the same thing, instead of getting positive 15, we get negative, you know, negative 15, negative 12. That same portfolio, even over the 10 years, which is going to get a 4.7% return, is going to end with 361,000. So it’s almost a million dollar swing. So it’s the same aggregate, you know, 10 year, you know, return. But after the first year, for the favorable, you end with 1.085 million. After the first year, you end with $800,000. So you’ve taken off 15% because that’s your that’s basically the market downturn, but you’ve also withdrawn $50,000. So that’s what we’re talking about here with sequence of return risk is that the timing of when you retire is probably one of the most important things related to the market. So what we’ve always said is like flexibility here. So if the market is tanking, it might be worth to, like, work another year, and most of the time, like, you know, in this scenario, we have, you know, four years minus 15, minus 12, minus eight, minus five. Typically, the market doesn’t do that. You know, we don’t have, you know, consecutive years, maybe two, maybe three of year. But like, this is where, you know, pushing that out and having flexibility of like, okay, maybe I’m not going to retire at, you know, 53 I’m going to retire at 56. I’m going to retire at 57. That type of thing. So that, to me, is really important, and that, and that speaks to the the timing of the investment returns that you’re getting. Now, the ways to combat this is, which is really hard, is, is really to kind of be more conservative, take your money from, you know, equities to bonds or even cash. But the problem with that is, you know, nobody has, like, a, you know, a crystal ball to say, like, when’s the best time to do that? So that’s, that’s kind of sequence, risk at play.

Tim Ulbrich  24:20

Number five on our list, Tim, I alluded to this a little bit earlier, is what will I do for health insurance coverage? We’re not yet at the age of 65 we can’t necessarily put Medicare into play. We no longer have employer coverage if, if we’re working part time or not working at all. You know what options are we thinking about here and and obviously we’ve got to factor this in as a cost as well.

Tim Baker  24:42

Yeah. So I mean, unfortunately, and we’ve kind of bemoaned this fact being business owners, there’s not a great option here. You know, I think you know, looking at employer sponsored COBRA coverage, but that only typically lasts 18 months, and that’s really expensive because you’re paying the full premium. If you have a spouse that you can ride his or her coattails, that’s one way to do it. It could be private health insurance. So looking, you know, at the exchanges, things like healthcare sharing ministries like that, that might be something. I know you looked at those in the past. It could be, you know, there are some, and I don’t know if Starbucks still does this, but I remember a lot of people. I think my sister worked for Starbucks, you know, when she was in college, just to get in, you know, insurance through them, she was working part time. It could be Medicaid if you don’t have assets, like, if, you know, I would say that you probably shouldn’t be retiring if that’s the case. Or just, like, short term plans that provide, like, temporary coverage. So probably, for most people, it’s going to be looking at the exchanges and trying to trying to find the best, you know, probably catastrophic plan that they can. But unfortunately, there isn’t really a great, you know, a great solution here to kind of bridge you before you get to 65 to get to Medicare, you know, yeah, it’s, it’s kind of, you know, pick your poison, so to speak.

Tim Ulbrich  26:00

You know that you mentioned the Starbucks, there’s actually a FIRE pathway, barista fire that’s named after that, that play, right? Which is, you know, working part time at a place like Starbucks or a place that has those benefits to be able to get access to those. You know, the other other comment I’d make here, Tim is, I think while these costs are very real, like, we have to put them as objectively in play as possible. What I mean by that is, like, if you’ve done a good job and the dollars are there, like, even if this feels scary or you don’t want to spend money on it, like, if the math supports it, like you just factored into the plan, right? I’ve seen some people, I think, talk about this as like, Oh, I’ve had employer coverage my whole life. I’m three years away from Medicare. I’m done working. I’m over it. Don’t need it, you know. Don’t want to be working anymore, but I’m gonna wait till I get to 65. And maybe that’s the play. But if the nest egg is there, like, we just need to factor this in as an expense and consider it. I mean, the other note and comment I’d make here, back to our discussion of early planning with something like a brokerage account. This would be another play of early planning with something like HSA contributions, where, you know, can we be accruing and saving money in HSA throughout our career, such that one of these instances here, we’re talking about early retirement. We’ve got some dollars that are earmarked specifically for that, that we don’t have to have to necessarily draw separately from our portfolio.

Tim Baker  27:21

That’s right, yeah. HSA would be a great bucket for this, because it has the triple tax benefit, but the flexibility to be able to use for you know, now and later. So yeah, that’s a great bucket for that.

Tim Ulbrich  27:34

Number six is, are my dependents independent? And if not, have I factored that into my planning and assumptions? Tim lots to think about here, kids and elderly parents, but looking at dependence and cost of dependence.

Tim Baker  27:48

Yeah, this is, um, this is, this is kind of hard too, because, you know, I always joke with my with my kids, that, you know, they they need to move out so I can, you know, turn their room into a a whiskey room. And, you know, my kids are 10 and five or whatever. Obviously, Zoe’s always younger, but I think this is hard, because I think we are all trying to prepare our kids to kind of launch, right? But, you know, oftentimes they come back. And you know, we have to kind of figure out what that looks like. So that could be, you know, it could be for kids managing, like, their college and expenses related to that. But then after, like, if they don’t get a job, or if they’re not, you know, able to support themselves. Like, what are the, what are the rules around rent and things like that, and just, how does that affect your overall financial plan? And then elderly parents, there’s a lot of, you know, pharmacists that we work with that they say, I am my parent’s retirement plan. Like, that’s the thing, right? And, and I respect that, you know, a lot of it’s like, Hey, I’m a first generation immigrant. You know, they’re you know, they’re sacrificed to get over here. And my sacrifice is kind of making sure that they’re okay, you know, in retirement. So, you know, we have this term called the sandwich generation. It typically is, you know, people in their 40s and 50s that are taking care of, like adult children, but they’re also taking care of, like elderly parents. That’s a big thing. And again, like, I would say, it kind of goes back to when we talk about, like, education planning, like you have to put your mask on first and then put on the mask of your child. I don’t think that ever goes away. So I think that, you know, this can be an unexpected thing for a lot of parents, but you know it can, really, especially like elderly plant parents, if you’re the one that’s kind of, you know, caring for them, and these are often the things that kind of force can force a retirement early for you is that you’re taking care of other people, right? So I think having these conversations with, you know, your kids, with your elderly parents and and come up with a plan and kind of ground rules. I think is really important. So we can kind of include this in the plan and know, you know, when does zig and zag?

Tim Ulbrich  30:06

Yeah, Tim, anytime we talk about this topic, always comes to mind conversation we had with Cameron Huddleston on the show a couple times, who wrote the book, Mom and Dad, We Need to Talk. And, you know, in the context of elderly parents, this is where those conversations are so important, as uncomfortable as they may be, right? Because, you know, I’m thinking about even discussions I’ve had with my parents about, you know, what does their financial position look like? What are their retirement goals? What are their desires for, you know, staying in the home versus other living arrangements. What is their long term care insurance policy look like? And, you know, part of those conversations, obviously, is focused in a genuine care and desire of what, what do my parents want? But there’s also a reality of like that may impact our financial plan, and that’s not being selfish, like we’re just trying to be responsible. And I think you know, if we can get into those open conversations, we can start to plan around that a little bit, to understand what the impact may or may not be of that situation with parents on our financial plan. 

Tim Baker  31:05

That’s right.

Tim Ulbrich  31:06

Number seven, we touch on this a little bit. Tim, but when will I draw on Social Security? We talked before in episode 294 about common Social Security mistakes to avoid, and a big part of that discussion was around when we opt into starting Social Security benefits. For someone who’s saying about early retirement, you know, and building that retirement paycheck, a Social Security benefit might, might be an important part of that, and the temptation, perhaps could be there to start those benefits early and just understanding what the impact of that could be versus a delayed benefit selection. So thoughts here on this question of, when will I draw? 

Tim Baker  31:41

I think a lot of financial planners are, you know, coming around to the fact that, like, if you can delay your Social Security benefit as long as possible, the better knows for the the overall plan. And I know this, to your point, it can be if you’re, if you’re working for or if you’re, if you’re retired for, you know, 10 years or whatever it is, and your funds are dwindling in some of those, you know, brokerage accounts or savings. I think it can be tempting to to draw earlier, right? But I think if you look at the math, and I have, you know, I think I pulled, I think this is from my Social Security statement. If you look at my Social Security statement. If I were to retire at 62 my monthly benefit would be $1,826. if I were to retire at not full Social Security age, but 65 it would be $2290. If I then go to 67 which is my full retirement age, it goes to $2662. If I delay it till age 70 so I’m getting those deferment credits, it goes to $3,306. So the spectrum of early at 62 is $1826, to delayed is $3307.  But the big thing here, Tim, that doesn’t get enough press, is that it’s inflation protected, which there’s no other pension or annuity out there that you can get that does that. So one of the big hang ups for for retirees is like, I’m working on a fixed income. I’m working on a fixed income. But once you know inflation takes over, as we’ve seen in recent years, that really, like, you know, provides pressure on, okay, how am I going to let you know, how I’m going to make this, you know, these dollars last. So that would be the thing that I would implore, you know, people, when they’re looking at their, you know, their, their benefit for Social Security is, you know, if we’re planning this, can we plan to at least get the full retirement age, or, you know, can we delay it from 62 to 67 at least, to get from, you know, an $1,800 benefit to a almost $2,700 benefit because this will pay you out for the rest of your life, which we don’t know what that is, inflation protected. And that’s where you see that exponential benefit versus, you know, if you, if you, if you peg it at $1,800. So it’s still inflation protected, but I think you want that, that percent of your paycheck to be as high as possible that is covered by, you know, the Social Security and Inflation. So it’s really, it’s a really important discussion to have. 

Tim Ulbrich  34:21

Tim, it’s a good plug and a reminder for folks, if they’re not already doing this, to check out their My Social Security account ssa.gov just to dig into that report, what are the expected benefits? Always a good thing to build into. I typically try to check it in just once a year, kind of see what’s going on. So since you mentioned inflation, Tim, let’s jump down to that one, and that question being, have I accounted for inflation? You mentioned social security being inflation protected, but really nothing else beyond that. So, you know if we think of inflation as of late, which has been higher than historically, although that’s come down, you know, more recently, but even the historical rate of inflation, if we’re retiring, let’s say, in our early 50s and were afforded the opportunity to live into our 90s, like costs are going up right significantly over that time period. So the question here is, have I accounted for inflation when I’m looking at these early retirement numbers?

Tim Baker  35:13

Yeah, and one of the best ways to account for inflation as retire is to be in a you know, is, have some of your your assets in equities, right? Which gets scary, because then we talk about, you know, the sequence of return risk. But I think, really, for a portfolio to endure 30, 40, 50, 60, years is, is to make sure that you’re taking, you know, intelligent risk in the market. So you know, we just got news of the rate cut yesterday, and immediately, you know, you’re seeing like our cash account at our custodian went from 5.1% which is really solid, to 4.6%. So savers, and often, you know, people that have reached you know that are in retirement have a good amount of cash, or they should, because, you know they’re they’re basically taking slugs of cash out to basically build their paycheck. That’s going to affect them potentially negatively. Now, you know interest rates, you know in inflation, sometimes, you know we’ll see interest rates go go down, but we won’t see like the cost of goods go down because they’re pegged that we talked about that in previous episodes, they’re kind of pegged at that high watermark. So I think is really important, you know, when we talk about this question is, you know, are we accounting for inflation? I think the best way to do that in a retirement, you know, setting is, again, as much as your dollars can come from Social Security as possible is great. But then also taking, you know, intelligent risk in the market, where, you know, the market is kind of, you know, performing in a way that kind of, you know, keeps pace or outpaces inflation, you know, is what we want. So, you know, on the so that’s, that’s kind of on the asset side, but then on the debt side, you know, just making sure that, you know, we’re, we’re efficient, you know, there with with rates and where inflation is as well. So I think it’s important to, you know, for retirees that are potentially living on a fixed income to account for, and a lot of people this, and really, taxes. Tim, it’s kind of like, can be a second, you know, an afterthought.

Tim Ulbrich  37:20

Good point on the taxes, probably a whole separate episode, yeah, around like, tax planning and early retirement. Um, number nine on our list is, is my partner spouse significantly now they’re on the same page. We already talked about this in the context of, hey, what does that, you know, schedule look like? What does that ideal life, that rich life, look like in retirement? And, you know, what’s the I? What’s the we? But I think it’s also just a bigger question of, like, are we on the same page with this concept of early retirement, and maybe, if one spouse wants to work longer than another and one’s having to draw down from their assets, like, are we good with that? You know, does that jive? 

Tim Baker  37:55

And I think, I think this kind of starts with, you know, where are we at and where are we going? So you know, when we do this with clients, we we call the first meeting, Get Organized where, you know, we’ve plugged everything into our client portal, checking, savings, credit cards, student loans, investment accounts, value, the house, the mortgage, all the things, right? And for a lot of people, it’s the first time they’ve seen their stuff all in one spot, right? Because we bank over here, we have debt over here, we have investments over here, and then for spouses, that’s also true, right? Because I don’t necessarily see everything that Shay has, you know, if I’m not tuned in. So if we plug that all into one platform, we can kind of see the landscape of where we’re at, and then I think from there, once we establish where we’re at, we talk about where we where we’re going. And then I think this is some of these questions that come up is like, okay, Shay, if I retire and you’re still working for 10 years, like, Are you cool with that? Probably not, right. So I think those that’s the space to have the conversation again. I’m biased, Tim, right? Because, you know, we’re planners, but sometimes these are hard to have with your spouse. So having that third party, like the independent third party that has your best interest, that can ask questions, is, I think, a safe place so to speak, to have these conversations. Because, you know, if Shay says I’m going to retire early and you can keep working. I’m going to say, Yeah, that’s cool, whatever. But maybe I have some resentment about that, you know, and I think if you’re in a in a place where, you know, it’s safe, and we can kind of talk these out and get on the same page, it’s really important because, you know, we’re trying to row this boat in the same direction. And if, you know, if we’re just, you know, having these service conversations and not really getting, you know, into depth, then we’re just kind of spinning in a circle. So I think it’s really important to to make sure you know, and this goes back to life planning, to make sure that you know your vision of early retirement, you know, overlaps. It doesn’t have to be the same, yeah, but it overlaps with your spouse or with your partner to make sure that you know your needs are taken care of, but also your spouse’s needs are taken care of. 

Tim Ulbrich  40:08

What came to mind, Tim, as you’re talking about, is my I think my parents, to their credit, have done a really good job of this. My mom’s been retired now for a few years, and my dad has no plans in the near future retire. He just loves his work. It’s energizing, and he acknowledges maybe that will change at some point in the future when it does, and maybe it looks part time or consulting or whatever, but they have kind of figured out like for them individually. My mom, you know, has a ton of joy that she gets from just the daily rhythms and routines that she has, and it doesn’t mean my dad has to be doing the same thing. So I don’t think there’s a right or wrong here. It’s more about what works for you as a couple. And as you mentioned, having some of those conversations to avoid, or try to avoid, as much as you can, some of the resentment or other feelings that might come up along the way. All right, our last question, number 10 on this list of 10 questions to consider for early retirement is, am I prepared for potential long term care expenses? Tim, we talked about Medicare already briefly, but here we’re talking about some of the significant expenses that can come beyond what Medicare may cover, and specifically here thinking about long term care insurance, we talked about this on episode 296, we’ll link to that in the show notes. Your thoughts here on, am I prepared for potential long term care expenses?

Tim Baker  41:25

Yeah. So I think the stat is, is that you know, a person that’s age 65 is going to spend $157,500 on health care and medical expenses, you know, throughout the course of their life, a couple of $315,000. So you know, and this doesn’t necessarily include the cost of, like, long term care. So when we talk about long term care, this is really, you know, help with kind of the the daily living thing. So like being able to get out of bed, you know, move around your house, use the bathroom, dress, feed yourself, but also kind of more like, you know, cognitive things like being able to pay bills, or, you know, shop so, you know, oftentimes, and actually one of the biggest, the biggest cause for, like, you know, a long term care policy to get triggered, is Alzheimer’s. But the second one is, the second biggest is arthritis, Tim, believe it or not. So, you know, a lot this is one of those things. It’s like, Ah, this will never happen to me, or I don’t got to worry about that, or I’ll figure this out later. But you know, it’s, it’s one of those biases that we have that, you know, it often can come and bite us in the rear end. So what we talk about with long term care is, there’s, there’s really two ways to prepare for this. One is to self insure. So just like we’re talking about being able to, like, pay our own health care and things like that, this is kind of, this is not that. This is where we’re basically saying we’re going to forego a policy. We’re basically going to, you know, if this comes up, we’re going to reach into our own pocket, reach into our own portfolio, and pay for the care that we need. The alternative, and what I would recommend, is purchasing a long term care insurance policy where it really affords you access to benefits that allow you, at a minimum, to age in place. So these, you know, there’s studies that show that, you know, couples are willing to spend, you know, $2500 to $3,000 a year on a long term care policy. And you can get a policy that you know can kind of get you a basic, a basic policy that will have, you know, someone come in the home, or things like that. I think a lot of people, when they think of long term care, they think of like, of like a nursing home and things like that. This is really trying to, you know, get, get a policy that provides benefits that can bring people into your home to assist you as you age. So, you know, there’s typically a Goldilocks zone. Is that you should start, you know? So we talk about early retirement, you should start discussing this, probably in your 40s and 50s, start really assessing it in your 50s. And the kind of, the sweet spot the purchase of policy is, like, early 60s, yeah. So this is really important, because, again, like the once you once you kind of go into, like, a facility, if that, if that’s the case, like, that’s where expenses can get really astronomical. So the longer that you can stay in place and have the help that you need, the better, I think it is for you from a psychological perspective, but also from a financial perspective. And again, this is one of the ones. It’s like, like, not going to happen to me, Tim. I think important to look at. And I think we look at these policies as almost as like a a coupon for future care. So, like, hey, you know, if I get a benefit, that’s $3,000 a month, but you know what I need is $4000 then I’m only reaching in my pocket $1000 bucks to kind of cover down on the difference.

Tim Ulbrich  44:54

Again, episode 296, five key decisions for long term care insurance recovered that topic in depth. We’ll link to that in the show notes. Tim, great stuff. And one thing I would say to our listeners, early retirement or not, we touch on a lot of areas of the financial plan. We talked about the importance of having a life plan, having the vision for where we’re going, why we’re going there. We talked about building a retirement paycheck. We touched on insurance, Social Security, investing priorities and decisions to make around investing and how to prioritize different parts of the investing plan. And at YFP, this is what our team of certified financial planners and tax professionals do. We support pharmacists at every stage of their careers to take control their finances, reach their financial goals and build wealth through comprehensive – looking at all the different areas we discussed – fee only, financial planning and tax planning. And we’d love to have an opportunity to talk with you, to learn more about your situation, to learn more about our services. Determine if there’s a good fit. You can book a free discovery call with Tim by visiting yourfinancialpharmacist.com top of the page there, you’ll see an option to book a discovery call. Thanks so much everyone for listening. We’ll catch you again next week.

Tim Ulbrich  46:01

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

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YFP 377: 10 Moves to Make to Become Financially Fit


Gathering wisdom from his own journey and those of many other pharmacists, Tim Ulbrich, YFP CEO, shares ten moves that are key in building a strong financial foundation.

Episode Summary

YFP CEO and Co-Founder, Tim Ulbrich, distills the lessons learned from his own financial journey and from speaking with thousands of pharmacists about their financial plans into a list of ten moves that are key in building a strong financial foundation. 

Whether you’re just getting started and have the opportunity to build a strong foundation from the beginning or you’ve been at it for a while and sense the need to reinforce that foundation, this week’s episode is for you.

About Today’s Guest

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

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

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

Key Points from the Episode

  • Financial Moves to Build a Strong Foundation [0:00]
  • Commitment to Living Off Less Than You Make [4:05]
  • Building an Emergency Fund [5:59]
  • Developing a Plan to Eliminate High-Interest Debt [10:17]
  • Determining the Best Student Loan Repayment Strategy [12:07]
  • Tracking Net Worth and Understanding Insurance Needs [14:53]
  • Starting to Invest Early and Often [19:03]
  • Refusing to Accept a Fixed Income [20:04]
  • Implementing Systems and Automation [21:30]
  • Conclusion and Encouragement [24:51]

Episode Highlights

“As I truly believe everything else we talk about, right the X’s and O’s, whether it’s investing, insurance, debt repayment, tax planning, whatever it may be, all that stems from understanding and improving our own financial IQ.” – Tim Ulbrich [4:07]

“Life happens, and you want to be prepared. I want to be prepared so that those bumps don’t derail momentum and progress in other areas. The last thing we want is that we feel like we’re finally making progress towards building wealth, saving, investing for the future, achieving the goals that we’ve desired to achieve, and all of a sudden, we haven’t prepared for an emergency, and something sets us backwards and disrupts that momentum.” – Tim Ulbrich [5:00]

“Your six figure income – it’s a great tool, but it is not a financial plan. Without a vision and a plan, that good income is only going to go so far.” – Tim Ulbrich [27:51]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I’m flying solo with an episode that is short and to the point. One that distills a lot of learning from my own journey and from speaking with 1000s of pharmacists about their financial plans. I’ve taken those experiences and narrowed it down to a list of 10 financial moves that are key in building a strong financial foundation. Think of these as the prerequisites to building wealth and living your rich life. So whether you’re just getting started and have the opportunity to build a strong financial foundation from jump street, or perhaps you’ve been at it for a while, and sense the need to reinforce that foundation, this week’s episode is for you. And if you’re looking to identify areas within your own financial plan that could use some love and attention, we’ve got a great free resource for you. We created a five minute financial fitness test so that you can learn about the areas of your financial plan that you may need to work on, where you’re doing well, and resources that can help along the way. So head on over to yourfinancialpharmacist.com/fitness and see how your financial health is tracking. Again, that’s yourfinancialpharmacist.com/fitness will also provide the link in the show notes. 

Tim Ulbrich  01:25

All right, let’s jump right into our list of 10 moves to make to become financially fit. Number one on our list is be a sponge. Be a sponge. This is intentionally number one on the list as a consistent commitment to learning, I believe, is going to yield the greatest return on your investment. The earlier you learn, the higher the return on investment of your time. At most, some pharmacy schools offer a personal finance elective but the vast majority have little to no personal finance that’s embedded in the curriculum, whether that’s at the graduate or the undergraduate or even the K through 12, although we see that expanding more recently. While you don’t need a master’s degree in finance to be successful with your money, you should have the basic knowledge that helps you make good decisions and develop good habits. Read books, listen to podcasts, watch YouTube videos, whatever works for you. Some of my favorite personal finance books that have had the most impact on my journey include Rich Dad, Poor Dad by Robert Kiyosaki;  I Will Teach You To Be Rich, by Ramit Sethi; The Millionaire Next Door, by Tom Stanley; Money: Master the Game by Tony Robbins; and of course, I’d be remiss if I didn’t mention the book that we wrote, Tim Church and I co authored, Seven Figure Pharmacist. These resources, as well as many other podcasts for me in my own journey, were instrumental to just developing that hunger and habit to learn, recognizing that there’s always an opportunity to grow, right? This is a journey. This is a marathon. This is not a sprint when it comes to long term financial success, and we have to put the work in to make sure that we’re upping our financial IQ over time. So be a sponge. When I think about some of the guests that have been on this show recently, right Brandon Gerleman on last week’s episode 376, that shared his debt free journey paying off about $160,00 of debt. Or Dr. Manny on Episode 375, a new practitioner that has opened up his own community pharmacy, is building his business. Or Mike Beyer from 365 who shared his story, going from a net worth of zero to becoming a Seven Figure Pharmacist. These are just a few of the stories, but one consistent theme and thread that I think of from their journeys is that they really believe there is no arrived. There is no arrive. When it comes to the financial plan, they are hungry to learn, to grow, despite the success that they have, they recognize there’s always an opportunity to learn, to improve and to grow. So that’s number one on our list. As I truly believe everything else we talk about, right the X’s and O’s, whether it’s investing, insurance, debt repayment, tax planning, whatever it may be, all that stems from understanding and improving our own financial IQ. 

Tim Ulbrich  04:22

Number two on our list is make a commitment to live off of less than you make. Make a commitment to live off of less than you make. Outside of learning, outside of being a sponge, this is at the top of the list because other goals require cash flow. It’s that simple, right? If we want to pay off debt, if we want to save and invest for the future, if we want to invest in experiences and travel, whatever goals we have, they’re dependent on cash flow. And cash flow comes from living off of less than we make now, easier said than done. Many of you know that firsthand, but until we figure out ways to take off the cap on our income. We’ll talk about that here in a little bit. The cash flow will come from the difference between what you earn and what you spend. The financial plan is this simple and this hard right. Executing, of course, is the hard part. But without cash flow and without a monthly system, we’re going to talk about that here in a little bit as well. We’re going to find ourselves spinning our wheels financially long term, right? We want to implement a system that from the breathing room and the cash flow that we create, we’re able to fund our goals each and every month, and know that we have a process in place for those goals, the dreams that we have to become a reality. So that’s number two on our list. Make a commitment to live off of less than you make.

Tim Ulbrich  05:48

Number three, you’ve heard me say it many times on the show before, build an emergency fund. This is not just about the dollars in the account. It’s about the breathing room that this creates in your financial plan, getting out of the day to day, month to month, year to year, mindset, and ensuring that we can have the peace of mind. So if you haven’t already done this, open up a high yield savings account or money market account that is separate – keywords – separate from your checking account, and label it as your emergency fund. One of these, my partner, Tim Baker, often says is, hey, if you’re doing the mental accounting, do the actual accounting. What does he mean by that? He means that if we’re looking at our funds, let’s say you’ve got 20, 30, $40,000 that’s sitting in a high yield savings account, or perhaps in a checking account. Hopefully not the case. But if we know that, hey, about five or 10 of that is for an emergency fund. About five or 10 of that is for an upcoming trip, about 10 of that is for a future roof replacement in the home, right? That’s the mental accounting. So if we’re doing that, let’s create the buckets here. We’re talking an emergency fund, label it and do the actual counting of putting it in a fund that is earmarked specifically for the emergency fund. Now we’re going to want to work towards saving three to six months of essential expenses. That’s our goal. That’s our target, general rule of thumb. But don’t let that number overwhelm you if you’re just getting started, or perhaps you’re doing some cleanup work in other parts of the financial plan, because here’s the reality, if you’ve never had an unexpected car or medical expense or another emergency, it’s only a matter of time. Life happens, and you want to be prepared. I want to be prepared so that those bumps don’t derail momentum and progress in other areas. he last thing we want is that we feel like we’re finally making progress towards building wealth, saving, investing for the future, achieving the goals that we’ve desired to achieve, and all of a sudden, we haven’t prepared for an emergency, and something sets us backwards and disrupts that momentum. Now here are five questions that I think you need to answer for your emergency fund, just to get you started and hopefully to get you on track. Number one is adequately funded. We talked about that general rule of thumb, three to six months of essential expenses, not all expenses, essential expenses. So what does that mean? Housing, food, transportation, clothing, minimum debt payments, things that you would continue to fund, even in the event of a short term job loss or emergency add those up. Multiply them by three to six. That’s a general target we’re shooting for with an emergency fund. So that’s question. One, is it adequately funded? Number two, a problem, but a good problem to have is, do you have too much saved in an emergency fund? I’ve talked with several pharmacists that have done a great job saving, but big numbers in an emergency fund, and ideally, we would put these funds, probably elsewhere, to use in the financial plan now, right now, because of where interest rates are at, it’s not a terrible option to have money sitting in an account earning four to 5% in high yield savings account. But if we have other high interest rate debt, or we’re looking to build up our long term investing or savings, there is an opportunity costs that can come from having too much saved in an emergency fund. So that’s question two. Number three, are you optimizing your emergency fund? So what I’m talking about here is making sure it’s not sitting in a checking account, that we have it working for us, especially with where interest rates are at right now. Whether that be a high yield savings account or money market account. You know, right now, at the time of this recording, most of those are in the four to 5% range. So are we optimizing that fund. Number four is, does it need a boost? So this is something that we can set it but forget it, and we have to come back and look at this, right? So, you know, especially for those that are earlier in their career, where expenses creep at a rapid rate, right? Perhaps when you when you graduated, maybe you didn’t have a home, or you didn’t have a family, all of a sudden you wake up in 3, 4, 5, years, our expenses have gone up significantly. So we want to visit this, revisit this at least once a year, and maybe at one point you hit that target of three to six months. But do we need to look at it again? And finally, our fifth question here. Is, as I mentioned already, is it separate from our everyday checking account? Right? If we’re doing the mental accounting, let’s do the actual accounting. So that’s number three on our list, build an emergency fund. 

Tim Ulbrich  10:11

Number four on our list of 10 moves to make to become financially fit, develop a plan to eliminate any high interest rate revolving credit card debt, or any high interest rate revolving consumer debt. Now, if you don’t have any revolving, high interest rate consumer debt, credit card debt, high interest rate, car loans, etc, great, right? Let’s move on. But if you do, baby steps, baby steps, this, along with the emergency fund, is really a top priority, given the interest rates this debt often demands, right, especially when talking about credit card typically north of 20% we have to plug this hole before we can start playing offense with other parts of the plan. Now, I know that sounds obvious, but I see this mistake commonly made, where because student loan debts there’s there’s an emotional burden there, or because there’s a feeling that I need to catch up and save and invest for the future, we can often get these priorities mixed up, right? So if I have high interest rate credit card debt that’s accruing interest north of 20% but I’m paying down debt at 5% 6% whether that be student loans, or I’m trying to save and invest in various retirement accounts. I may have those out of order, right? So we got to look at that. Now. Last thing I want to say here is, if you have credit card debt, know that you aren’t alone. Okay? We often think that, hey, all my other pharmacist friends have this figured out. They’re making a great income. I’m the only one with credit card debt, I can assure you that is not the case. This is a fairly common struggle that we see, especially with new practitioners. Although others are not immune to this, but there’s a lot of expenses that ramp up in that final year of pharmacy school, or those that transition into residency or fellowship. High cost of living areas. There’s a tendency to accrue some credit card debt at the end of that training program. So know that you’re not alone doesn’t mean or minimize that we have work to be done. Of course we do, but you aren’t alone, and we got to really start to begin to tackle this. So that’s number four, develop a plan to eliminate any high interest rate revolving consumer debt. 

Tim Ulbrich  12:15

Number five is we have to get clear on determining what is the best student loan repayment strategy for you. Now, if you’re listening and you have no student loans, you’re further along in your career. Great. Keep moving on, right? But for those that do have student loans, this is often a huge piece of the puzzle that we have to figure out, given the magnitude of it so that we can then plan around it. Because what you’ll notice, if you’re not already aware, especially when it comes to federal student loan repayment, there are a variety of options that can result in either big, big, big monthly payments or much smaller monthly payments, depending on which repayment plan you choose. And so we have to understand what fits into the budget. What is ideal, what is optimal for your situation, so that we can then plan and budget around it. Now, the median debt load for a pharmacy graduate here in 2024 covering right around $160,000 and for many grads, this is one of the most important and overwhelming decisions that they’re going to make. And to be fair, this is way more complicated than it needs to be, both on the federal and the private side. For those of you that have private loans. And to make that worse, this is just a hot mess right now, right. There’s a lot of changes that are going on with student loan repayment, a lot of uncertainty. The Save program has been held up. We don’t know what’s going to happen with that in the future. And by the way, we’re in the midst of a presidential election where student loans are often discussed and used in terms of political jockeying, so there’s a lot of unknown, which means for a lot of borrowers, it’s kind of a wait and see. Right now, it’s a wait and see for many people. So if you’re not already plugged into Studentaid.gov, make sure you get plugged in. We’ll link to that in the show notes so that you can stay up to date. We’ll also try to bring information here on our channels with what’s happening with student federal student loan repayment. But again, given the size, given the magnitude, notice, I didn’t say debt free, and I was intentional there, because for some of you, this is going to be a loan forgiveness pathway. But what I did say is we have to get clear on what our strategy is. We don’t want to be wandering when it comes to how we’re approaching our student loan. So once we can determine what is the optimal repayment strategy, we can then figure out what does that mean for a monthly payment. And then, as I mentioned, we can begin to build around that. So that’s number five, determine your student loan repayment strategy. Number six is, start tracking your net worth. Start tracking your net worth now if you’re early in your journey, especially if you have student loan debt or credit card debt, you’re not going to like this number, right? Because it’s a number that’s going to highlight especially if we have a high amount of debt that hey. We make a good income, but we’re probably not at the point we would like to be in terms of our overall financial health. Net worth is your assets or what you own minus your liabilities or what you owe. And I believe this is a much better indicator of your financial health than is your income, right? Because your income a six figure income. It’s a tool, but it’s not a financial plan, and it’s a tool that we can leverage to grow our net worth by paying down our debts and growing our assets that are hopefully compounding over time, but net worth is really going to shine a light on are we or are we not making progress. And so understanding and respecting this calculation can propel your financial plan. I really think about this as the 20,000 foot view on what’s going on for Jess and I in our own financial plan. So this is something that we’re tracking monthly. Very easy to do. I’ll share with you the template that we use. If you go to your financial pharmacist.com/toolbox. You’ll see a network tracking sheet there. You can save a copy for yourself, edit it. Nothing complicated. You can set up your own sheet as well. It’s a simply a listing of all the accounts that we have, checking savings, retirement accounts, real estate accounts, etc. Add up all the assets, subtract the liabilities. Amount that’s due. That’s our net worth. We’re tracking that over time to make sure that we’re heading in the right direction. If you’re not already doing this, even if you don’t like the number implement a system a recurring task to track your net worth each and every month. That’s number six on our list of 10 moves to make to become financially fed. 

Tim Ulbrich  16:36

Number seven is determine what insurance policies you do and do not need and do not need is perhaps equally as important. And while there are a lot of different types of insurance to consider here, I’m talking in specifically about three that I see get overlooked most by many pharmacists: professional liability and having your own professional liability insurance policy independent of your employer. Term life and long term disability. With the latter two, term life, long term disability, we’ve got to be thinking about what coverage we need in addition to what our employer policies are providing, not only to plus those up if they’re not enough, but also we got to remember that those policies aren’t going with us when we transition jobs, right and so as time goes on, as we get older, these policies typically become more expensive. So if we can lock these in in terms of our own independent Term Life policies, long term disability policies, while we’re younger and we can get the coverage we need, that’s probably going to be the best action that we can take. Now, when it comes to long term disability, you put a lot of time, energy and effort to be able to become a pharmacist and make a good income, and that’s why it’s so important to protect it. Disability Insurance for pharmacists is really income insurance. It’s addressing what would you do and the event that you’re unable to work as a pharmacist, right on the term life insurance side, what we’re trying to do there is especially if we have dependents or someone else that relies upon our income, in the event that you were to prematurely pass away, and that income is needed. What is that term life insurance policy going to produce? What expenses is it going to cover both short and long term now, we’ve got more information and resources on all of this. You can check those out at our website, yourfinancialpharmacist.com, I’ll link to a couple resources we have specifically on term life and long term disability in the show notes; guides that we’ve written specifically for pharmacists, what you do need, what you don’t need. Make sure to check those out. That’s number seven on our list. Determine what insurance policies you do and do not need. 

Tim Ulbrich  18:54

Number eight is we have to start investing as early as we possibly can. Now I know we’ve all been told this, but again, as with many of these items easier said than done, because when you’re flooded with things like student loans and other debt, it can be hard to balance prioritizing investing, and it’s easy to fall into the trap and perhaps feel that you can put off retirement savings for a few years, but the reality is that you want to take advantage of compound interest, time, value of money, and the earlier you start contributing, the better. And your investing strategy, it’s going to evolve over time. It’s going to get more complicated. But don’t succumb to inaction, because you’re overwhelmed with all the options. Start typically, what we’re focused on is starting with the employer match to a, 401K or 403B, 401 k, for those that you work work for a for profit, 403B for those that you work for a non profit, assuming that you’re there long enough to be vested, that’s a key factor we have to look at. And then we’re going to build from there, right? We’re going to look at things like IRAs Traditional and Roth IRAs, typically. Roth IRAs for pharmacists. HSAs health savings account and other investment vehicles along the way as well. We have talked extensively on the show about various investing strategies, long term retirement plan strategies, so make sure to check out those episodes for more information. 

Tim Ulbrich  20:17

Number nine on our list of 10 moves to make to become financially fit is refuse to accept your income is fixed. Now, common misperception I see among many pharmacists is that there is a ceiling on their income, and that mindset can lead to stagnation. Stagnation. It can lead to career dissatisfaction, and it can really limit on what is possible. So whether it’s pursuing additional opportunities within your organization, or perhaps for some of you, it’s starting a side hustle or business or investing in real estate, these are just a few of the many examples of how pharmacists are taking the ceiling off of their income potential. Bob Berg, the author of the Go Giver, said that your income is determined by how many people you serve and how well you serve them. I believe that to be true, whether it’s people that start their own business, whether that’s people that get started in real estate and develop great collaborations and partnerships, or whether that’s folks within their own organization that really are able to demonstrate and provide the value that then unlocks additional opportunities for them. So that’s number nine, refuse to accept your income as fixed because,

Tim Ulbrich  21:25

as we talked about earlier, all financial goals stem from the cash flow that we create by living off of less than we make. One way to do that is cut expenses. The other way we’re talking about here in our ninth point is growing our income. 

Tim Ulbrich  21:37

And finally, number 10 on our list of 10 moves to become financially fit, implement systems and automation as soon as possible. Now, if you’ve listened to the show for a while, you know that I love automation, and Ramit Sethi he talks about this in his book, I Will Teach You be Rich when he says, and I agree that automation can be the single most profitable system that you ever build. And as you’re getting started, it’s the process, not the outcome. It’s the process that’s most important. Remember, this is a marathon, not a sprint, and building and automating a system is ultimately what’s going to allow you to identify and fund your goals. You are directing your financial plan rather than reacting to it. That’s what we’re talking about here with automation. And it’s so apparent, so effective, so easy to implement, but it’s vastly underutilized. It involves essentially scheduling the transfer of funds to predefined goals, and doing so confidently, knowing that you’ve already accounted for it in your monthly spending plan. That’s what we’re talking about with automation. So whether it’s paying down your debt more aggressively through extra payments, whether it’s saving and investing money to an IRA or another type of investment account, whether it’s putting money towards a down payment on a home or investment property, whatever the goal is that we’ve identified and we account for in our monthly spending plan, once we identify that goal, automation, the next step here is to move those funds after we get paid, rather than waiting to see if there’s money left over, right? It’s proactive versus reactive. Sure, it takes a little bit of time to set up, but once it’s set up, it provides a long term return on your time, benefit and peace of mind, knowing that you have thought about, you’ve prioritized and you have a plan that is working itself to fund your goals. Do not underestimate how powerful that can be in terms of momentum and confidence. Now, what does this actually look like? So for my wife and I, we have a high yield savings account. We use Ally for all our online banking, this is not commercial for Ally, but in our high yield savings account within that, we have various buckets, and we name them according to the goals that we’re setting out to achieve. Now, of course, if there’s anything that I want to go directly to an account, not to sit in a high yield savings account, right? Perhaps this would be funding a Roth IRA or a brokerage account, or putting money into 529, those are going to be automated directly to that account. But for anything else, as I mentioned before, the mental accounting and the actual accounting, for example, this year we’re finishing, right now, a basement remodel project. So we have a bucket in our high yield savings account for a basement remodel. It could be a vacation. It could be the next car purchase. It could be gifts that you are funding throughout the year. It could be your insurance, homeowners or auto insurance that you pay once a year, twice a year, that you save up through throughout the year. Right? Any of these goals, we can create a bucket, and we can automate the contribution of the funds to that, and then we can see, and have a visual representation of what our goals are, and whether we’re not or not, we’re on track to achieve those. So this system, it took us about 15 minutes to set up, and could just as easily be achieved, probably through your own bank, or if they don’t have a bucket tool like that, through tracking in a simple spreadsheet. Again, resources I have that you can see more of our system. You go to yourfinancialpharmacist.com/toolbox, feel free to download any of those templates or resources and make them your own. 

Tim Ulbrich  25:06

Now, if you’re someone that’s listening, that’s feeling perhaps financially stressed or stuck or overwhelmed or confused or anxious, whether you’re a new practitioner, mid career, approaching retirement, or maybe you’re wondering, why am I not further along? Right? I’ve earned a good income, or I am earning a good income. Why am I not further along? I want you to close your eyes for a moment, unless you’re driving, of course, don’t do that and imagine a scenario where you are regularly investing in time to enhance your financial IQ, whether that’s reading, podcast, whatever you’re consistently learning and growing in this area. I want you to imagine where you have a fully funded emergency fund, where you have the peace of mind knowing that you have a backstop in place. I want you to imagine a scenario where if you have any high interest rate revolving debt, that that’s gone, and for other debt, you have a plan in place for how that’s going to be paid off and where that fits in the budget. I want you to imagine a scenario where you’re regularly tracking your net worth over time each and every month. I want you to imagine a scenario where you’re saving and investing each month and hopefully growing that each month, taking advantage of compound interest and time value of money. I want you to imagine a scenario where you’re advocating and negotiating for your income to be commensurate with the value that you’re providing and the confidence that can come from that. And I want you to imagine for a moment that you have a system in place that is accounting for and automatically funding your goals each month. And as you imagine those things. How does that feel? What emotions are coming up, and how does that contrast against those feelings of feeling stressed or stuck or overwhelmed, confused, anxious, notice that there is nothing complicated about what I have shared today. Sure, there’s a time and place for more advanced strategies, many of which we have talked about on this show, but first we have to do the foundational work that will put us in the position to take some calculated risk. And this just this isn’t just new practitioner stuff, right? I know many pharmacists, myself included, that sometimes we have to go back to the foundations, whether we’ve been out five years, 15 years or 25 years. And while all of this is pretty straightforward, you and I both know that executing consistently over time is a different challenge. So let me wrap up by saying that if you could use some help and guidance, we have a team of certified financial planners and tax professionals at YFP that can help. Your six figure income. It’s a great tool, but as I’ve said already once on this show, it is not a financial plan without a vision and a plan that good income is only going to go so far. That’s why, in part, I started Yfp back in 2015 because at Yfp, we support pharmacists at every stage of their careers to take control their finances, reach their financial goals and build wealth through comprehensive fee only financial planning and tax planning. Our team of certified financial planners and tax professionals work with pharmacists all across the country and help our clients set their future selves up for success while living a rich life today, both are important. So if you’re ready to see how yp can help support you on your financial journey, you can visit your financial pharmacist.com, and at the top right, you’ll see an option to book a discovery call that will take you to a scheduling page to book a meeting with my partner, a 60 minute meeting. Tim Baker, fee only, certified financial professional, where we’ll talk and learn about your situation, your goals, what’s working, what’s not working. We’ll share more about our services, and from there, we can determine whether or not those are good fit again, yourfinancialpharmacist.com, at the top right, you’ll see an option there to click on book a discovery call. Thank you so much for listening to this week’s episode. If you found this information helpful, do me a favor. Share this with a friend and colleague and leave us a review on Apple Podcasts which will help others find the show. Have a great rest of your day, and we’ll catch you again next week. Take care.

Tim Ulbrich  29:14

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

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YFP 376: From Student Debt to Financial Freedom: How Brandon Paid Off $160k


Brandon Gerleman, PharmD shares the strategy for how he paid off $160k of debt.

This episode is brought to you by APhA.

Episode Summary

Brandon Gerleman, a 2017 pharmacy graduate from the University of Iowa, shares his journey of paying off $160k of debt through not one, not two, but five refinances along the way. Brandon discusses his repayment strategy, why he decided for a more aggressive loan payoff, and what’s next for him and his family. He emphasizes the importance of living within your means, being aware of finances, and the impact of interest rates on repayment strategies. Brandon and his wife are now looking toward the future and he shares what other financial goals they are preparing for.

About Today’s Guest

Brandon Gerleman, PharmD is a 2017 graduate of the University of Iowa College of Pharmacy. He currently works as a Senior Product Manager on the Pharmacy Product Team at Outcomes, where he manages products to help pharmacists practice at the top of their training and provides tools to help drive pharmacy campaigns and increase efficiencies. After graduating in 2017 with $161,000 in student loan debt, he paid it off in May 2024. Brandon and his wife, Mariah, have 2 children and live in a rural community in Iowa. He enjoys spending time with his family, golfing, and watching Iowa Hawkeye football.

Key Points from the Episode

  • Brandon’s Passion for Personal Finance 1:36
  • Career Journey and Student Loan Debt 6:08
  • Refinancing Strategy and Financial Discipline 9:29
  • Balancing Financial Goals and Family Life 19:48
  • Future Financial Plans and Legacy 28:59

Episode Highlights

“Within that entire last seven years, though, I’ll say that we lived within our means, but we weren’t crunching pennies. We’re not in some fancy house. We’re within our means here. We still go on vacations with the kids. We still do fun things with the kids.” – Brandon Gerleman [20:59]

“For me and my wife, it was just like, how can we tackle the student debt and take that off our shoulders to then enable us to do more things? And it’s all about the family, and it was like trying to prepare for the future that way.” – Brandon Gerleman [21:38]

“At the end of the day, the math is the math, and we weren’t so aggressive, where we couldn’t do things. And we weren’t so passive, where the dollars kept loading on. So I think it was finding that right balance.” – Brandon Gerleman [22:34]

“We want to be able to live in the moment and celebrate and do things with our kids. I love the word intentional. Be very intentional about what we’re doing. We can still splurge on a Starbucks every now and then, right? You can still do things while living within your means and being intentional about how we’re how we’re approaching our student loan debt payoff.” – Brandon Gerleman [24:50]

“We’re always learning, I feel like the more aware we are around what’s happening. That’s why I was listening to all these Your Financial Pharmacist Podcasts back in pharmacy school, on fourth year rotations, and ever since, it’s just being aware. It’s always learning. It’s asking questions and trying to put ourselves in the best position for success.” -Brandon Gerleman [30:25]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody. Tim Ulbrich here and thank you for listening to the YFP Podcast, where each week, we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I welcome Brandon Gerleman onto the show, a 2017 pharmacy graduate from the University of Iowa and longtime listener of the YFP Podcast, to share his journey paying off $160,000 of debt through not one, not two, but five refinances along the way. We discuss his repayment strategy, why he decided for a more aggressive loan payoff, and what’s next for him and his family. Today’s episode of the YFP Podcast is brought to you by The American Pharmacists Association. APHA has partnered with YFP to deliver personalized financial education benefits for APHA members. Throughout the year, APHA will be hosting a number of exclusive webinars covering topics like student loan debt payoff strategies, home buying, investing, insurance needs and much more. Join APHA now to gain premier access to these educational resources and to receive discounts on YFP products and services. You can join APHA at a 25% discount by visiting pharmacist.com/join and using the coupon code YFP. Again, that’s coupon code YFP at pharmacist.com/join. All right, let’s jump into my debt free interview with Brandon Gerleman. 

Tim Ulbrich  01:26

Brandon, welcome to the show.

Brandon Gerleman  01:28

Hey. What’s going on?

Tim Ulbrich  01:29

Super excited to have you on. It’s been a while since we’ve done a debt free story and celebration. So I’m certainly looking forward to that. And you and I connected back in 2023 although, as we discussed before the interview, we had some connections before that we weren’t necessarily aware of. And at the time, I saw a post that you shared on LinkedIn of a pharmacy personal finance talk that you were giving to Iowa pharmacy students. So let’s start there. Where does your passion for personal finance come from?

Brandon Gerleman  01:59

Yeah, no, I appreciate that. Definitely comes from being aware, and that, you know, just being aware of your situation, and it kind of spurs from  my parents really having that instilled, instilled that at a young age, and just being aware, you know, living within your means, having the ability to kind of see everything that that has come in and coming out, and yet again, just just that awareness issue and a little bit of that pharmacist, hey, I need to control a little bit of something here.

Tim Ulbrich  02:31

I love that. And you shared with me, you know, 2017, year you graduated, you were on APPE rotations, and you ran across the YFP podcast, which helped, in part, light a spark that you certainly took and ran with, and you’ve done the hard work, but I love that you’re now giving that back as well as you’re sharing with other students, and as you and I both know this is such a topic of interest and need among pharmacists at large, but certainly students and new practitioners. So thank you for your commitment to this topic, and as you continue to share the good news with students and others as well. Before we get into the weeds on your student loans and your Debt Free Journey, how you paid them off, why you paid them off, tell us about your career path, what led you into the profession, and what’s the work that you’ve been doing since graduating 2017. 

Brandon Gerleman  03:18

Yeah, for sure. For sure. Graduated in 2017. Prior to even getting into pharmacy school. I live here in a small town of 5,000 folks here in South Central Iowa, and really that independent community pharmacist and seeing the impact on what they did to the community. That sounds super cliche. You probably hear that a lot. I’m sure pharmacists talk about that a bunch. But the pharmacist at the independent community pharmacy uptown, like they were the, know it all for anything. It was, you know, drug related, it was, you know, any ailment related. It was, when’s the next bus come in? I mean, it was any question, you know, community events like they were just that go to resource. And I just, I just admired that and thought, gosh, I just, I like talking to people, love science. I think this could be a really good fit. Started working there as a pharmacist, you know, technician, tech and training prior when I was an undergrad and just ran, ran from there and never looked back. So graduated from the University of Iowa College of Pharmacy in 2017 and immediately ran back home, right. Came back to my hometown and was overseeing a lot of the clinical operations within the small pharmacy chain that we had here. And that was a really nice, fulfilling, you know, giving back to the community. Being involved in the community; was there for about two and a half years, and really had the mindset of wanting to impact more than just 5,000 in my community. So made the transition over to Outcomes MTM, where I could really help impact millions upon millions of patients. Patients, and help them with outcomes for about five years now, so been there ever since, worn a number of different hats within outcomes, been on the clinical team, been on the payer product team, and most recently, I’m on the pharmacy product team. So I’ve got a little bit of a non traditional pathway, A, B, current position, so I’m a senior product manager, and I oversee all the clinical pharmacy products for Outcomes, and so that that that involves or brings in anything from looking at our collaborative practice agreements and being on the clinical lens to review those, to writing pharmacy sponsored opportunities on the outcomes platform, to also writing clinical workflows that enable the pharmacist to, you know, to practice at the top of their license and submit as a medical bill. So really, anything clinical in the pharmacy, in pharmacy land from outcomes I oversee, and I absolutely love it. I sit with software engineers every single day, and they’re a tremendous group of folks and provide that clinical lens on a lot of what we’re doing. And it’s a very fulfilling position, a need position, and the ability to not only impact patients, but to increase efficiencies and provide more tools for pharmacists to impact even more patients and truly get that fulfilling, that point of patient care, that great, we’re in a state we can do test and treat. But what does that mean? Where do I start? What do I do? You know, how can I decrease my my risk of, you know, DIR fees, you know, how can I practice, you know, practice at the top of my license. So it’s a fun, fun position that I’m at. And been there, been been there, five years, five years now. 

Tim Ulbrich  06:48

Outcomes holds a special place for me, and I didn’t share this with you in advance, and I’m dating myself a little bit. And our listeners may not know this about my career path, but I graduated back in 2008 and I spent a year residency in community practice, and then my first job out of community practice was a shared academic role with the university up in Northeast Ohio. And then I was practice component was with a local community regional chain. Giant Eagle is the name of the chain, and we were implementing medication management services across the region. That was my job to go to various stores and help them think about the clinical workflows and how to embed this into patient care models. And it was a really exciting time, right? This wasn’t too long after the passage of the Medicare Modernization Act, and this was for us in Ohio, there was a huge Medicaid contract that landed, and through outcomes was really the ability that we had to do many of these services at the time, so just really fun memories and and really being able to help expand practice at the time. So feels like it’s coming full circle as you’re talking here and sharing your career journey as well. 

Brandon Gerleman  07:55

Yeah, definitely it’s that next, that next chapter, right? And now we’re just, we’re beyond just traditional MTM, and now we’re trying to help pharmacists just do more on that same platform.

Tim Ulbrich  08:05

So let’s get into the student loans. Give us the juicy details. How much debt did you have when you graduated in 2017 and what was the average interest rate on your debt at the time?

Brandon Gerleman  08:17

Yeah, did some math here, and kind of added things up. And I still have, when I first graduated, just kind of memory of seeing the number in my head there. But just shy $161,000 in student loan debt from both undergrad and grad and pharmacy school. So I’ve got twoundergrad degrees. I went the four and four route, and they averaged across all of them about 6.75% so remember, just graduated and be like, Oh, that’s a kind of a tough pill to swallow. 

Tim Ulbrich  08:51

Yeah. And as you and I were talking about before we hit record, you know, the the interest rate matters a lot, and we’ll talk about how that played into your repayment journey. Unfortunately, we’re seeing those rates – I graduated again, 2008 6.8% a lot of my loans were fixed. You mentioned in the six, sevens. We’re actually seeing now rates on those unsubsidized graduate loans, you know, north of 8% so those are tough interest rates. We talk a lot about the number right, 161, 170, 180, 190. And actually the the average debt load is, we just got the latest data from the class of 2024, hovering around that hovering around that $170k mark still. So it has flattened off over the last several years. But we don’t give enough attention to the interest rate, and I think that’s going to come to life as we talk about your repayment strategy, because for you, as I understand it, it was refinancing your loans, not once, not twice, but five times, ultimately, getting your rate down to 2.24% now, before our listeners, you know, are just like, what in the world, those interest rates don’t exist today, right? So talk us through that decision to refinance. What was it primarily or only based? Based on that 2.24% because there are some considerations, right? When people take their loans from the federal system to a private lender, which is what you’re doing through a process of refinance, there are some things that you might be giving up. Oh, and by the way, when something like a global pandemic happens and there’s a freeze on interest and no payments are required, right, that was something we never could have seen coming as a potential negative impact and consequence of refinancing. So tell us about that decision to refinance and how you ultimately got to the point that that was the best plan for you.

Brandon Gerleman  10:33

Yeah, yeah. Definitely didn’t have global pandemic and halt on student loan payments in my in my Uno cards there. But yeah, for me, it was the aspect of I knew I was never going to, I shouldn’t say never, never say that you never know where the career is going to take you. But highly unlikely for me to go to a another career that kept me in that student loan forgiveness within the federal sector there. So knowing that it just came down to math, and at the end of the day, it wasn’t a jump from 6.75% directly to 2.24% it was refinancing. And I would just always got in the habit of, every three months checking, and I actually always go on on Your Financial Pharmacist and go over to see what deals were going on, right? You know what was the bonus for refinancing? What were the rates at playing around? And never, you know, never hurt your credit score by checking. And you don’t know what you don’t know. And so I would just continue to chip chip, chip away, and eventually got that down to that 2.24% with that auto pay, you know, the rate reduction there by a quarter percent. But it just came down to math. And at the end of the day, what we’re doing is, is math here. And I hate to pay in interest, oh my gosh, just to think that I’m like, giving, like, somebody giving money, and I’m paying them back, and the interest payments are, you know, what’s killing you. I just wanted to that was just a fire in the belly. Wanted to reduce that as much as possible.

Tim Ulbrich  12:05

Yeah, you know, I gave a presentation just a couple weeks ago to a group of student pharmacists, and I walked them through how interest accumulates, right? Because when we’re talking about unsubsidized loans, which you know for most pharmacy students, that’s going to be all of your federal student loans. When it comes to your pharmacy education, there’s the principal, which is the original amount that you’re borrowing, and then there’s the interest which accrues while you’re in school. I often say, Well, when I’m presenting, hey, not to scare you, but while we’re sitting here, the interest is accruing, right? That’s just a matter of fact. And then when you get an active repayment, that separate pot of interest gets added to your principal, and that grows interest. What I say is baby interest, which is referred to as capitalization. So the result of that, why that matters, is that most borrowers, myself, included my own journeys, you vastly underestimate how much you’re actually going to pay off when it’s all said and done, because you’re looking at as a pharmacy student saying, okay, you know, I’m borrowing 15, $20,000 a semester. I’ve got so many semesters, that’s the number, right? And what we’re leaving out there is the interest that accumulates in school, and then the interest that accumulates all the while in the repayment period as well. So such an important lesson, whether we’re talking about student loans, credit card debt, mortgage, car loans, anytime you’re borrowing, right? Interest is the cost of borrowing anytime a bank is lending someone money that that’s a risk they’re taking, and obviously you’re going to pay for that in the form of interest. We have to understand how that interest accumulates and how we feel as well, which is an important one that you mentioned in terms of your hate of that interest. I also want to highlight Brandon,  you said something important, which I don’t want to overlook for our listeners that are thinking about their own situation. You said, Hey, I first determined that something like Public Service Loan Forgiveness wasn’t going to be my pathway. Once I made that decision, it really came down to a math, the math. And I want to highlight that, because that’s how I think about it, in terms of a decision tree, right? If there is a pathway to be considered, and it makes sense. And there’s some pros, cons, things that we gotta factor in before you ultimately make that decision. Let’s have that discussion first, if that is not a possibility, then we’re looking at, how do we maximize our repayment options and strategies? And for some people, that might be a refinance. Now, Brandon, I know our listeners are listening to say, is anybody refinancing anymore, right? Given where interest rates are at, and the answer is, actually there are, it’s certainly not anywhere to the point of what you did when you got this all the way down to the low twos. We saw that right before the pandemic. A lot of people, flurry of activity into refinancing below threes. You know, that has largely gone away for the most part, but there are many people out there who have existing private loans that may be at eight, 9, 10, 11, 12, plus percent, which is crazy to say out loud, that certainly should be considering whether or not they can move that private loan and get a better deal on that. So I just want to kind of pause for a moment and make sure we address that. So when you look at the math, clearly, you know, 6.7% down  2.24%. That looks good. What did that actually mean in terms of how much time that took off the repayment period? 

Brandon Gerleman  15:11

Oh, I should have written this down! Every single time I would use the some of the calculators that that are on the Your Financial Pharmacist website and and every time I would, you know, crunch it. If I’m here, here’s where I’m at, bringing it down, here’s where I’m at. I have to dig in there. But I know it was of the 10s of 1000s of dollars, and then as far as a time, I think that’s where, that’s where I compounded and snowballed things. So like my wife and I were incredibly comfortable paying when I first graduated this, you know, unsightly amount that was more than our house payment and and thinking, Okay, well, if we’re comfortable paying that, we’re going to refinance from, you know, from A to B, and that reduced my interest rate. Well, I’m going to continue to pay that because out of sight, out of mind, but I’m going to add that extra because my payment went down. My monthly payment went down. I’m going to add that extra as principal only. And so by the time you did that five times you’re you’re knocking it down. It is dollars that you’re not even used to seeing because you haven’t seen it yet that are just snowballing toward that principle. And then every time I would refinance, I’d play around with the calculators as well. Can I, you know, decrease the duration, you know, of my student loan as well? And the last one that we did in 2021 that got me to that 2.24 I also cut it from at that point would have been seven years down to five years. And so that also helped me, you know, really snowball. And then I’ll say that anytime we had a, you know, a tax return, or any, you know, any type of dollars that we felt, hey, let’s, let’s start throwing, throwing additional dollars that way. We throw it as a lump sum, and we’d, we chase it, you know, chase a traditional payment with a principal only. Payments would only go toward that principal, and that was, you know, the combination of refinancing, reducing that, the length of that loan, continuing to pay what we were used to paying, and have it go to our principal, and then the lump sums, kind of, you know, along the way doesn’t have to be much. Can be 500 bucks. This one month can be, you know, $1,000 you know, this other month can just be adding on. Hey, let’s, you know, just add on a little bit. Add 20 bucks a month toward principal. Those small things added up where all of a sudden you became much more manageable. And every time I was very aware, I’ve said that a couple times, I’m very aware, I would always be checking, you know, you know, what’s the balance? Now, you wouldn’t check every single day. That would just drive about, you know, a person crazy. But you know, as you’re checking, then you’re noticing that your payments going more towards principal and less toward interest and and then you can start breathing a little bit, right? And then there, you know, there’s that light at the end of the tunnel and that snowball. And just continue to snowball and snowball and snowball.

Tim Ulbrich  17:58

Yeah, what I hear there is momentum and energy that is coming, which, which is really defined by that snowball approach. And we’ll talk a little bit more about that. But you know, often people will refinance to potentially save on a monthly payment, and then that frees up cash flow to do other things, no right or wrong there. That’s just an option that people choose. Others kind of take the approach you did, which is, hey, we’re going to refinance, get a lower rate, but since we’re used to this monthly payment, even though we only have to now pay 1100 bucks a month, but we’re used to paying 1500 or whatever the number is, let’s keep paying 1500 we’re going to make these principal only payments, and by doing that, we’re going to jump down the amortization table, right? And for those of you that haven’t geeked out on an amortization table, it’s important to understand these things. Again, it’s not just student loans, it’s house payments, car payments, any other type of debt. To really understand what percentage of your payment is going toward principal, what percentage of your payment is going towards interest, and after you make that payment, what’s the balance due? Oh, and by the way, if we make an extra payment, what does that mean, right, in terms of where we’re at, and so depending on your goals, what you’re trying to achieve, interest rates, all these factors are going to determine how aggressive you may or may not be in that debt repayment to that point. And you mentioned Brandon that you know, when you first started, you were paying this unsightly amount. I remember that feeling very well, and that for you, it’s Hey, I hate interest these need to be gone as quick as possible, as what I’m gathering from you, and that’s a decision point that people have to decide, right? We talked about the first branch of the decision tree, which was, Hey, are you going to pursue loan forgiveness or not? If not, then it’s a mathematical decision. Now, once you go to the next decision point, it is, how quickly do I want these gone? And what does that mean for our monthly cash flow and potentially being able to do X, Y or Z. That could be a myriad of things, right? It could be that, hey, we’re looking to save up for a home. We’re looking to buy a second investment property. We want to invest in more in our retirement. We want to have experiences. We got kids on the way. There’s a million other goals that could be coming. But ultimately, you decided that, sure. Or more cash flow would be nice, but we want these gone, you know, tomorrow. And so how did you and your wife get to that decision, that despite the rate arguably being pretty darn low when you get to that point, 2.24  and even before that pretty low, that even though those rates were coming down, you really wanted to go that aggressive repayment. What was the philosophy behind that for you guys?

Brandon Gerleman  20:20

Yeah, yeah. Great, great question. I would say it wasn’t hard to not even going to use the word convince. My wife is already on the same page. So just more of demonstrating, showing the math, and saying, you know, by doing this, you know, semi aggressive plan, instead of being done in 2027 we can be done in 2024 so that freed up, you know, three years of more than our house payment worth of student loans that then will allow us to do more things. And so I’ve got two young kids under the age of four. And, you know, now all of sudden we can, we can go out and we can maybe do something. And, you know, go on a vacation here, and within that entire last seven years, though, I’ll say that we lived within our means, but we weren’t crunching pennies. We’re not in some fancy, fancy house. We’re within our means here. We still go on vacations with the kids. We still do fun things with the kids. Went and saw Caitlin Clark play in Minnesota last week, right? So, yeah, you know, so we’re, it’s from, for me and my wife, it was just like, how can we tackle the student debt and take that and just, you know, a big relief off our shoulders to then enable us to do more things? And it’s all about the family, and it was like trying to prep for the for the future that way. Also say that the snowball doesn’t doesn’t just stop with with my student loans. We We’ve now taken what we’re used to paying for my student loans, and we’re snowballing into other things, a truck payment. My wife student loans are almost done, you know, yeah, so, like, by the end of 2024 you know, really being able to breathe. And then you know that that allows you, and I’m sure I’m leading on to the next question. You know that that allows a person to do a little bit more. And now I can start putting dollars for a 529, plan for, you know, for the kids. And I can start, you know, and add a little bit more in the 401K, which can then reduce my, you know, my taxable income. So there’s other things that that that we can consider while, you know, we have a, you know, freed up a little bit of monthly cash, you know, when it comes to looking at the cash in and out, but it’s really having that supportive spouse who, at the end of the day, the math is the math, and we weren’t so aggressive, where we couldn’t do things, we weren’t. So, you know, passive, where the, you know, the dollars kept, kept loading on. So I think it was finding that that right balance,

Tim Ulbrich  22:49

I suspect that balance was really important for the two of you to get on the same page. And it’s something I see often. It was true in our own journey as well, that, I think, where people run into some issues, especially if you have two different money belief systems. And I’m not suggesting that was the case here, but when that is the case, you know, when one person’s like, hey, we want to go all in and I want these gone tomorrow, and we’re not going to do anything. Like, obviously, there’s going to be friction there, right? And I think we often have this perception of, hey, I would love to be debt free, like Brandon’s debt free, but I’m not willing to sacrifice everything. And what I hear you saying is like, Hey, we’ve lived within our means. We’ve done hard work. I’m not going to minimize that. We’ve been intentional, but we haven’t been, you know, to the point where we’re not also enjoying things and living this rich life that we so often talk about on the show. And what I often see, and I’m confident I will see here as well, is that when someone is as intentional as you have been, and you and your wife have been for for as long as you’ve been, then when you go to the next decision point, when your wife’s loans are done, and you’re like, hey, we were putting x per month between our loans. Now what? That’s the question. Now, what? Right this money isn’t going to go off into the ether and you’re going to be like, what happened? We used to pay loans, and now we don’t know where that money went. Like, you’re going to be intentional about, hey, it’s the 529 account. Maybe it’s putting a little bit more towards investing for retirement. Maybe it’s being intentional if we’re going to take another vacation a year or, you know, do whatever it means for you guys to be living the rich life. So I love that, and I think we don’t talk often enough about that that there are benefits that come long term from how we approach our decision making and how we live today, that even when the debt’s gone, you’re gonna see the fruit of that well beyond that. 

Brandon Gerleman  24:35

Definitely. And you know, I’ve seen other folks that have been on your podcast that have paid off way more in a shorter amount of time. And I think that is phenomenal. It’s kind of driving your own, you know, your own why? And for me, it was in my wife. It was like we want to be able to live in the moment and celebrate and do things with our kids. And as you know, before we had kids as a couple, but also be and I love the word intentional. Be very intentional about what we’re doing. You know, we can still splurge on a Starbucks every now and then, right? You know, you can still do things while living within your means and being intentional about how we’re how we’re approaching our student loan debt payoff. 

Tim Ulbrich  25:15

As you and your wife look towards that finish line of her loans coming in the not so distant future, and obviously, as aggressive as you’ve been there, there’s going to be some cash flow available, which is exciting. And you’ve, in part, answered this. You mentioned the kids college savings of 529, accounts. I’ve heard kind of the family experience aspect of it as well. What else? What else is? Is a priority for you guys as you look towards, say, the next decade or so? 

Brandon Gerleman  25:42

Man, hard to look past the next decade. When you’ve got two kids running around, doing everything every single week, there’s something new! I would say, you know, free enough to be able to start investing more, right? So because, I’m because we were so intentional about paying down debt, we weren’t as heavy on on investing. And so I would say, you know, investing personally, as well as investing in my children’s future with, you know, 529 plans. I’m that’s probably my biggest thing is, like paying it forward. I will say, here’s the nice little asterisk that I’ll throw with my 161,000 in student loan debt, my folks took care of my undergrad. So that includes, you know, around just shy or about $35,000 out of that $160k my mom and dad were very intentional to pay off for my twin sister and I, to allow us to then kind of pay it forward. So I’m really looking forward to being able to pay it, forward to my to my children. So I’d say, you know, between 529 some investing, some decreasing my taxable income, as well as saving for retirement. And then I, I think the biggest thing is, like taking a breath and just saying, Hey, we did it. Let’s just kind of, you know, relax, enjoy it for a little bit and and really enjoy the family and start doing more things and really getting those, those family experiences involved. We’re not anytime we’re doing presents for kids or anything we’re not big on, like a product or an item, like, for all those that are parents out there, Tim, yourself, included, like, man, like you, for you, the kid forgets about it maybe in two weeks, or plays with the box instead, right? Or and so those are replaceable, the the memories and the experiences are what we’re really trying to pass on, I think that’ll allow us to do a little bit more, you know, travel, and just be even more involved with our kids.

Tim Ulbrich  27:38

I love to hear that Brandon, and I’m intentionally asking the question, you know, to encourage our listeners to be thinking about this as well, and to encourage you and your wife to continue these conversations as well, because they’re so important, right? You’ve done incredible hard work with the student loan debt. You’re going to do great work with saving but, but there’s a bigger story here, right? And that’s what I’m asking about, because there will be a day. I call it the rocking chair exercise. There will be a day when I look back, when you look back and, you know, yeah, oh yeah. Remember, we paid off all that debt, yeah, we did that. You know, remember when we got to the point of financial independence because we saved for the future, and we don’t have our mortgage anymore, and our kids are taking care of, yeah, yeah, we did that. What do we remember, right? What’s the So, what? What’s the vision? What’s the engine behind all of this? And at the end of the day, money is a tool. Money has value because we all agree it has value, and as long as that’s true, it will have value, but it’s what we’re able to do with that money. And getting clear with that no right or wrong answer is really what this whole financial plan is about. So I hear a strong why of family experiences. You know, that’s something I often hear when I ask this question. You know, for other people, it might be a dream they have of starting a business, or it might be, you know, some type of giving aspect of time, reminding you’re having an option to work part time. Or it could be a myriad of things, and really getting clear on that, I think, for those that are listening, that are in the middle of the weeds of going through a journey like this. You know, it’s not a hey, I’ll think about that tomorrow. It’s, let’s think about this now, because that’s going to propel and give us some motivation while we’re in the midst of this journey. And we don’t want to wait till we get to the finish line, because this is something we constantly want to ignite the fire in the flame with. And for those that are doing this with a significant other, partner, spouse, so important, so important. We’re having these conversations because all the strategy is somewhat noise. If we aren’t clear on where are we going or why are we going there? And that really, I think, is where we see so much of the joy come and the opportunity. So I love what you shared there, Brandon, I’m so excited to see where you and your wife go into the future, and congratulations on the success that you’ve had so far. 

Brandon Gerleman  29:43

Very much appreciate that. And I will say one more thing, and that is, you know, nobody pretends to be an expert in this area, right? We’re always learning. And so even myself, as I’m going through this last year, learned about, you know, a. 529 you know, Secure Act. And then I was able to, you know, throw some dollars toward that,  a 529 plan over last year and this year, that even helped me from a tax benefit that I knew I was going to pay them off this year. So I might as well throw it in an account that I can kind of shelter a little bit through taxes. Had no clue about that. I was just kind of over a beer, discussing with with another colleague, and it’s like, Wait a minute. So I just just want to throw that out there that, you know, we’re always learning, I feel like the more aware we are around what’s happening. You know, that’s why I was listening to all these Your Financial Pharmacist Podcasts back in in pharmacy school, on fourth year rotations, and ever since, it’s, it’s just, it’s being aware. It’s always learning. It’s asking questions and just, you know, trying to, trying to put ourselves in the best position for success, for whatever that why is 

Tim Ulbrich  30:50

What I hear there is a curiosity, a desire to learn and grow. I love that example, right? Because there’s a state tax deduction that you’re talking about from a 529 to be able to pay off your loans, and that was opened up, you know, others might be using it to pay for kids private education, you know, K through 12. That’s a relatively new thing as well. And some people might hear that and be like, Well, what actually is the dollar savings, right? And sure, you know, we could look at that and say, you know, are we talking 1000s and 1000s of dollars? No we’re not, but it’s, it’s an important example, because it’s an indication of the curiosity you have, the desire to learn, to grow. And as I often say, there is no arrive at the financial plan, as long as we are hungry to learn and grow and be open to different ideas and strategies and figure out what’s best for our plan, right? There is an infinite number of possibilities for where we could go. So that is such a cool example of what comes from from compounded learning over time. So Brandon, thanks so much for taking time, time to come on the show again. Congratulations to you and your wife. Look forward to following your journey as well into the future. 

Brandon Gerleman  31:49

I appreciate it. Thanks for having me on. 

Tim Ulbrich  31:51

Before we wrap up today’s episode of The Your Financial Pharmacist Podcast. I want to again thank our sponsor, the American Pharmacist Association. APHA, is every pharmacist ally advocating on your behalf for better working conditions, fair PBM practices and more opportunities for pharmacists to provide care. Make sure to join a bolder APHA to gain premier access to financial educational resources and to receive discounts on YFP products and services. You can join APHA at a 25% discount by visiting pharmacist.com/join and using the coupon code YFP. Again, that’s pharmacist.com/join using the coupon code YFP. 

Tim Ulbrich  32:33

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

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YFP 372: Rising Stars: Meet the YFP Gives Scholarship Winners


Tim Ulbrich, YFP CEO, talks with the five recipients of the first YFP Gives scholarships.

Episode Summary

This episode is filled with inspiration as we share the stories of the five winners of the first YFP Gives scholarship.

Let this episode be a ray of sunshine amidst some of the cloudy skies plaguing the pharmacy profession. If the future is in the hands of these outstanding students and new practitioners, then the future is bright. In this episode, you’ll meet: 

  • Alyssa Falleni, clinical pharmacist who specializes in addiction treatment, HCV, and HIV and is currently working in HIV outpatient care at Hartford Healthcare
  • Momitul Talukdar, who after working in the radiology department at a hospital, discovered her calling as a nuclear pharmacist. Momi currently works at PETNET in Cleveland, OH
  • Perrigrine Garner, a pharmacy student at the University of Toledo with a passion for helping those in need and a dream of owning an independent pharmacy that caters to those with chronic medical conditions and disabilities
  • Ruth Adeyemi, a fourth-year PharmD/MPH Nigerian International student at the University of Florida College of Pharmacy and College of Public Health and Health Professions, with a deep-rooted commitment to improving health outcomes in underserved communities, particularly in her home country, Nigeria.
  • Ai Len Nguyen Phan, a Rutgers Industry Fellow at Roche Genentech in San Francisco, with a desire to work in medical affairs and give back to the pharmacy community through her mentorship to the Rutgers pharmacy students

About Today’s Guests

Alyssa Falleni is a clinical pharmacist who specializes in addiction treatment, HCV, and HIV. After graduating from the University of Rhode Island, Alyssa went on to complete an ambulatory care residency at Hennepin Healthcare in Minneapolis, MN. Following residency, Alyssa completed a two-year VA Advanced Fellowship in Health Professions’ Education, Evaluation, and Research (HPEER) at the VA in West Haven, Connecticut. She will be continuing her teaching with the Yale School of Medicine as she begins a new HIV specialty position with Hartford Healthcare.

Momi Talukdar, MS, PharmD Candidate 2024 is a graduate of Northeast Ohio Medical University College of Pharmacy. She’s an incoming nuclear pharmacist at PETNET in Cleveland, OH. Along with her passion for nuclear pharmacy, she loves teaching nuclear pharmacy as an adjunct faculty at University of Wisconsin LaCrosse. In her spare time, Momi enjoys watching new films and art shows and trying out local coffee shops.

Ai Len (Aileen) Nguyen Phan is a second-year Rutgers Pharmaceutical Industry Fellow at Genentech, Inc. – Rare Blood Disorders Medical Science Liaison. She graduated from the University of Maryland, School of Pharmacy with her Pharm.D. and M.S. in Regulatory Sciences in 2023. She supported the US Medical Information & Communication Target Therapies teams during the first year of her fellowship. While Aileen has just recently started her industry career, she continues to give back to the pharmacy community through her mentorship to the Rutgers pharmacy students, such as supporting their scientific research on using artificial intelligence to assess oncology treatments. 

Perrigrine Garner, a non-traditional student, and mother of three amazing daughters, is currently a P4 at the University of Toledo’s College of Pharmacy and Pharmaceutical Sciences. Perrigrine is passionate about advocating for people with disabilities, especially in healthcare, as she is also a person with physical disabilities. Upon graduation, her dream is to help advance inclusivity in her community by opening an independent pharmacy that caters to those with chronic medical conditions and disabilities.

Ruth Adeyemi, a fourth-year PharmD/MPH Nigerian International student at the University of Florida College of Pharmacy and College of Public Health and Health Professions. Her journey in pharmacy is fueled by a deep-rooted commitment to improving health outcomes in underserved communities, particularly in my home country, Nigeria.

With this passion, she started The Compassionate Pharmacy Practice Project (TCPPP), a project dedicated to transforming the Nigerian pharmacy practice system. The goal is to ensure that Good Pharmacy Practice (GPP) and Compassionate Care are not just concepts but realities in both urban and rural areas, significantly improving health outcomes in these communities.

While Ruth is Nigerian, her commitment to improving health equity in underserved communities extends beyond borders. She is dedicated to her goal of ensuring that all patients, regardless of their neighborhood and built environment, receive the patient-centered, optimal, and compassionate care they deserve.

Key Points from the Episode

  • Student loan debt and career transition with scholarship winner Alyssa Falleni. [0:00]
  • Financial planning, upbringing, and community support for a pharmacist’s future. [5:18]
  • Pharmacy career path and nuclear medicine technology program with Momitul Talukdar. [12:17]
  • Pharmacy school, career goals, and community service with Perrigrine Garner. [20:18]
  • Resilience and financial planning for pharmacy school student with disabilities. [28:24]
  • Pharmacy student’s passion for advancing health equity in underserved communities with Ruth Adeymi. [34:41]
  • Digital skills training for African women. [39:08]
  • Career goals and experiences in the pharmaceutical industry. [44:36]
  • Resilience and determination in overcoming challenges with Ai Len Nguyen Phan. [51:47]
  • Managing student loan debt and long-term financial stability. [55:50]
  • Financial goals and debt management for a pharmacy student. [59:31]

Episode Highlights

“I want to be able to be present. I don’t want to have money, and the fear of not having enough or running out or, you know, that is not what I want for my future. So I am trying to be very intentional in making these decisions to set me up, to keep me on that path that I want for my future.” – Alyssa Falleni

What I learned early on from my mentors is that when I was an API student, I had the mentality that I was an employee, and now that I’m an employee, I had the mentality of a student, and this way I always like to learn, and I always like to be in a growth mindset.” – Momi Talukdar

That’s what has helped me through this pharmacy school has helped me through pharmacy school, and just thinking of my kids and knowing I went into this to better the lives of my children and better the lives of other people with disabilities, that’s just what kept me focused. “ – Perrigrine Garner

“Wherever I find myself, always looking for opportunities to promote and advance underserved communities.” – Ruth Adeymi

“It was really focusing on what are my goals now? What are the long term goals? And working towards them has always gotten me to where I am today. Going from learning English to getting into being a first generation in college. For me, it’s always been setting goals and working really hard toward them.” -Ai Len Nguyen Phan

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey guys, welcome to this week’s episode of The YFP Podcast, where each week, we strive to inspire and encourage you on the path towards achieving financial freedom. This episode is filled with inspiration as we share the stories of the five winners of the first offering of the YFP Gives scholarship. Let this episode be a ray of sunshine amidst some of the cloudy skies that are plaguing our profession. If the future of our profession is in the hands of these outstanding students and new practitioners, I do believe the future is bright. Each of these five individuals featured on this episode recieved a $1,000 scholarship, along with one year access to our online community, yp, plus a copy of our book, seven figure pharmacist and a one on one Ask Me Anything session with myself or Tim Baker. Each of these applicants submitted a video recording that described their career goals and journey and how they would benefit from the scholarship, along with a letter of recommendation. Now, I expected these submissions to be good, but they were great. You’re going to hear yourself here in just a few moments as I share their incredible stories. And while I am grateful to have the opportunity to give out these scholarships through our nonprofit, YFP Gives, we want to do more, and we need your help. Please consider making YFP Gives a part of your giving plan and set up a one time or recurring donation by visiting YFPgives.org and clicking on Donate Now. As you’ll hear from these stories, your gift will have a positive impact and go a long way in helping students and new practitioners make that important financial transition early in their careers. Again, you can make a donation by going to YFPgives.org and clicking on Donate Now. All right, let’s hear from our first scholarship recipient, Alyssa Falleni. Alyssa, welcome to the show, and congratulations on being a YFP Gives scholarship winner.

Alyssa Falleni  02:01

Thank you so much. It is such an honor, and I’m so excited to be here with you today.

Tim Ulbrich  02:05

So give us a brief introduction of yourself, your background in pharmacy and the exciting work that you’re beginning now.

Alyssa Falleni  02:12

Yeah. So I am a University of Rhode Island PharmD graduate, and after spending six years there, I went on to residency in Minneapolis, Minnesota, at Hennepin Healthcare, where I focus primarily on ambulatory, outpatient clinical care, specifically in HIV and primary care. And after that, transitioned a little bit non traditional pathway to an academic fellowship with Yale and VA Connecticut in health professions, education, evaluation and research. It’s a bit of a mouthful, but just finished up my two years there, and thankfully have found a position working with Hartford Healthcare, where I will be doing outpatient HIV patient care. So I’m super excited to be transitioning into that new role.

Tim Ulbrich  03:10

So nearly a decade you’ve been training, right? You mentioned six years of school, three years of postgraduate training, a really unique academic fellowship program, and now you’ve got an exciting position that you’re heading into in the HIV outpatient clinical space. So all of that great on the career side, but we know with nearly 10 years of training can come a significant amount of student loan debt, right? That’s a big investment of time, big investment of money. And one of the things that you shared in your application submission for the YFP Gives scholarship is that you’re gonna be coming out with nearly $200,000 of private student loan debt. So as you reflect on the path going forward, couple $100,000 of student loan debt, that’s a big number. I’m sure there’s some weight that you’re feeling there also the exciting aspects that are ahead for your career. Just emotionally, how are you feeling about this transition financially?

Alyssa Falleni  04:06

There’s definitely a lot of excitement. I feel like all throughout pharmacy school, and even when I decided to become a pharmacist, everyone told me, you know, oh, what a great career. You’re going to be making so much money. And I have not felt that yet. I’ve been, you know, paying off my loans since I graduated on my trainee salary, which, again, very blessed to have at least that opportunity to be paid for that, but transitioning now to making more than double what I just was for the past three years, I’m excited. I’m also terrified. You and I talked a little bit about that a couple weeks ago, where I just don’t want to make the wrong decisions, and I want to make sure that I am putting every dollar in a spot that’s going to serve me well. So, yeah. A lot of excitement, but definitely some nerves about making the right choices.

Tim Ulbrich  05:05

Yeah, and you’re not alone in that kind of the split feeling right, the excitement, the enthusiasm, also the fear can be real, the overwhelming aspects of the student loan debt, and as you said, wanting to make the right decisions. And that’s one of the things I really admire about you, Alyssa, when we talked last week, I really sensed an intentionality and engagement of how you want to do this well. And I often say that mindset is such an overlooked yet important part of the financial plan. And many pharmacists are blessed with a great income, but if we don’t put that income to work, which largely depends on, you know, what is the mindset that we’re bringing? How intentional are we going to be? How proactive are we going to be in our planning? That income sometimes can only go so far, and so I’m excited to see where you go over the next several years, and I sense and feel that fear and some of those feelings have overwhelmed with you. But I also think you’ve got a bright future ahead of you. One of the other things you shared in your application, which is worth discussion, because I think we often underestimate how our upbringing can inform how we approach our financial situation today. And so you shared a little bit about some of the challenges, some of the struggles financially in your upbringing, and perhaps how you want to rewrite that story going forward.

Alyssa Falleni  06:24

Yeah, you know, I never felt like I didn’t have all the opportunities growing up, but now that I have, you know, looked back and seen what my parents did, so that I never felt that way. They definitely were stressed about money all the time. I’m one of four kids. We live in New Jersey, so, you know, property taxes are really high, and, you know, my parents gave us everything to be able to play, you know, club sports and do all the activities. But now, you know, hearing some of their discussions, because they’ve gotten a little bit more open, discussing with us about their finances, and I realized that they worked really hard to do that, and it was always on their mind, and that is not what I want for me or for my future family. I want to be able to be present. I don’t want to have money, and the fear of not having enough or running out or, you know, that is not what I want for my future. So I am, you know, trying to be very intentional, as you alluded to, you know, making these decisions to set me up, to keep me on that path that I want, you know, for my future, and I just got engaged, so my future husband and I, you know, we’re starting to really think about how we want to, you know, merge our lives together and make sure, you know, we make the right choices so our kids can feel that way. But also, you know, I feel a little guilty now as an adult. You know, never made to feel that way by my parents. But yeah, you know, I had known maybe I would have given something up or, you know, and I don’t want that to burden my future.

Tim Ulbrich  08:08

and I really admire, Alyssa, your awareness of that, because we often may not realize that, you know, some of the upbringing, some of the emotions, we call it, the Money Scripts, the Money Classroom we grew up in, we bring that into our own financial plan. And when we’re in relationship with someone else trying to do this together, we bring that together and and an awareness of that can really help identify, you know, in the moments when you’re like, Oh yeah, I sense fear, like, Where’s that coming from? Well, you know, that was probably a script that you grew up with. And then you can begin to work through that. So excited for your awareness of that. As you think ahead to this transition again, you’ve been in training for a long period of time, income’s about to go up. How do you feel like this scholarship is going to help you as you progress forward in your career?

Alyssa Falleni  08:54

Yeah, well, you know, a big part of why I applied for this scholarship was not necessarily for, you know, just the monetary award, but it was for that YFP Plus membership. It was being a part of a community that thinks similarly. It’s, you know, having that opportunity to get advice from people who are in a similar position. You know, as a pharmacist, we fall at a very interesting spot in healthcare providers. And so, you know, hearing from other people what they’ve done and in a similar career path, it does make a difference. It’s not the same as general financial advice, in my opinion. And so I think this scholarship gives me, really that community to become a part of that maybe financially. I you know, who knows if I would have found it, um, but I think hearing from those people and being a part of YFP Plus, and having, you know, the opportunity to see what other people are doing. Um. I’m also super excited for the book. I had a friend who lent it to me a couple years ago, and I got to read some of it before I had to give it back. But I’m excited to kind of have my copy and go through my financial steps, you know, as I read through that. So a lot of different areas, this has definitely connected me and made me feel a little bit more autonomous in making these decisions and not as fearful.

Tim Ulbrich  10:27

Yeah, I hear a sense of empowerment there. And you said something really important about community and being around like minded individuals, and so important in many phases of life. Here, we’re talking about finance. But you know, whether people engage with YFP Plus or they find another community that’s a better fit, so important that you’re being challenged, encouraged, supported by others that are on a similar journey. Community is huge, huge when it comes to making sure that we’re really progressing with our financial plan and really being challenged in the direction that we need to be growing as well. I’m gonna embarrass you for a moment and brag on you as we wrap up here and and read to our listeners just a segment from a letter of recommendation that came from a physician, Dr. Turner, that you worked with at the VA that speaks to you as an applicant, and I think why you really stood out to the selection community. Dr Turner had this to say: “Alyssa has a special collection of skills and abilities. She was able to excel on an interdisciplinary team with a variety of people from different backgrounds. She was universally well received, and I was especially impressed by her work ethic, humbleness, curiosity and ability to be flexible to make any team composition better and more effective. Alyssa has a rare combination of strong clinical skills, interpersonal skills, and a professional, hard working approach that brings out the best of those around her. I could, in good faith, recommend Alyssa to almost any team or project and be confident she would make the team stronger.” Alyssa, you should be proud of that. That is incredible. I don’t even know if you’ve heard that, seen it come in. So thank you so much for your application. Congratulations on the success that you’ve had thus far, and I really look forward to following your journey into the future. 

Tim Ulbrich  12:11

Momil, welcome to the show, and congratulations on being a recipient of the YFP Gives scholarship. 

Momitul Talukdar  12:17

Thank you so much. I am so excited. I was jumping up and down when I got the email about the YFP scholarship. I was actually standing in line to get Graeter’s ice cream. 

Tim Ulbrich  12:32

Good stuff!

Momitul Talukdar  12:34

Yes. So definitely celebrated with the extra scoop of ice cream when I found out! 

Tim Ulbrich  12:41

It’s funny, you mentioned jumping up and down. I was thinking before we hit record of when I think of Momitul, what I think of, and we’ve had the chance to cross paths a few times. We share a connection with NEOMED College of Pharmacy, and I have the opportunity to meet you several years ago, and in my brief encounters with you, I picked up on two things. Number one, is your joy. So when you said jumping up and down, that doesn’t surprise me. And number two, the passion that you have for the profession and the work that you are doing, and both of those things are contagious. And so it’s a pleasure to have you on the show and to be able to award this scholarship to you. Give our listeners a brief introduction of yourself, including what led you into the profession and the work that you’re doing right now. 

Momitul Talukdar  13:25

Absolutely. So my name is Momi. Last name is Talukdar, but most people will call me Momi. I had quite the journey into pharmacy, so I had a very non traditional route. So after undergrad, I did my undergraduate studies at the University of Cincinnati, and that is my hometown. So I lived at home while I went to college, and at that time in my life, I thought I wanted to become an optometrist. Long story short, optometry was not for me, and at the time, I was a little heartbroken when things didn’t work out. But, you know, life led me into doing a Masters of Science program in Tennessee and so, and I encountered a lot of people at that time, and you know, I really developed a lot of my study skills in my Masters of Science program that I did at Lincoln Memorial University. And so after that, I moved back home to Cincinnati to work at Mercy Hospital, and I worked at the scheduling radiology appointments, and when I was scheduling radiology appointments, I encountered nuclear medicine, and a lot of nuclear medicine patients, and I was responsible for reading a lot of their patient prep instructions. And radioactive iodine piqued my interest in terms of all the patient safety things that patients have to do before and after ablating their thyroid with radioactive iodine. I actually reached out to the nuclear medicine manager, Ingrid, at the time, and I asked her, I’m like, Hey, like, this sounds really cool. Like, you think I could be a nuclear medicine technologist. And she said, yeah, like, go for it. I think it’s a very rewarding career. So I applied to Mayo Clinic. Mayo Clinic’s nuclear medicine technology program, and got accepted. And through my time at Mayo is what opened my eyes to pharmacy actually. I had a rotation at a nuclear pharmacy that’s on Mayo’s campus, and that was a 4am shift. And when I first got my schedule, I didn’t think I was gonna like it. I really thought I was gonna dread this rotation, like, you know, I’m just gonna try to, you know, get through it. I ended up loving it. And I ended up doing a project with the nuclear pharmacist, Dr. Andrew Paulson at Mayo Clinic. And you know, long story short, he convinced me to go to pharmacy school. And after, you know, some thought in the cold Minnesota morning, at 4am I decided to go to pharmacy school. I wanted to move back home to be close to my parents in Ohio, in Cincinnati, and I actually interviewed at NEOMED. And right from the start from the interview, even after the interview, I reached out to Dr. Jackie Boyle, and I asked her, What nuclear pharmacy APPY rotation opportunities there were, if that was my career goal, that was why I was going back to pharmacy school, is to become a nuclear pharmacist. And just after speaking with her and all the opportunities that she presented to me like, yes, we do have a nuclear pharmacy. APPY rotation. I picked NEOMED to pursue my pharmacy education. I know it’s a kind of a long story there, but that is really how I came into pharmacy, and especially nuclear pharmacy.

Tim Ulbrich  17:20

Bringing it full circle, today is day one, when we’re recording, of your job as a nuclear pharmacist. So tell us a little bit more about the position you have entered into.

Momitul Talukdar  17:30

Yes, so if anyone is familiar with the nuclear medicine world, so you have PET and then SPECT. So what does that mean? So this is referring to the two types of cameras that you’ll see in nuclear medicine. So PET is your positron emission topography cameras, and you are mostly dealing with oncology patients, and you’re looking at the metabolism of a tumor. And a lot of oncologists love to order PET scans to see a progression of a tumor, if it’s benign, if it’s malignant, okay, great. So then the other side is SPECT. And these radio pharmaceuticals that we deal with, spec cameras, they have a longer half life than your PET radio pharmaceuticals. Pet radio pharmaceuticals are very quick. SPECT is more diagnostic. So, S, P, E, C, T, so  Single Photon Emission Computed Topography cameras and so say you have gastroparesis, and the gastroenterologist wants to see how fast or slow food is moving through your stomach and your GI system. So they’ll probably give you a gastric emptying scan, and that is basically eating radioactive eggs in the morning and with sulfur colloid technetium, 99m sulfur colloid eggs. And after the patient digests or eats that very big breakfast, we have them come in and take pictures with two SPECT cameras at the one hour mark, three hour mark, six hour mark. That’s like one of hundreds of SPECT studies that are out there for nuclear medicine. My position is PET, so I will be dealing with a lot of the therapeutic side, not quite diagnostic side, of nuclear medicine. So it’s not chemotherapy. Often times that pet radio pharmaceuticals, or a lot of therapeutics in nuclear medicine, get confused with chemo. It’s a little more direct than chemo and less adverse side effects than your average chemotherapy that oncology patient would go through. But I do love the behind the scenes nature of nuclear medicine. I am a very much early bird, so a lot of radio pharmaceuticals are produced early in the morning, 12am 1am 4am because these radio pharmaceuticals are teed up for your 7am/8am patients, whether it be a treatment or a PET scan.

Tim Ulbrich  20:17

Well, congratulations on you know, you talked about the journey and progression to Mayo and the interest and the pharmacist that led you there, which led to pharmacy school, completion of pharmacy school and the job. So congratulations on the progression and achievement of that. I think I just learned more about radio pharmaceuticals. I don’t even know if that’s the right term, than I ever did in pharmacy school. All right there we go. And I also learned that I’d be a terrible spec patient because I don’t like eggs, and I definitely don’t like radioactive eggs, so hopefully I don’t ever need that therapy. But what will make do. Yes, shifting gears to the scholarship. In your application video, you talked about the magnitude of student loan debt that you and to be frank, many of your peers, are facing upon graduation and beyond the $1,000 award that’s associated with the YFP Give Scholarship, which, let’s be honest, any little bit helps, right, but that’s going to put a small dent in and the overall magnitude of we think about the average student loan debt today is about $160,000 for the graduate. So my question here is, how will the scholarship and the materials help you, as you make this transition as a from a student pharmacist to a new practitioner?

Momitul Talukdar  21:30

Yes, so as we know, transitioning from a student to a pharmacist is a little tough, because now I’m not reliant on student loans that I have been for the last four years, moving into our apartment, getting new furniture, just setting up a new life for myself. I know I’m no longer a student and the responsibility of a practitioner is a little bit bigger, but what I learned early on from my mentors is that when I was an API student, I had the mentality that I was an employee, and now that I’m an employee, I had the mentality of a student, and this way I always like to learn, and I always like to be in a growth mindset. And I say that to say transitioning from any position in life, whether you be a student, an employee, mentality or not, it comes with a financial burden. Moving is not easy, and nor is it cheap, and just setting up a whole new life for yourself. I lived on campus, so I had to benefit a lot of benefits you know, as a student that now I don’t have now that I’ve graduated, which makes sense right now, I have a paycheck that’s coming to me,but I say that to say it’s definitely eased my transition from student to practitioner. This scholarship has, yeah. 

Tim Ulbrich  23:01

I think you highlighted something that’s really important is that there is a lot of transition, both in financially, you know, no debt, to finally earning an income. Often there’s relocation that comes with expenses, as you mentioned, and so important in that transition to be setting a strong foundation for the rest of your career. So I’m excited for you, Momi, on what lies ahead into the future, I look forward to following your journey and staying in touch as well. And again, congratulations on being a recipient of the scholarship. 

Tim Ulbrich  23:32

Perry, welcome to the show, and congratulations on being a recipient of the YFP Gives scholarship.

Perrigrine Garner  23:38

Thank you so much.

Tim Ulbrich  23:40

Let’s start, if you could give our listeners a brief introduction of yourself, including what led you into the profession of pharmacy and some of your career goals after graduation. 

Perrigrine Garner  23:49

Sure. My name is Perrigrine Garner. I am currently a p4 at the University of Toledo, College of Pharmacy in Toledo, Ohio. What led I’m a non traditional student, so I like to throw that out there first. I’m a mom of three daughters, so I decided to go back to pharmacy school in my 30s. A couple reasons was, first of all, I’m a person with physical disabilities, and I just noticed in the healthcare setting, there was a disconnect between different providers and services for people with chronic conditions and disabilities for throughout their lifetime, and I wanted to go into pharmacy to not only educate myself to better my physical disability symptoms, but to assist others in helping them as well, and kind of close, try to close those gaps in access for people with disabilities and just healthcare education as well, and then also, my great grandfather was a pharmacist, and he managed and owned local pharmacies back in the 30s in Toledo and Sylvania, Ohio as well. So following that family.

Tim Ulbrich  24:55

I think the synchronicity is really incredible. You shared with me right before when we hit record that you happen to be living in Toledo, which has some big aspirations of becoming the most accessible city in America for those that have disability, and for you to be there with the goals that you have, I think is a really cool opportunity for alignment into the future. So tell us more about some of the career goals that you have after graduation.

Perrigrine Garner  25:20

For sure. So my biggest career goal, my dream, is to open an independent pharmacy, or have some sort of pharmacy business that caters to people with disabilities and chronic conditions, and that it makes it more accessible for them to access healthcare and medicine to make their lives better throughout their entire lives. And so I developed relationships with local nonprofits that help people with disabilities, for example, the Ability Center of Greater Toledo, and they are the ones that their mission statement right now, with their new CEO, is to make Toledo the most accessible community in our country. So we really my thought process and my ambitions really align with their goals as well.

Tim Ulbrich  26:05

It’s exciting. I look forward to following that into the future. We had a great conversation before we hit record about some of the directions that that might be able to go and really sense the vision and the passion that you have for that. You are recently recognized as a recipient of the 2024 US Public Health Service Excellence in Pharmacy Award. Tell us more about your work and impact that led to that award. 

Perrigrine Garner  26:28

So I want to, I want to state that was a complete shock. It was a complete surprise, and honestly, so what had happened was there was an opening for pharmacy director for our Community Care Clinic, which is a nonprofit, free clinic for people in need in the Toledo area community that is a student run by students, medical students, pharmacy, nursing, all different groups Through the University of Toledo. We have a little space in a church down the road where we help people every Thursday. And I just said, You know what? When that position came up, I said, that is exactly what my passion is, is to help people in need. So I’m gonna apply. And I got the position, and I just did what I thought was right. And I just said, Okay, we need donations. You know what are some ways I can just help people. And then I I realized that the Ability Center of Greater Toledo, like I’ve mentioned before, they take donations and but then I mentioned to them, like, oh, are there some items you can’t use through, you know, your services? And they said, Oh, yeah. Like, we have certain items. And I said, Well, we can use, we can use those items. Are we have items possibly you could use? And they’re like, Yeah, so I actually just developed this, continue to develop a relationship with them, and would get donations for the clinic. And I just, I just did what I thought was right, and I would just stay all night at the clinic, helping people, helping the students. I really wanted to educate students on how important it was to help people in need in our community. So I’d go to all the travel clinics and just try to really educate how important it is to help people and that I truly feel. That’s what led to that award, because, like I said, I was just doing what I thought was right and what I’m passionate about. And then one day I came into class, and all the staff of the university was there, of the college, and I was like, what is happening? 

Tim Ulbrich  28:23

What is going on?

Perrigrine Garner  28:27

So overwhelmed with joy, I was just so thankful for that to be recognized.

Tim Ulbrich  28:32

That’s incredible. And I hear what you’re saying in terms of, you know, some of the shock and surprise, it sounds like it was very well deserved. So congratulations on that award. I want to talk about resilience for a moment. You know, that was something that really struck me, and I think struck our scholarship committee as we reviewed your application, your letter writer spoke to it as well. But as a mom to three daughters, and someone who has openly shared some of the personal struggles with cerebral palsy, with a disability, what what has been your secret to staying resilient and maintaining a positive attitude that’s allowed you to lean into the efforts, the work that you’ve done, the impact that you’ve had, and even as you think ahead to the goals that you have.

Perrigrine Garner  29:12

For sure, you know what I love to say, so starting in pharmacy school, I was nervous about how I would do physically. I knew I had the mentality to get through pharmacy school, but with my physical conditions, I have, like, I get weakness and pain and that sort of thing. But I said, You know what? What’s the worst that can happen? So I was just like, I’m just gonna give it my best try and go and honestly, my education through pharmacy a lot of the clinical aspects of it, and learning about my body and symptoms has really helped me. So it it’s like that’s what has helped me through this pharmacy school has helped me through pharmacy school, and just thinking of my kids and knowing I went into this to better the lives of my children and better the lives of other people with disabilities, that’s just what kept me focused. And there were times I’d be sitting in class in tears because of just being in pain, but I said, You know what? It’s just a feeling, and then just push through it and keep studying and keep doing your best. And I would at some points, I even was going to physical therapy within the hospital or college is located in between classes, just to keep pushing through, because I knew if I could get through this, I would be able to help more people in my position.

Tim Ulbrich  30:32

And you said something there, Perry, that I want to reflect and mirror back to you, because I think it’s a really important point as you think ahead to the big goals that you have and the impact that you desire to have, and I think are going to have on other people. And you said, What’s the worst thing that can happen? Right? When you talked about going through pharmacy school, what I hear there is an openness and acceptance to step into something that’s unknown. And perhaps that means failure, however we define that, or perhaps that means success, but not letting that fear get in the way of taking that important step. And I just want you to hear that, because that’s going to be if you can hold on to that as you step into these next phases, whether that be as a mom or eventually as a business owner and this vision that you have to help others, the vision and the impact that you want to have is great, and in order to step into that, it’s going to require running up against that fear and being willing to kind of push through that, and it will involve some failure here, there along the way. That’s part of taking risk. And I think you obviously have done that once, and I look forward to you continuing to do that in the future.

Perrigrine Garner  31:36

Yeah, thank you. I’m so excited.

Tim Ulbrich  31:39

As you think about this scholarship, there’s a monetary component. There’s some other resources that we’re providing with this as well. What role will this scholarship play in helping you as you make this transition into your final year of pharmacy school and eventually as a new practitioner?

Perrigrine Garner  31:54

Yeah, so this scholarship was very, very important. So I want to preference with for my bachelor’s degree. Thank goodness I was able to get enough grants and scholarships to do my bachelor’s degree. But then when I realized the graduate part of it, I was have a struggling with grants and scholarships, and so this is contributing to that, and where I don’t have to pull as much loan for that. So I just spoke with Tim Baker the other day, and he says the average student loan debt for a pharmacy student is about $160,000 which is crazy to me, but I’m going to be at about $80,000.

Tim Ulbrich  32:39

 Let’s go.

Perrigrine Garner  32:40

Every penny, every dollar helps. And this scholarship, I actually immediately bought the NAPLEX prep guide book because I knew that was something. It’s expensive. And I said, You know what? This is going to help me push forward through my education and studying and to do that exam. And then, honestly, like, I have got the book right here. I’m already, like, halfway through, and I’m just making goals and plans for my financial success. I’ve had a lot of setbacks, but I feel like I’m on the right track, and this is definitely an amazing tool to help me through this. 

Tim Ulbrich  33:17

Perry you’re embodying something I think is really important for any other students that are listening is, you know, I think sometimes it’s sometimes it’s easy to look at a $500,000 or, excuse me, not, 500,000 a $500 or $1,000 scholarship, you know, is, hey, what impact is that really going to make, right, when I’ve got $100 or $200,000 of debt, or perhaps when it comes to, you know, taking out loans each semester, you know, does it really matter if it’s another $1000 or $2000 and the answer is, yes. It does mathematically. But what you’re really highlighting is it’s it’s really a mindset thing as well, because you know, when you make some of these micro decisions over and over and over again, that’s how you’re able to graduate with $80,000 instead of $160,000 and that’s going to give momentum as you make this transition, and through having a reduced indebtedness as someone who also wants to own their own business, that’s an important thing, right as you’re making those next steps financially as well. So just admire the great work that you’ve done on behalf of the YFP Gives Scholarship Committee. Again, I want to say congratulations, and you certainly have earned this award. We’re excited to be able to administer the scholarship, and I wish you the best of luck going forward.

Perrigrine Garner  34:25

I really, really appreciate it. Like I said, every penny counts, and it’s just, it’s just a wealth of information as well. So I really appreciate it.

Tim Ulbrich  34:32

Thank you, Perry.

Perrigrine Garner  34:33

Thank you.

Tim Ulbrich  34:36

Ruth, welcome and congratulations on being a recipient of the YFP Gives scholarship.

Ruth Adeyemi  34:41

Thank you very much. I’m very excited about that. It definitely met a need for sure. Well, let’s

Tim Ulbrich  34:47

Start with a brief introduction of yourself, including what led you into the profession of pharmacy.

Ruth Adeyemi  34:54

Yes, so my name for everybody listening, is Ruth Adeymi, and I’m a fourth year student at the University of Florida College of Pharmacy. Highly passionate about advancing health equity, particularly in underserved population. And I say I mentioned that because my passion for pharmacy actually stemmed from watching my uncle growing up. He passed away already, but then when I was growing up, he was just very devoted to his profession, and a lot of people nearby even thought that he was a medical doctor because he cared for his patients beyond what your average pharmacist would do. And then that led me to wanting to be more like him and also to carry on his legacy. And what I saw now that I’m grown is that in the rural areas in Nigeria, you have pharmacists that they’re very transactional. And then when you look at the urban areas, that’s not the case, because they they take their profession more seriously. Once you, you know, offer counsel and make sure that the patient understands why they’re taking the medication. But then when you look at the population of Nigeria, about 60% is rural, so the majority of the population are not getting that counseling. They’re not getting that pharmacy based care, you know. So my goal is looking at what my uncle did. Just wanted to go back home to promote the need for patient focused care, ensuring that counseling is a part of everything that we pharmacists and patients can actually trust us to do our job, to ensure that when they’re taking that medication off the counter, they know how to use it, they know when to use it, and they know what not to use it with and what to use it with.

Tim Ulbrich  36:37

I love that, and I shared with you before we hit record that you had a beautiful letter of recommendation that was written by one of your professors, Dr. Whitner, from Florida College of Pharmacy. And in that letter, one of the things that was mentioned building on what you just shared, is, “Ruth stated to me during one of our first meetings that following pharmacy school, she hopes to change the infrastructure of Nigerian pharmacy practice.” So you’ve done a great job of articulating that vision, obviously, to other people as well, and thank you for sharing it with us here. I want to ask you about your involvement in chartering a new pharmacy chapter of SNAFA, which is a national pharmacy organization whose mission is to serve underrepresented minorities and underserved communities, and chartering that new chapter at the University of Florida College of Pharmacy. How did that, or how has that impacted your development as a leader within the profession of pharmacy?

Ruth Adeyemi  37:32

Yeah, I like that question so much, because one thing for me is wherever I find myself, always looking for opportunities to promote and advance underserved communities. And when I came to the University here in Jacksonville, we’re literally positioned in an area where there is a need, you know, and realizing that we don’t have a student organization that focuses on meeting those needs and going out to share, you know, to the different marginalized communities on how to take their medications, you know, and even like, just different explaining to them when a vaccine is needed, explaining to them when a medical intervention is needed. To me, that was alarming. And then, you know, having Dr Whitner, who is also very passionate about underserved communities, when she raised that question of, you know, having an establishing a SNAFA chapter in Johnson, though it just clicked for me, because it was like two passions meeting two passionate people is meeting and wanting to achieve a common goal, which is ensuring that even the student population understands why it’s important to have an organization that is centered on promoting and advancing health equity in underserved population so and also using my expertise and the knowledge that I’ve gathered over the years, just working in Nigeria and working with Nigerian students for the vision that I just shared with you, that also helped in chartering this Chapter in Jacksonville, using the different knowledge that I’ve gathered from doing that and bringing all of that into chartering SNAFA in Jacksonville. And so far, I’d say that just starting this chapter has really helped me to number one when starting any initiative like this, first of all, just understanding like the needs of the community. That’s very important. Because when I started the compassionate pharmacy practice project, which is a project that I’m working on back home to advance pharmacy practice, that wasn’t one of the things that I did initially, just trying to understand the need of the people, but with chartering SNAFA here in Jacksonville, it definitely helped me understand the importance of knowing what the need is in the area and using that information to put together events right put together initiatives that would actually meet the needs of these people. So I’d say that this organization is definitely helping me and building me to become that health equity leader that understands those basic aspects of putting together an organization, and I’m hoping to use that knowledge to use the knowledge that I’ve gathered as I move on in my career.

Tim Ulbrich  40:13

Yeah, and it’s clear to me that you’re a builder, a creator, an innovator, which excites me. We need more of those in the profession of pharmacy, so that that is definitely exciting. It’s evident through the work that you’ve done in starting that SNAFA chapter you mentioned the compassionate pharmacy practice project initiative, and another I want to ask you about. You also started the SARM life Digital Skills Program, which to date, has served and coached over 100 African women across the continent, in Nigeria, Ghana, Ivory Coast, Kenya and Senegal to capitalize on the digital surge in an effort to build their professional brands. Tell us more about this initiative and how it came to be in the work that you’re doing. 

Ruth Adeyemi  40:52

I love that you asked it that way, because this initiative is very dear to my heart. When I graduated from undergrad at Jacksonville University, and my original thought was to go home say hello to my family, because I had not seen them for four years. So I wanted to go home to see my family, and then come back to the United States, because I already had my admission to go to University of Florida. But on going home, that was not the case. Funding became a huge issue, and because of that, I had to defer my admission for a year. Now, during that one year of deferring my admission in Nigeria, you have a one year service to the country program for those who would like to work in the country eventually, and based on what I’ve told you about my passion for going back home. That’s something I have in mind. So one of my mentors told me, You know what, Ruth, enroll for this program. And that’s what I did in 2019-2020, enrolled in the National Youth Service Corps. That’s what it’s called. And during the first month of the one year training, we all get to be together, the batch. We all get to be together, and then we learn different skills. We get trained, and then we get dispatched to the different states in the country. So during my time getting trained, I decided to learn digital skills, and then I learned, like, one other skill trade. But the digital skill was very dear to my heart, because I just started my website, actually, where I was talking about, you know, my travel to New York City, because, you know, I’m coming from, like, a very small village in Nigeria. So I just wanted everybody that, yeah, so with the digital skills, uh, training, every knowledge that I get in there, I put it into my website, and I saw the growth. So I share that online. And from there, people just wanted me to coach them and teach how I was able to grow my website within a short span. And I love teaching. I love to see technology. So that’s how my blog became. It turned into a business which is now storm life. Now what happened a few years later, a year or two later, was was started as just a passion, you know, for sharing information online via blog, became a business that come last year, was able to pay my tuition before paying my tuition for school. It was able to cater to my needs when I was in Nigeria and even when I moved back to the United States. So I thought about it. If having a digital skill, owning a digital skill, could impact and change my financial journey this way, I also want other people to experience that. The unemployment rate in Nigeria is quite high, and we as citizens can contribute to reducing that so that, that was the thought process that I had, you know, and then I started the summer live digital skills internship in 2020 that was the initial language that we used the Covid year. And we had a lot of students that joined. They just wanted to do something, because everybody was inside. And from there, you know, we thought about it and decided to grow the initiative from just focusing on Nigerian and Nigerians to expanding so this year and we expanded into different African countries, Ghana, Kenya, Ivory Coast, Senegal. And we had about 133 students this year that trained on eight different data skills, and I had to hire like coaches and these skills to ensure that they’re getting the best knowledge. So for me, it’s a journey of financial freedom, so to speak, and just wanting other people to benefit from that. 

Tim Ulbrich  44:35

And while, while there is a piece related to your own financial plan, there’s also a contribution component, right? There’s a building and skill development, and I love that. To me, those are the best kind of businesses when you can provide value and fulfill an unmet need while also growing a business that’s going to have positive financial benefits to yourself and allow for other contributions to be made as well. Those are the best kind of businesses to be building. So I look forward to watching that grow. We’ll link to the SARM Life Digital Skills website in the show notes if our listeners want to go and learn more about that work. Related to that you shared with me right before you hit record, that you’re in the final editing of two books, not one two books. And by final editing, I mean like coming out within the next week. At the time of this episode going live, those books will be out. So tell us more about those two books.

Ruth Adeyemi  45:28

Yeah, so the first book is Mastering the Art of Blogging for Your Brand, and this book literally walks a blogger or a potential blogger, through the journey of blogging. Everything you need to know, from what website platform to use, what themes to use, what plugins to use, and even how you could build a sustainable blogging business, so everything from A to Z, that’s what I’ve included in this book to ensure that a new blogger can use it and get good results. Then the second book is Mastering the Art of Search Engine Optimization for Brand Growth. Now, with blogging knowledge, what ensures that your blogging efforts is successful is understanding search engine optimization so earchers and users can see your information on search engines. So with this book, you’d understand the different aspect of search engine optimization, the different strategies, from local SEO to technical to content, every aspect of SEO to ensure brand growth on search engines. So that’s what those two books are about. I’m very excited, because it’s my first time publishing books ever.

Tim Ulbrich  46:40

It’s a big project. It’s a big lift. So I admire the work that you’re doing there, while completing your PharmD, while running the business, while doing other all these other things. So we will also link. We don’t have that information at the time of recording, but by time we go live, we’ll have some information on how folks can learn more about those books and get a copy if they’re interested. So we’ll link to that in the show notes as well. Ruth, I have just a ton of admiration for the work that you’re doing, the goals that you have for the future. It really was an honor on behalf of the YFP Gives scholarship committee to be able to award you this small monetary award, I think, is a recognition of the amazing work that you’re doing. So again, congratulations and thank you for taking time to come on the show. 

Ruth Adeyemi  47:21

Thank you very much. Thank you for the opportunity as well.

Tim Ulbrich  47:27

Ai Len, welcome to the show and congratulations on being a recipient of the YFP Gives scholarship.

Ai Len Nguyen Phan  47:33

Thank you. Thank you, Tim for having me here.

Tim Ulbrich  47:36

Well, let’s start. If you could give our listeners a brief introduction of yourself, including what led you into the profession and some of your career goals after completing your industry fellowship, upcoming this year with Rutgers and Genentech. 

Ai Len Nguyen Phan  47:50

Again, first off, thank you, Tim for inviting me here today. I’m grateful for the opportunity to share my journey and story. Hello. My name is Ai Len Nguyen Phan and I am a pharmacist currently completing my second year as a Rutgers industry Fellow at Roche Genentech in South San Francisco. I grew up in Northern California and went to University of California, Los Angeles for my undergrad, and then I moved over to Baltimore, Maryland and attended the University of Maryland, Baltimore School of Pharmacy. I graduated back in May 2023 with my PharmD and Master’s in Regulatory Sciences. And then I moved back to California in July 2023 when I started my two year fellowship at Genentech. During my first year, I was with the medical information and communication team supporting the oncology and target therapies team, and then this year, I am with the medical science liaison team supporting rare blood disorders. So pretty much what got me into the profession is growing up in a family of my father worked in the healthcare system, and pretty much my uncles and aunts were all in the healthcare system. So growing up, I’ve always had this mindset of I want to be in the same setting, working setting, as they were all in. And so it’s never something that my parents pushed me to be in. It’s something that I have just grew up loving seeing the different stories that they share with me, the different experiences of meeting different individuals and how they are able to help them in small or big ways. So then that led me to really looking into pharmacy. And so that’s why I pursue pharmacy, first off, and then after the first year Pharmacy school, I got an internship with a company in Carlsbad, California. Love what I did. It was in rare diseases, and so seeing the impact again with helping people in a different way, different setting, I really fell in love with that. So I got the opportunity after my internship, and they offered for me to stay on as a part time. So I was able to be in the industry for almost four years throughout pharmacy school. So I grew in terms of my experience in industry, learn the ways of you know, like what medical affairs consisted of. And so here I am with the USMA team, or the medical affairs team at Genentech, but what my career goals are. So currently, I am completing my second year in the fellowship. I would love to stay within the medical affairs team, there’s just a lot of strategies and excitement and seeing how products go from, you know, a small molecule into the approval and seeing the amount of patients that we’re helping with the even in the rare space where there’s no treatment, or if there is treatment to cover any of that unmet medical gaps, is really fulfilling to me. And so that is my goal, short term, but long term, I would love to, you know, expand more within medical affairs or even in other functional areas, just because within the pharmaceutical industry, there’s so many opportunities. And importantly, I would love to be a mentor to those in that are in pharmacy school, in college, considering pharmacy or early in their industry careers, because I wouldn’t be here without the mentors that I have and then so still very new in my career journey, with a lot of things to learn every day, but outside of work and professional life, one of my professional goal, personal goals is to increase my financial and investment literacy. So I am thrilled to be here and speaking with you. 

Tim Ulbrich  51:47

Well that’s an exciting journey. And one of the things I want to highlight there, especially for any students that are listening, is what I heard was some internships very early in your career that opened the door to different aspects of the profession, how you could use your pharmacy degree, which, obviously those experiences led to pursuing fellowship, and now the career path you’re going to go, and I always am encouraging students to make the most of the seasons of internship that you have, right? There’s only so many of them before that partly gets the dictated for you, whether that be on IPYS or APYs is you only have so many options and choices, and really using those internship opportunities to pursue some more of the quote, “non traditional pathways”, and to explore the many different aspects of the profession that a pharmacist could go. So love that journey, love what you shared there. And I can really tell you know how mentors, preceptors have influenced you and your desire to give back in that area as well. One of the things, before we talk about some of the financial stuff, your application really centered around resilience and determination as two characteristics that you have embodied, that have helped shaped who you are today, and I suppose, will help you as well into the future. Tell us more about that resilience and determination and where that comes from? 

Ai Len Nguyen Phan  53:04

I would say the resilience and determination comes from my family background, and I see it through my father and mom. But pretty much, you know, I moved here as an immigrant when I was eight years old. I didn’t really know English, really struggle in school, and for years, faced bullying, but through that, I still continue every single night, I remember opening the thesaurus and the and the dictionary and learning from A to Z all the words in there. And I don’t think by the time I became proficient in English, I got through all the words in the alphabet the dictionary. But, you know, every night, I continue to learn each word. I learn past, perfect tense and all that, and continue to see the progress from there I saw, you know, it took me a long time to get to be able to be proficient in English. And so being able to get through that, and then understanding the language, being able to speak it well, has made me feel like, okay, if I can do that. There are other things in life that in the moment it gets difficult, but just determination. And I do think a little bit luck here and there, when opportunities come up, take them. They do help. But I would say for me, going through one hardship, really focusing on, like, what are my goals now? What are the long term goals? And working towards them has always gotten me to where I am today. So, like, going from learning English to then, you know, getting into being a first generation in college where my parents didn’t go to college here, so they didn’t know, like, what the SAT was, or, you know, like you needed to take the SAT to get into college at the time. And so me, just hearing people talking about it, and being curious, I just started to study for this exam, and being able to get into, like a really good university, and making my parents proud, being the first generation student, and from that working really hard to get into pharmacy school, and then now getting a fellowship, which is something that is also not the easiest thing to do. So I think for me, it’s always been putting my, setting goals, working really hard towards them, and then when I do face conflict, I reach out to my mentors. So I think the theme for me has always been, reach out to your support system, get their input. And then, you know, seeing those advices and seeing what works for me at the time, it makes me comfortable to take those actions or advice that they have shared with me and then implementing that in my strategy to reach my goals.

Tim Ulbrich  55:50

Yeah, and I think that mindset, as we transition to the financial aspect, I think that mindset I see is already translating for you on the financial side, one of the things that you mentioned in your submission was that the weight and burden of six figures of debt is real, and the impact of that debt is real when it comes to, you know, other expenses that can fit into the budget, being able to save and invest for the future. And as I shared with you before we hit record, I think sometimes as fellows, residents or even other new practitioners, there can be this mindset of like it is what it is like I’ll take care of in the future. I don’t really have the time or the money to kind of worry about this right now, but you’ve taken a different approach, which is, you’ve started to make student loan payments, you’ve applied for this scholarship, you’re pursuing opportunities to increase your financial literacy. And so that’s the mindset that I’m referring to it, and I’m curious, as you reflect on that, what keeps you motivated to have that long term mindset while taking one step at a time right now, even though those may not feel like big financial decisions you’re making in the moment, but that allow you to keep momentum without getting overwhelmed.

Ai Len Nguyen Phan  56:58

Tim, I would be honest the first time when I looked at my loans and I opened my No Net and I saw the amount, it was so scary to me, because when I went through college and even going through pharmacy school, I knew that I had loans, but just being able to open my account and seeing those numbers, it then hit me that at one point in my life, I am going to have to repay this. And so I was very lucky in a situation where I started work so I was able to work while I was in pharmacy school, and my motivation was really seeing those numbers each month or each paycheck that I received going down as I was making the payments and at the time as a student and based on what I was making, I did a different approach, where I don’t think I would be using the same approach once I later on, after I am done with my fellowship, but I tackled those loan groups that I knew I could afford and afford to pay off. And so over time, throughout four years, I was able to pay off multiple groups of loans, and that kept me motivated, and then I saw the numbers slowly going down. And truly, for me, it’s also a psychological thing where I was very happy and satisfied that I’m slowly making progress, but I’m also always I’m a planner. I think about what are my goals later in life financially? I want to be able to afford a home. I want to be able to live comfortably where, you know, I don’t have to live paycheck by paycheck or being worried that I have such a huge debt that I owe to their, you know, like in terms of loans. So for me, that has been kind of the mentality now, going being a fellow, I would say, you know, being a fellow now, I am making more than I did when I was a pharmacy school. So then again, it that motivation where, okay, if I was able to make payments while I was in pharmacy school working, I should also be able to make a payment now, especially if I’m making a little bit more and so. So then I think it helps me. I feel like what I’m doing now will ease the worry and the burden later on in the future, and again, always sticking to those long term goals, which is being able to be financially stable one day.

Tim Ulbrich  59:31

A lot of richness in what you just shared there. And you know, I think as as I heard you say, like, hey, when you think about your student loans into the future, you might have a different approach in terms of how you tackle those but as a student, it was all about momentum. It was about traction. It was about not getting stuck. And you know that meant going after the ones that you could tackle based on what you’re making as a pharmacy student at the time, and that is so important, we underestimate that in the financial plan. Yes, we’ve got to worry about interest rates and all that stuff. All. Important that we nerd out on it, but momentum is such a driver of the financial plan and progress, especially when we think about doing this over a long period of time. You know, with our careers, I often say that the financial plan, it’s a marathon, it’s not a sprint, right? We have to maintain that momentum, and this is what Darren Hardy is talking about in his book, The Compound Effect, when he says that small, consistent choices over a long period of time equal radical difference. It’s the compound effect. It’s the momentum. And obviously there’s strategy to be had there. But I love that you were thinking about momentum even when you’re in pharmacy school. That is great. Let’s talk about the future. So you mentioned in your application you have a 10 year timeline as a goal for paying off your loans. I think you’re going to do it faster than that, but let’s assume that it is 10 years from now. We wake up, it’s August, 2034 which is weird to say that out loud, it’s 2034 you’re debt free. What else is going on? What are the financial goals would you like to accomplish in this first decade of your career?

Ai Len Nguyen Phan  1:01:02

Yeah, I would say, you know, looking thinking about 10 years from now. So by then, I hope I would already, like, I said, own a home, financially stable, living comfortably. But also I really want to dive into real estate. I feel like that’s something that has always been a goal of mine, or at least thinking about it, or seeing I’m always either real estate, a parking lot or a laundromat. Those are like the three things that I always think about investing in. But truly, before even diving into those, I just think that, you know, like I want to take care of myself, but again, the core of my success has always been my family, my parents. So I do want to also be able to financially invest in them in one way or another, either it’s their retirement home or just their retirement plan. But then also thinking about my retirement plan as well, and thinking of what investments I can make during that time. And like I said earlier, when I was introducing myself, one of the things that I want to be able to do is gaining increasing my financial and investment literacy, just because I don’t feel like I am there yet to comfortably make any decisions. And I think that is somewhere that 10 years from now, I hope to achieve that by then, and at least have my own retirement plan established, as well as a investment plan.

Tim Ulbrich  1:02:32

Well, I have no doubt that you’re going to figure all of that out. I hear a lot of different goals around not only the paying off the debt. I hear goals around financial independence, whether that be through traditional investments, real estate, etc, I hear goals potentially in owning some businesses, supporting family as well, right? And that that’s the clarity that I’m often encouraging new practitioners to really spend some time thinking about hard to do when you’re in postgraduate training. You got a busy schedule, but we want to have a North Star for our financial plan, so as you’re paying off debt, as you’re saving and investing money, like what’s the purpose? What’s the why? Where are we trying to go to make sure that we’re finding that balance that we so often talk about between living a rich life today and also planning and saving for the future? I look forward to following your journey. We’ll have you back on the podcast. 2034 we’ll get an update, see where you’re at. But in all seriousness, Ai Len again, congratulations on being a scholarship recipient, and I’m excited for what lies ahead for you.

Ai Len Nguyen Phan  1:03:26

Thank you, and thank you again to you and the committee for believing in me. And I’m so grateful for this scholarship. I do truly believe every dollar counts, and so this will really help me too with my financial burden. So thank you for having me again.

Tim Ulbrich  1:03:42

Well, there you have it, five incredible stories of the first round of winners of the YfP Gives scholarship. If you’d like to learn more about the efforts that are happening within YFP Gives, our nonprofit, you can visit YFPgives.org from there, you can learn more about the scholarship as well as participate by donating. As always, thank you so much for listening to the YFP podcast. If you found this episode to be helpful and insightful, do us a favor and leave us a review on Apple podcast or wherever you listen to your shows each and every week, we’ll catch you next week. Take care.

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


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

Episode Summary

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

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

About Today’s Guest

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

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

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

Key Points from the Episode

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

Episode Highlights

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

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

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

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

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

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

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

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

Tim Ulbrich  01:25

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

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

Tim Ulbrich  09:56

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

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

Tim Ulbrich  18:51

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

Tim Ulbrich  20:25

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

Tim Ulbrich  23:04

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

Tim Ulbrich  24:44

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

Tim Ulbrich  27:51

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

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YFP 370: Your Retirement Questions Answered with Tim Baker, CFP


Tim Baker, CFP and YFP Director of Planning answers questions from the YFP community on saving and preparing for retirement. This episode is brought to you by First Horizon.

Episode Summary

Planning and preparing for retirement can feel overwhelming. In this episode, Tim Baker, CFP®, RICP®, RLP®, makes the steps to planning for retirement more manageable. He answers three questions from the YFP community on retirement planning, including:

  • How to determine the optimal amount to save for retirement
  • Strategies for dealing with market downturns during retirement
  • How different investment options impact retirement savings

This episode is brought to you by First Horizon.

About Today’s Guest

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

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

Key Points from the Episode

  • Retirement planning, investment options, and home loans for pharmacists. [0:00]
  • Retirement planning, including determining optimal savings amount and factors to consider. [2:24]
  • Retirement planning, nest egg calculation, and potential deficits. [5:51]
  • Retirement planning, including nest egg calculation and goal setting. [12:46]
  • Strategies for dealing with market downturns during retirement. [19:33]
  • Managing investment risk through asset allocation and flexibility. [24:25]
  • Retirement planning, investment options, and their impact on savings. [28:42]
  • Traditional portfolio allocation and retirement savings with emphasis on asset allocation and tax considerations. [32:49]
  • Retirement planning for pharmacists, including asset allocation and tax strategies. [37:30]

Episode Highlights

“I think the big thing is how do you define optimal [savings for retirement]? And then the factors are so important. What type of lifestyle do you want? I think what most people want is to live a similar lifestyle to what they’re living as they’re working. So they don’t necessarily want to be more lavish. But they don’t necessarily want to give up things either.” – Tim Baker [4:27]

“The nest egg calculation, to me, that’s the best way to make that big number, the kind of unknown, a little bit more digestible.” – Tim Baker [9:37]

“I think a lot of people think that they have control over when they’ll retire and they don’t. There’s a stat that says 40% of people don’t work to their expected retirement age, either because of health issues, or they were eliminated from a job, etc.” -Tim Baker [11:12]

“I think the best time to plan for retirement is now and the sooner you can kind of look at where you’re at and be able to adjust where you need to go, the better.” – Tim Baker [11:44]

“When you talk about the nest egg calculation, that is where the value really lies. The short answer of how do you determine the amount of savings needed for retirement? Nest egg calculation, three words.” – Tim Ulbrich [13:39]

“So, you know, and again, the most successful retirees are the ones that are most flexible.” – Tim Baker [25:45]

“It’s being in the right asset allocation. It’s keeping your expenses low. And being consistent with that structure. I think we’ll get people through any of the seasons that you’ll see over the course of an investing career.” – Tim Baker [28:28]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week we take questions from the YFP community on retirement planning, we discuss how to determine the optimal amount to save for retirement strategies for dealing with market downturns during retirement, and how different investment options such as stocks, bonds, and real estate can impact your retirement savings. Let’s hear from today’s sponsor First Horizon and then we’ll jump into the show.

Tim Ulbrich  00:31

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Tim Ulbrich  02:24

Tim Baker Good to have you back on the show.

Tim Baker  02:27

Good to be back. Tim, how’s it going?

Tim Ulbrich  02:29

It’s going well. I’m looking forward to this episode. We’re gonna be talking about retirement planning – a topic that we’re seeing a ton of interest in getting lots of questions about. You did a webinar recently around retirement planning. Lots of engagement that came from that. So we want to answer some of the most common questions we’re getting from the YFP community around retirement planning. And we’re gonna go through four different questions around how do we determine how much is enough? What are some of the strategies to deal with market downturns while you’re in retirement, I know something that you’ve talked about before of that important window before leading up to an after? And how we think about the investment strategies. We’ll talk about some of the different investment options that can impact retirement savings, and then we’ll wrap up by talking about some of the health care costs in retirement. So let’s start with the first question, Tim, which is how do you determine the optimal amount saving needed for retirement? And really, what are the factors that should be considered when setting what this number is what the goal is?

Tim Baker  03:24

Yeah, so huge question, Tim. I think, you know, I’m going to answer the question with with a question is, like, define optimal? Yeah. Right. So like, optimal? Well, we’ve talked about, you know, is, you know, should die with zero be the goal. And, you know, what am I mean by that is, there are a lot of people that, you know, they’ll save, save and save, and maybe the goal is to pass on some, you know, money to their heirs. You know, I always I think I’ve said it said this on the podcast before my parents have said to me, like, hey, we want to make sure that like when we die, like we we give, we give you and your siblings some money, and I’m like, I don’t expect that I don’t really need that. I’m not really banking on that at all. And maybe when I’m older, I would want the same thing for my you know, for my kids, but the die was zero concept is it’s kind of like, you know, you can’t take it with you type of thing. So you’re you’re kind of spending on your portfolio, you’re giving it away, etc, etc. And maybe there’s some, you know, maybe there’s some somewhere in between where you don’t want to be right on the on the needle there. You don’t want to be with zero. So you maybe you have a little bit more cushion. So, you know, I think I think that would be the big thing is like how do you define optimal? And then the factors I think are so important. So like, what type of lifestyle do you want? I think in a vacuum, what most people I think want is to kind of live a similar right lifestyle than what they’re living as they’re as they’re working. So they don’t necessarily want to be more lavish. They don’t necessarily want to give up things either. Unfortunately, some people have to give up things just because of you know, poor planning or they have to work longer. So you know, what, where do you want to live? What’s the geography? What’s your housing situation, that’s going to be the biggest fixed expense. The biggest expense in retirement typically is housing. You know, what are your hobbies? Activities? Are you taking care of grandkids? Are you? Are you jet setting? Are you working? Are you not working? Are you volunteering? Consulting? What does that look like? And, you know, I think from there is, you know, estimating, you know what your retirement expenses would look like? So I mentioned like, what are the fixed expenses? What are the variable expenses, which could be big trips, maybe you’re paying for kids’ weddings, maybe it’s a medical expense. And really kind of zeroing in on that. Unfortunately, Tim the B word doesn’t ever go away. Right. So understanding what your budget looks like, is, is I think an integral part of of retirement planning. There are there are rules of things and way that you can slice it, there’s some planners that will look at the tax return, and then assume like, whatever’s on last year’s tax return is what I need for this coming year. And that’s kind of a very top down approach. A bottom up approaches a budget, you can use, use a rule of thumb, like a replacement ratio. So hey, if I make $100,000 and 70, or 80% replacement ratio means that I need $70-$80,000, you know, in that in that year of retirement. Looking at accounting for inflation, so do you think inflation is going to go up? It’s going to go back down to kind of the 3% levels? The big question is, is like what’s the retirement duration? Nobody knows that, right? So, you know, some people are like, Oh, I’m gonna, you know, retire at 65. And I, maybe I have a good five or 10 years on me, most people, you know, live longer when they want, they think they’re gonna retire. And that’s probably the trickiest part about all this, unlike, you know, other types of planning that are similar to this, like education planning, we kind of know that, hey, our goal was to kind of get through four years, maybe eight years of, you know, education. Here, it could be five years, it could be 45 years. We just don’t know. And that’s kind of the the major wildcard, but then understanding like, what are your sources of retirement? Is it social security? Is it a pension? Is it a, is it an annuity that you buy? Is it your traditional portfolio? Is there other types of you know, is it real estate income, whether your cash flow in real estate, or it’s a liquidation event? Are you selling a business? Is there a part time work there? So I think all of these play into play a part in it, and then I kind of how you distribute the cash also plays and how you handle taxes. So from a distribution perspective, you know, are you looking at, you know, what we’ve talked about in the past, which is a floor and strategy, which is very conservative strategy. Is it a bucket? You know, where, you know, in this, this will be, you know, another question that we have, it’s like, how do we account for like volatility or, you know, in the market? You know, is it a bucket strategy? Or is it the systemic withdrawal strategy, where it’s, Hey, we’re distributing 4%, no matter what, or we’re being flexible, depending on what interest rates what the markets doing? So lots of different lots of different ways to kind of, you know, go about this, but I think defining like, what optimal is for you is going to be important. And again, that’s why a lot of people are like, I just want to, you know, die with zero, that plays.I think the best place to start in terms of the optimal amount of savings needed for retirement to answer that question is, I think starting with a nest egg calculation is the best the best way. It is the, it is the best way, in my estimation, to deconstruct a problem and problem is not the right word, but a scenario that is years in the future, that’s a big freakin number. So, and when I was talking about this, like when we would do retirement planning at my past firm, you’d be the client and we would say, Okay, now now’s the time to talk about your retirement. Based on our time value of money calculation, you need $3.65 million to retire. Alright, let’s talk about your insurance, onto the next thing. And we could see kind of like, maybe the color come out of your face, maybe that little glossy, you know, glassy eyed look, and just, it didn’t connect with people. So, you know, it got me thinking, how can I make this number impactful to you today in 2024? So a nest egg calculation, which says, Okay, this is the number $3.65 million, but then what does that mean to me today? And we compare it to what’s currently in your retirement portfolio? What’s your contribution rate? How was it allocated? And then how does it compare, you know, to what you potentially need. So where are we running a deficit, meaning we’re behind on that $3.65 million? Or are we ahead meaning that we’re, you know, we’re overfunded? So to me, that’s, that’s the starting place. And again, it’s not a perfect, it’s not a perfect calculation, there’s a lot of assumptions in there in terms of investment returns and inflation and actually, when you’re going to retire and when you’re potentially going to die, we’re estimating all that which you would do anyway, in any type of, you know, scenario analysis. But to me, that’s the best way I think, to make that big number that kind of unknown, a little bit more digestible. There’s other ways that you can look at it, where there’s Monte Carlo analysis where you’re looking at, you know, a randomize portfolio return or other things that are related to you know, economic variables that you can say, hey, we’re going to run 1000s of scenarios and what it shows you is, hey, you’re a 85% chance of success. And that one chance of success means is that there are assets left, at the end of the plan, whether you set that for age 90, 95, 100, or whatever that is, that kind of is the next level. The rule of thumb is, you know, what people have heard of is a 4% rule. So, you know, if you’re, if you’re looking at your optimal savings plan, and you have $500,000, in retirement, if you use 4%, that means you have $20,000, over a 25-30 year return. So you might say, Hey, that’s not enough. I need more. So obviously, the right way to reverse engineer that, Tim, is to say, Okay, what do you need, if it’s 40,000, use a 25x, ROI, you need a million dollars, and that’s just a 4% rule inverted. So to me in terms of practical things that I wish I would have a listener, you know, it’s like, okay, are you getting the match, get to that race to the 10%. So your employee contribution, again, this is a vacuum. You know, I’ve talked with prospective clients that had lots of credit card debt, and other things that are going on, I wouldn’t necessarily prescribe this for them, but you know, get to the 10% employee contribution, then eventually, you know, get to a phase where you’re maxing out, and then use IRAs or brokerage accounts to kind of supplement along the way as you can. So, but remember that this is a problem set, Tim, that I think a lot of people think that they have control over that they that they don’t. You know, there’s a there’s a stat that says 40% of people don’t work to their expected retirement age, either because of health issues, or they were eliminated from a job, etc. You know, those types of things, I think where in my mind, I’m like, probably work till I’m 70 and Shay is 65. But, you know, I could lose my marbles was between, you know, before that, like, who knows? So, you know, I think I think, the best time again, I’m a planner, so I’m biased, but I think the best time to plan is now and the sooner you can kind of look at where you’re at and kind of be able to adjust where you need to go, the better. You know, one of the things that I would always kind of lament working with at my last firm was that we only worked with like pre retirees and retirees. So people would come off the street, and they’d say, Hey, I’m 55 years old, I’d like to retire in the next five years, I have $50,000, to my name, I have credit card debt, but like, it was almost like doesn’t, it doesn’t add up the math is not mathing. And so those are yeah, those are all the kinds of things that go into this. And it’s, it’s a huge thing to kind of deconstruct but I think, you know, looking at this as in a vacuum is not necessary ideal. You want to look at all the different parts. We talked about this with our own plans, and kind of, you know, where we’re trending and things like, you know, but it’s, it’s a big question, I think, and there’s just a lot of ways that kind of, you know, look at it. Yeah,

Tim Ulbrich  12:46

The thoughts that are coming to mind, as you’re talking, Tim, is I think there’s risk here to oversimplify this and be overconfident in this. And what I mean by the over over simplification is like, you can run numbers in a calculator. But if you’re not having some of the important discussions and questions of the inputs into that calculator, then we’re not doing the work that needs to be done, right. You mentioned like what what do we mean by optimal? Like, what does that actually look like? What does it mean to be living a wealthy life and retirement? As you mentioned, some huge variables of are we working at all? Are we working part time? You know, is this 55? Is this 64? You know, might we be caring for elderly parents? What does travel look like? What are all these things? And then, you know, when we think about even that word, retirement, I think can carry meaning that you and I might look at that word and say it means two very different things, right. And so, you know, when you talk about the nest egg calculation, to me that that is where the value really lies, to me the short answer of how do you determine the amount of savings needed for retirement? Nest egg calculation, three words. But to do the nest egg calculation and put in all the inputs and variables, which again, as you mentioned, are assumptions and things might change and move. And there are things that we think we have control over that we don’t, but it’s the closest we can get, and we can modify or update that look at it over time. In order to put the numbers in the calculator, we got to have some really good conversations. And this, to me is really where the planning comes to base, we’re not just trying to shove money away into accounts that were, you know, like, somebody said, I should put money in a 401 K, or an IRA or an HSA or whatever. Or we’re looking at these big scary numbers in the future thinking, Am I ever gonna get there? Looking at the individual variables, having the discussion and the conversations, answering those questions, plugging those in. And then as you mentioned, bringing it back to today. So important. Especially for the people that you know, for someone who’s two, three years out from retirement, that may not be as critical as for someone who’s in the middle of their career, or even in the front half of their career where, you know, we got to come up with a number that I can actually put my arms around and do something with today because otherwise I’m gonna look at this number 30 years in the future 20 or 40 years in the future and say, the math just doesn’t even seem possible.

Tim Baker  14:58

Yeah, in one of the things that when we go through the Script Your Plan, which is our second second meeting, and the way that we kind of start building a financial plan, we go through what’s called a Get Organized meeting, which is we bring up the client portal. And we’re basically trying to get to like a clean snapshot of what the balance sheet looks like. So the assets, the things that you own, minus the liabilities, the things that you owe equals your net worth. And our job is to hope, you know, the idea is to kind of grow that quantifably to get your, you know, your net worth grow over time. The second piece of that is Script Your Plan, which is all about like goal setting, right? So it’s like, Okay, now that we know where we’re at, where are we going? And with those two things in place, that that answer of it depends that I always give, Tim transforms into this is given your balance sheet, given your goals, Tim, this is what I think you should do. So it’s no more It depends. Because like, we know, you, we know what your goals are, we know what your passion is, this is what your goals are. But part of that Script Your Plan exercise, when we would kind of talk about a timeline, you know, we I would ask the question of, hey, like, it’s July 2024, let’s fast forward a year, what is success? And you know, what does success look like? And then we go three years, five years, 10 years, 30 years. The further you get out, you know, the further away that you go, the harder it is for you to kind of imagine that self. So with retirement planning, you know, the way that you know, with the way that I would do this, it’s like, I kind of, you know, I would say, hey, let’s get into the DeLorean. Let’s go 88 miles per hour, rev it up, we get out in, let’s see, 2054. So it’s 30 years from now, what does success look like? And for a lot of people, it’s like, I don’t know. So I’m like, okay, like, how much? How would your dad, you know, if I’m, if I’m 40. My dad’s like, imagine yourself, as your dad, like, pitch yourself, as a seventy year old, what does success look like? So it’s just like, the next day where we’re trying to, like, equate the numbers in from a from a Script Your Plan from a lifestyle perspective is, the further that gets out, the harder it is for us to kind of relate to our 10 year older self,  20 year older self, 30 year older self. So if there is a group or a person that you know, very closely that you can say, okay, like, if I’m in their shoes, and you probably do that, anyway, I’m like, oh, like, when I’m retired, I’m not going to do what my parents are gonna are doing, or I am going to do what my parents would do. So you can kind of like, take that, but even 10 years out, Tim, if you look 10 years back, from, you know, if you look back to 2014, how much of your life has changed over those 10 years,. You know, like, like, things like time flies, but, you know, to me, it’s like, you look at, you know, time is so hard for us, as humans can conceptualize. And it’s no different in in something like this. So I think it’s like, really kind of going through those, like thought experiments and, you know, kind of assessing, because I think so much of this is really about the numbers. But when you deconstruct this, it’s really not. You know, I think, you know, if you’re working with a financial planner, again, shameless plug, I think the numbers are going to be fine. Especially if you have enough time, you know, the longer that you’re engaged with, with a plan, the more success, you know, you know, whatever version of success. It’s the people that don’t, I think is where you kind of run into problems. But to me, it’s really important to kind of deconstruct like, the answer that question is what is optimal, and then plan around that, you know, the nice thing about, you know, having decades so to speak in a financial planner, is that the micro things that you do today really steer that frigget to where you can have success, you know, in the long run, so. But it’s an interesting, you know, it’s an interesting problem set, because it is a huge number. And it’s far in the future for a lot of people, it just, it doesn’t seem real, you know, I have a lot of people that, you know, will work with us in their 20s and 30s. Like, I’ll never be able to retire. And when we show them how, you know, the math to get to that, like, I think that’s transformative. Now, I think the second piece of that is like, okay, like, what is a happy retirement? What’s a successful retirement and I think people are starting to figure that out, but it’s not necessarily a destination, right? It’s just the next chapter. And, you know, especially with sometimes pharmacists, or like highly, you know, people that are higher achievers, you know, their role and identity gets really tied up together. And it’s like, okay, if you step away from your career as a pharmacist, like, who are you? What do you do? Like you know, and that and that for some people can be really difficult to kind of again, unbolt.

Tim Ulbrich  15:42

Tim, one thing I want to say and separate topic for another day that we can dive deeper into, we’ve talked about in the show before, but when you talk about time, being hard to really, you know, wrap our mind around, especially for folks that are early in their career, you know, your 2014 examples, a really good one when I think back to 2014, like it’s a distant memory and and it feels like Yeah, we were doing some savings and things now, but if it weren’t for things like automation, you could see how a 10 year period slips by you without having the intention out. This is why we believe so firmly in automation is an important part of plan. Yes, we got to do the hard work up front. Yes, we got to check in periodically. But once we start to kind of remove ourselves from that equation, and we do that hard work, and then we turn it on, whether it’s automatic contributions, it could be automatic savings buckets or other things, that’s where we’re gonna start to really see the progress and prevent this scenario where we say, How did those 10 years go by? And I didn’t make much progress on my retirement planning?

Tim Baker  19:32

Yeah. Yeah, I think it’s so important, because we just get into this, like, autopilot and you wake up. It’s like, where did that? Where did it go? 

Tim Ulbrich  19:56

Yeah. Alright, second question we have is, what are some strategies for dealing with market downturns during retirement? If we even zoom this out a little bit more? I’m guessing this person might be asking, you know, given the volatility, certainly the markets had a good run lately, but it’s been pretty volatile, right, you know, over the last couple of years. So for those that are, you know, in what you call that eye of the storm, around retirement, or coming up on, just got to retirement, or maybe they’ve been in retirement for a period of time? How do we address and deal with some of the market volatility?

Tim Baker  21:11

Yeah, so this is market risks, and you really don’t have any control over at all outside of like, taking all your money out, you know, take your investment ball home, and, you know, and go home, right? So like, this is where people get scared, they’ll go to cash, and they typically are selling low, but then they like, oh, the markets good now, and, you know, dip my toe back in, and they’re buying high. So you know, what you’re talking about a sequence risk where is where it’s basically, you know, when the timing of your retirement, and the distribution of your retirement accounts, matters a lot. Probably more so than most of the other investment or the retirement risks that are there. So to kind of zoom out of this first, Tim, this question is, you know, what are some so the question is, what are some strategies for dealing with market downturns during retirement. So what we’re assuming here is that you are no longer in that accumulation phase, you are in the deaccumulation, that withdrawal phase. But I think like the, the, my thoughts is, are consistent no matter where you’re at. You know, to me, the big things that I look at from a retirement portfolio is I want to make sure that you’re in the right allocation, and that you’re driving the expenses down as much as possible related to your portfolio. Now, what I’m taking, typically talking about here is like expense ratio. So the right allocation is probably the optimal, you know, the optimal term in and I think, if you look at the rule of thumb, that I don’t love is the rule of thumb in terms of like, how you should have your portfolio allocated is, you take 110, you subtract your age, and that’s the amount of stocks or equities you should be in your portfolio. So if I’m 40, you take 110, minus 40. And I should be in a 70%, stock portfolio and a and a 30%, bond portfolio, which I think and it’s very much a linear thing. So as you as you age, go, 60/40, 50/50, etc, etc. I think that that’s wrong. I don’t think that that’s a great rule of thumb. I think that, to me, I look at this almost as like a, my, my strategy or my thought process is more like a cliff. So my thought is like, you know, if I’m 40 years old, and I have 30% of my allocation in bonds, I think that’s a mistake. And if we, if we zoom out, you know, if you look at stocks, and again, not all stocks are created equal, but in broad strokes, stocks are typically there’s a higher potential for growth, with a lot more volatility. Bonds or fixed income, there’s less potential for growth, but less volatility. So there’s more of an exponential growth with stocks and more of a linear growth of bonds. So, to me, what you give up during the accumulation phase, if you’re in your 40s, is you give up a lot of the market, the market is still gonna go up, but I equate it to like, if you’re in mostly equities, it’s gonna be kind of Rocky Mountain in terms of ups and downs. If you put bonds and there’s more Appalachian Mountains, there’s a little bit more, you know, you know, there’s less ups less downs, but they’re still they’re still that. So to me, I think that, uh, mostly equity, you know, again, this is not investment advice, but I think like maybe mainly in equities in your accumulation phase. And then when you get to five to ten years before and after your retirement age, that’s when you’re going to, that’s when you’re really going to manage the sequence of return risks that you mentioned. So think of that as like the eye of the storm. So let’s assume that my retirement age is 65. And I’m being as conservative from a timeline perspective, at 55. That’s when I really am going to kind of that’s what that’s the cliff where I’m going to say, Okay, I’m now no longer going to be mostly in equities. That’s where I’m going to be the most conservative and go to bonds. So instead of this glide path, where I’m going from 100% equities to 80, 90, basically, I’m not doing that over a period of years, I’m doing that right when I hit 55, and that’s where I’m going into more of a balanced portfolio, which could be a 60/40, or 50/50. And then over those years in that either storm, so 55, to 75. And the most conservative sense, that’s when you’re gonna be the most conservative in terms of your balanced portfolio. And then when you come out of the eye of the storm, that’s when you start ramping up the equities, again, whether that’s 60/40, 70/30, 80/20, which is very different than kind of the, you know, most people, it’s like, oh, you’re in your 80s, you should be in a 20/80 portfolio or whatever. And a lot of people, it’s, it’s not sustainable. So the the eye of the storm is to kind of get through the sequence of return risk. So, you know, and again, the most successful retirees are the ones that are most flexible. So if you go through like the subprime mortgage crisis, or the.com crisis, and your portfolio goes from a million to 700,000, and then you’re drawing $50,000, you know, for the next couple years, the portfolio and a lot of cases are going to fail. If you were to delay your retirement and wait for the market to recover two years later, it’s completely different scenario. So that to me, is what we’re talking about here. So you know, the strategies for dealing that is, I think the best thing is the being the right allocation is to not do what you’re feeling. So I always talk about do the opposite of how you’re feeling. So if you get scared, a lot of people should go cash and a lot of ways you should be doubling down and investing. Another thing that we’ve talked about in the in the in this forum, Tim, is something like an annuity, which is hard to really wrap people’s minds around, but like if I can peel off $300,000 from my portfolio, to supplement Social Security to say, Okay, come hell or high water, I’m gonna have the steady check between social security in my annuity, regardless of what’s going on. For that, for a lot of people, that’s a peace of mind. So like the the market volatility is not as as big a concern, because I’m like, I don’t I have all my basic necessities, necessities handled. Right. So the mental thing of like an annuity might be might be a big thing. Being flexible, as I mentioned in, it could be a bucketing approach where you’re like, hey, my, my near term bucket, my zero to five year bucket is spoken for me and I have that in cash or tips, I’m good. So I don’t care what the market does, you know, as long as it’s recovered in the next five years for me to kind of replenish that bucket. And this is where we’re basically have a short term and medium term, and then a long term bucket. So short term, zero to five, medium term, six to 15, long term 15 plus, and then those buckets kind of replenish themselves as time goes. If there’s, if we’re in a time where the market crashes, but I still have $100-$200,000 in my cash bucket, I don’t really care, I’m hoping the market will return in that period of time to replenish that cash bucket. And typically, it should. A lot of the most, you know, the Great Depression in the Great Recession, you know, those recover those market recoveries aren’t decades. They are typically, you know, two to six years, two to seven years, that type of thing. So that could be that can be something as well. So, you know, the market, the market does what the market does. And I think those are that are best positioned like they they understand that. It’s not, you know, we’re not trying to like game the market, outside of very few people in the history of the market can can beat the market and kind of, you know, foreshadow what’s going to come. So it’s, it’s being in the right asset allocation. It’s keeping your expenses low. And being consistent with that structure. I think we’ll get people through any of the see any of the seasons that you’ll see over the course of an investing career.

Tim Ulbrich  28:42

Tim, let me mention a few resources for people that want to dig deeper, and this will link to these in the show notes. It’s been a while but we did a whole series on retirement planning, digging into the question of how much is enough, some of the alphabet soup of different accounts, building a retirement paycheck, things that you’ve been talking about that was episodes 272 through 275. Again, we’ll link to that in the show notes. And then 305, episode 305. We did a primer on annuities, a lot of myths, conceptions around annuities, we try to break those down, understanding what they are: fees, costs. That was a great episode. Again, we’ll link to it in the show notes. And then several of the risks that you’ve talked about, we put together a guide that’s all around understanding retirement risks. So it’s Retirement Roadblocks: Identifying and Managing 10 Common Risks. It’s a free guide that we have available. One of the most popular resources we have, again, that will be linked to in the show notes as well. Tim, one thing that struck me is you were talking you mentioned flexibility, right is a key. And this is a piece I think that pharmacists have a benefit of, right. Many pharmacists work in a position, whether that be hospital, whether that be community practice where they have an opportunity to do something like PRN shifts or work part time and make a good income. And so, you know, maybe the game game plan was a full retirement at 55, but because of some of the things that you talked about, maybe they either choose to work longer, full time or hey, if they want to pick up 15-20 hours, making $60-$65 bucks an hour, a lot of pharmacists have the opportunity to do that. And so I think that flexibility piece can be really important, specifically to our audiences as they’re thinking about retirement.

Tim Baker  30:12

Yeah. And what I This, to me, this stat still like is unbelievable to me. So this was these two stats were put out by a paper called The Power of Working Longer published in January 2018, by Stanford’s Institute for Economic Policy Research. And basically, it makes the case for working longer. That’s the best, you know, medicine for if you have a shortfall shortfall in income for retirement. But we talked about sequence risk Tim, so we know the market. So like, let’s say, you know, you know, 65, in, you know, 20 years from now, not quite there yet. But say the market is not going great. Deferring retirement by three to six months is like saving 1% more of salary for 30 years. Deferred retirement by one month is like saving 1% more of salary for the final 10 years. So, to me, there’s I know there’s a lot of pharmacists that are listening to this that I speak to, they’re like, I need to retire as quickly as possible. And I get it, I get it, I understand. But but to me, like the people that are most flexible from a lifestyle, from a timing, are going to be the most successful in terms of their retirement. So if you have a lever that you can pull that you can consult or you can do, you know, you can do a shift or medical, right, whatever that is, you know, whatever that that is like that’s going to benefit you and over and help the overall retirement picture. So those would be two stats, I would leave you with us on this question.

Tim Ulbrich  31:44

That’s great. And it’s a balance, right? We talked about this all the time, it’s a balance between, hey, you make enough of these concessions. And you could always argue, hey, I should keep working longer, right? So we’ve got to get back to like, what’s the why, what’s the purpose, but also be in tune with those numbers, which aren’t wild when you talk about one month of employment, and the impact that it has in terms of dollars that could have been saved. Our next question: how to different investment options such as stocks, bonds, real estate impact retirement savings? And I think, Tim, this is a really interesting question, because one of the things we lose sight of when we talk about nest egg calculations, retirement planning, we talked about these big numbers, 3 million, 4 million, 5 million, is that not all dollars are created equal? Right? Both in how are they invested, and the types of investments in which they’re in and then eventually, how they’re utilized to build the retirement paycheck. So what are your thoughts here in terms of how do different investment options impact retirement savings?

Tim Baker  32:37

Yeah, so this question is really about like asset classes. So when we talk about a traditional portfolio, you know, there’s a, we talked about a high level, you know, a 90/10 portfolio and it would be 90% in stocks or equities and 10% in bonds or fixed income. That 90% you can, you can draw even a finer line, you can have large cap, mid cap, small cap, you could have international funds, you could have emerging market, you could have commodities, you could have, you know, you could have sector funds that are just in biopharmaceuticals or whatever. You could have digital assets. So, the big news this year was that they released spot Bitcoin ETFs. Last week, Tim, they released nine, eight or nine spot theoreum ETFs, which have come on the market and started trading last Tuesday. So that can be part of your your asset allocation now, because they’re, they’re in ETFs. The bonds at 10%, you could buy a total market bond, or you could buy different types. You could buy munis, you could buy treasuries, you can buy a total market and international bond, like there’s lots of ways to kind of, you know, slice it. But you can also talk to, you know, real estate, you know, one of the things is like, you know, is it real? Is it real estate, you can hold real estate in a mutual fund or an ETF, or you can hold it directly. So, to me, this kind of goes back to the one of the earlier questions is, you know, the more stocks, there’s the potential for more growth, but more volatility and risk, the more bonds less potential for growth, but less volatility and risk. So I think, at a baseline, being in the right, asset allocation from a traditional portfolio is really important. And this is what I’m talking about is, you know, should you be in an all equity or, you know, a 9010, and then hit that cliff and then go to a 60/40 or 50/50. That’s what I’m going to talk about from a traditional, but the things that we have to overlay, Tim, and I was talking about this with you a couple of weeks ago, I was kind of lamenting the fact that we talked about like tax allocation with retirement with your, your investment assets. So we kind of talked about we went a little bit in column A, Column B, Column C. Column A would be pre you know, like traditional. So pre tax, so these are, you know, traditional 401 K traditional IRA, etc. Then you want a little bit in Roth, which is kind of tax free since you’ve already paid  the taxes. So this is like And when you pour out a Roth, if you have a million dollars, all that million is yours because you’ve already paid the tax man. And then the last one is a taxable account. So I was looking at my taxable account as a percentage of my portfolio, I’m like, oh, that’s exactly where I want. Now, I don’t have any designs on retirement before 59 and a half. So I don’t really need, that’s typically what you use a taxable account for the purpose of retirement. But I know like when I sell my real estate, that’s probably going to go into a taxable account. So like, like, right now, I know the plan is, it’s kind of unequal scales, though, they’ll be equaled out in the future, or when I sell my share of our business like that will probably go into partly a savings account, but partly a long term investment, you know, in the form of a taxable account. So to me, that plays a part of this as well. So I think the the idea is to be in the right asset allocation, as opposed to what I talked about, typically, the one that you’re it’s going to be more stock heavy is going to have more volatility. So the closer you are to retirement, or in retirement, the less you’re going to want to have, although it’s still needed for the kind of that longevity risk of like not live outliving your savings. Real estate, it’s going to be typically how you know how your whole net, whether you are a landlord, or if it’s in a fund. But the things that we haven’t really talked about this, as part of this is things like digital assets, things like commodities, cash – right now, Tim, you could, you know, with our cash accounts at YFP, it’s paying like 5.1%. So I’m looking at that, and like, if I’m a retiree, if I can park, my short term bucket there, I’m pretty happy with that return. Now, I know inflation has been ticking up higher. So maybe need a little bit more to offset that. But these are all the things that kind of construct the retirement, you know, savings and retirement assets. And I think, you know, doing it with a traditional portfolio, but then overlay in some of the other things that you have going on, you know, if you have a pension, that’s going to affect how you retire, you know, your allocation is, because if you have a if you have a pension plus social security, you might not have to be super conservative, because you might say like, Hey, my, most of my things are handled, or if I buy an annuity, I can be more aggressive, because I’m not going to have to withdrawal that as aggressively as if I didn’t have that annuity or that pension. So there’s lots of different things. But I think the rule of thumb is kind of looked at your stock to bond, you know, ratio, and understand that with stocks, again, more growth, more volatility. With bonds, less growth, less volatility.

Tim Ulbrich  37:30

And I think you just gave a great example there, why blanket asset allocation recommendations don’t work, right? Because, you know, if someone’s listening, and they have a pension, and they have social security, or maybe they have an annuity, like the floor that they’ve created, is completely different from someone else that maybe doesn’t have a pension or annuity, And therefore, they’re going to rely more on withdrawing from their investments. So how much risk they take with the remaining amount of whatever’s investable, and whatever buckets they have, could be very different based on you know, what those are? And I think this question gets at a couple different aspects of asset allocation, which you talked about nicely, but also a conversation. We don’t have enough, which is that d cumulation. Building that paycheck from what buckets are we taking from and how do we do that? And what order tax strategies all those things? And I think for people are listening that maybe have done the hard work, are nearing retirement, have two, three $4 million saved whatever the number is. That’s great. Now, hey, are we thinking about the decumulation side of this?

Tim Baker  38:30

Yeah, and that was one of the reasons, Tim, after going through the CFP coursework, you know, I decided to do the Ri CP, which is Retirement Income Certified Professional, because it really tackles that question that the CFP I don’t think does the best job. CFP is all about, okay, accumulation of accumulated assets and what that looks like. But once you get to that, that’s not the destination, then the next chapter, how do you take these buckets of money and build a sustainable, sustainable paycheck over time? Unknown, right. And actually, one of the open questions in in that is like, if you do build a floor for a client, and they’re, you know, they’re a 75 year old, but their allocation is something like 90/10 or 80/20. A lot of regulators will look at that and be like, that doesn’t look right. But you know, the justification, that’s why you can’t have a blanket, you know, yeah, one rule for everyone. The justification is like, we really don’t have to draw that much from that portfolio. Because, right, the floor is the floor, right? So I remember that being kind of like, oh, that’s odd. Because, you know, again, most, most planners, they kind of they go, they get social security in place. And then they say, Okay, what’s the total return? What’s the best optimal way to get the portfolio through the all the retirement years, but it’s much more nuanced than that. And I think, you know, it’s important to understand that.

Tim Ulbrich  39:54

And that’s why for the pharmacists that are listening, that are working for an employer, like the VA or whoever that still has a pension plan, be grateful for that. They’re not they’re not common, but it’s gonna play a huge role when it comes to building that floor  and creating that retirement paycheck. We’ve got lots more retirement questions. I’m gonna hit pause there. We’ll tackle more of those in future episodes, we’ve done a lot of information in a short period of time again, we got more resources. If you’re listening to this, and I want to learn more, make sure to check out the YFP podcast again, we’ll link to some of these older episodes in the show notes. You can go back and learn more, we’ve got more information on the YFP blog as well. We have more webinars that will be forthcoming related to retirement retirement planning that Tim and the rest of the team will be leading. So be on the lookout for those as well. For those that are listening and said, Hey, I really could use some one on one help with a qualified, certified financial planner, we’d love to have the opportunity to talk with you to learn more about your situation to see whether or not what we offer is a good fit in the form of fee only financial planning and or tax planning. If you’re interested in a discovery call with Tim Baker to learn more about the services, you can go to yourfinancialpharmacist.com you’ll see a link there to book a discovery call. Thanks so much for listening, Tim. Great stuff. We’ll catch you again next week.

Tim Baker  41:03

Sounds good.

Tim Ulbrich  41:06

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

Tim Ulbrich  41:51

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

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YFP 369: 10 Common Tax Blunders To Avoid (From 2023 Filings)


Sean Richards, CPA and Director of YFP Tax, talks about the 10 common tax blunders he saw and how to remedy those mistakes to optimize taxes in the year ahead.

Episode Summary

July might not seem like the time of year to think about your taxes, but for Sean Richards, CPA and Director of YFP Tax, it’s a great time to make projections for the year ahead and remedy any blunders from last year’s return. 

Reviewing 10 common mistakes he saw made with taxes in 2023, Sean breaks down ways to optimize your tax plan from utilizing HSAs, to adjusting withholdings, to making sure any side-income is planned for appropriately. Sean’s biggest piece of advice: planning ahead can help avoid these mistakes and can optimize your tax situation.

About Today’s Guest

Sean Richards, CPA, received his undergraduate degree in Corporate Finance and Accounting, as well as his Master of Accountancy, from Bentley University in Waltham, MA. Sean has been a Certified Public Accountant (CPA) since 2015 and is currently pursuing his Enrolled Agent certification. Prior to joining the YFP team, Sean was the Senior Treasury Manager at PRA Group, a global debt buyer based in Norfolk, VA. He began his career at American Tower Corporation where, over 10 years, he held several positions in audit, treasury and accounting.

As the Director of YFP Tax, Sean focuses on broadening the company’s existing tax planning and preparation operations, as well as developing and launching new accounting offerings, including bookkeeping, payroll, and fractional CFO services.

Key Points from the Episode

  • Tax blunders and optimizing tax situations with a CPA and tax director. [0:00]
  • Common tax mistakes and how to avoid them. [3:13]
  • Tax planning strategies and common blunders to avoid. [9:33]
  • Optimizing retirement contributions and HSA benefits. [12:59]
  • Tax deductions and filing status, with a focus on maximizing savings. [17:31]
  • Tax planning strategies for side income sources. [22:05]
  • Tax blunders to avoid, including not making estimated tax payments. [26:14]
  • Tax planning for small business owners, including extension deadlines and investment activity. [32:18]
  • Tax planning and law changes, including energy credits and potential future rate increases. [35:44]
  • Tax planning for pharmacists and households across the country. [41:34]

Episode Highlights

“Doing a projection mid year and identifying that you’re going to have a surprise bill or refund at the end of the year, or at least beginning to see that it’s trending in that direction allows you to begin fixing all those problems before they even become problems.” -Sean Richards [7:38]

“For small business owners or for a side hustle, when we’re doing projections about where you expect the business to land in profit and loss this year, and you have a pretty good idea, or at least you hope you do. But that can always change for anybody, not none of us can see the future. But the point here is, at least giving it some thought and trying to come up with a number and planning accordingly.” – Sean Richards [24:16]

“It all comes down to planning. To the extent you’re able to identify any kind of gaps in where you expect to owe money at the end of the year and can close them now whether that’s making estimated payments directly to the IRS or adjusting your withholdings, it’s much better to fix it now and get ahead of it.” – Sean Richards [31:57]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. On today’s episode, I welcome CPA and YFP Director of Tax, Sean Richards, onto the show to discuss the 10 most common tax blunders that he saw pharmacists making during the recent tax season so that you can avoid these mistakes and optimize your tax situation. To learn more about our tax and accounting services you can visit yfptax.com. Alright, let’s jump into my interview with YFP Director of Tax Sean Richards.

Tim Ulbrich  00:41

Sean, welcome back to the show.

Sean Richards  00:43

Thanks for having me. It’s always a pleasure to be here.

Tim Ulbrich  00:46

So have you had a chance to recharge, recover? It’s now July. Tax season is behind us. But I know that work can linger on, that’s the nature of the business. How are you feeling at this point in the year?

Sean Richards  00:58

Yeah, I’m feeling good. Projection season. I mean, by the time this comes out, we’ll probably be in full swing there. But our projection season is going to be kicking off soon for most folks. But again, you know, we have some folks that are more complicated that we’re still kind of wrapping up 2023. Now, all by design, that’s where we’re taking the time in the summer where other accountants might be sleeping, I am catching up on some sleep, but also using the time to wrap up some of the more complicated returns, make sure we’re optimizing things for those folks. Maybe those projections are a little bit later in the year. So yeah, I’m feeling pretty good. I mean, there’s a little bit 23 stuff still in the works, but mostly close the book there. Looking a lot towards 24 and even 25 and beyond. So feeling refreshed.

Tim Ulbrich  01:38

Well, I’m convinced you’re gonna look back at this season of life as a blur at some point. I mean, you got young kids, tax season and owning business in that season. That’s a lot going on at once. So kudos to you and the work that you and the others have been doing on the team. So give us a rundown. You mentioned there’s some work still to be done individual business extensions. That would include Tim and myself as well. So we’re a couple of the stragglers, but how many returns have you in the team done this year on the federal and state side?

Sean Richards  01:50

On the federal side, we’ve probably locked down about 160 returns or households at least. So you got to factor in that you’re gonna have, you know, if you’re filing separate there, that’s that’s double on those returns. And then for each one of those, I mean, I’d say for each one, you probably average at least a state, because some folks have more states, some folks are in states like New Hampshire that don’t have state income taxes. So probably at least double that on the state side. And then you know, some some couple dozen or not, maybe not a couple of those in but a few business returns on top of that, and yeah, it definitely adds up quite a bit. So there’s only a couple hanging out there right now. If you’re listening, by the time you’re listening, you’re probably actually going to be filed unless you’re Tim Baker and haven’t submitted any of your documentation yet, but everybody else should be all set by the time you’re hearing this. So yeah, we did quite a bit this year. Maybe not as many number wise as before, but definitely, you know, more complex returns where we’re able to get in there and really do that maximization during the year. It’s awesome. 

Tim Ulbrich  03:13

does Ohio still win the award for the most difficult state to deal with? Or do we have a new winner this year? 

Sean Richards  03:20

No, Ohio still number one, as far as most difficult, just given the different municipalities and how you know, some of them are part of the RITA system some of them are completely not not the worst as far as the worst state tax liability that probably be somewhere out west California, Oregon’s up there but yeah, Ohio, I think still is the most annoying. 

Tim Ulbrich  03:41

Our tax liability here in Ohio very friendly, especially for small business owners. Grateful for that. But the bureaucracy of the RITA system, known as the regional income tax authority, shout out to them for listening wish I can assure you they’re not listening. But makes it very difficult because not everyone is in a RITA and just the complexities of dealing with that. So certainly feel for you and others during the season when you’re dealing with the nuances of a system like that. So anyways, not what we’re here to talk about. Let’s jump into the most common mistakes that you saw pharmacists making, the blunders during the tax season. Really an opportunity for us to learn and opportunities, were in the middle of the year. And we’ll talk about the importance of doing projections and looking ahead, but as we hear some of these common mistakes or blunders, it’s a great reminder of what tax planning can we be doing throughout the year. So we’ve compiled 10 I’m sure there’s many more and there’s some layers within each one of these but let’s jump into our list number one, on the list. Perhaps the most common probably will always be the most common is getting a surprise bill or refund at filing. What’s the usual cause here, Sean of some of these unwelcome surprises.

Sean Richards  04:56

And the reason we always have this number one we probably always will unless there’s some sort of broad tax reform in this country is that there’s so many different things that can cause that to happen, that I couldn’t even begin to answer. I mean, I can give some examples, you know, you could under withhold, you could have a side gig and not have, not plan accordingly. But, I mean, we have 10 things on this list, or I guess nine, not including that first one. And they all can kind of result in that number one issue of getting that big refund back, which, you know, that one might surprise some folks, because you might hear that and think, Well, what’s wrong with getting a huge refund back. But if you’re getting $5,000, back in April, that’s $5,000, that you could have been utilizing more efficiently, evenly throughout the course of the year. So you know, that side or the worst side, even, you know, the other opposite is owing that at the end of the year, and nobody wants to have that. So there’s just so many different things. We’re gonna hit on a bunch of them while we talk through this. But I mean, to even start talking about what the causes of that could be. I could be here all day. 

Tim Ulbrich  06:00

Endless possibilities, we’ll get to those throughout the list of 10 of where the most common ones are coming from. As you mentioned, it’s the surprise bill that causes the most pain, right? Even though this year, the number of people that reached out to us post tax deadline, say, hey, I’m interested in learning about what you offer for tax services. If they came after the tax filing deadline, I can assure you that most of them were because, hey, I just got through that that was a mess. I owed money. I don’t want to ever do that again. Right. So the good news is, there are remedies to that problem. There are solutions we can put in place, there are planning that can be done. And changes are going to happen. You know, as we think about the things that can result in those surprise bills that might be causing that to be the case. And so we can with diligent planning, be able to make sure hopefully, that doesn’t happen again in the future. So to that point number two on our list, which is the remedy to the surprise biller refund. Number two is not performing a tax projection. And Sean, talk to us about why this is important, when the projection should happen, what we’re looking at in doing that projection, and to be frank, most people aren’t doing this. 

Sean Richards  07:10

Most people aren’t. I mean, pretty much anybody I talked to who’s not a client working with us, has never really even heard of doing this or they’ve done something like it, but it’s not as formal of a process. And it may not be fair to start with number one being the overarching problem for all tax returns. And then number two sort of being the solution. And if you didn’t do that, that’s our, our issue. But frankly, I mean, not doing this piece really is the biggest second issue because doing a projection mid year and identifying that you’re going to have a surprise bill or refund at the end of the year, or at least beginning to start to see that it’s trending in that direction allows you to begin fixing all those problems before they even become problems really. And so a tax projection is basically just doing a little bit of an estimate of what your your where you expect your tax return to be at filing time. And as silly as that sounds or as simple as it sounds, it’s not something that a lot of people do. And a lot of it’s because you know, tax returns, there’s a lot of complicated or not complicated, but there’s just a lot of different inputs that come into it, you have your credits and your deductions, and you have various sources of income and having all those pieces kind of in your brain and trying to think about how they’re all being covered off. And then getting to the end of the year. And throwing it all on paper is is just chaotic. So doing something around this time of year, or at least mid year for your kind of tax cycle. So if you’re filing every year around tax day, or in the springtime, mid year, July, August, great time to be doing it. If you’re maybe extending and you’re more complicated, and you’re filing a little bit later in the year, you know, you can kind of flex accordingly. But basically, you want to give yourself enough time where you’ve seen enough of the year that you know kind of what’s been going on, what you expect to have happen throughout the rest of the year and maybe even early next year. But you also have enough time to make adjustments based on that. So you don’t want to do it too early. You also don’t want to do it too late. And ideally, you want to have your prior year return kind of solidified and everything to use as a basis. So yeah, I mean, again, it’s it sounds like a simple kind of concept. But it’s something that a lot of people don’t do, and just that one little activity will open up so many areas for you to improve your tax situation every year. It’s outstanding. 

Tim Ulbrich  09:33

These are the situation that again, there are endless possibilities. Right. You know, I’m thinking of the common ones that I’ve heard you talk about, hey, we bought a rental property. We switched jobs, you know, significant change in income. Got married. We had a child. Started a business, a side hustle. I mean, there’s there’s so many things that can adjust and change what our tax liability is going to be. I mean, I just lived this firsthand with you, Sean. As we think about our situation, we pay quarterly estimated taxes when it comes to the business income. When went to go make our first quarter payment, you know, we did kind of rough rough calculations number. We’ve got a well oiled machine process system that you’ve helped us develop internally. Made that payment. And then we said, hey, when we get to the quarter to like, based on what happened last year, my individual situation, I’ve got four kids single, single income in the household, let’s do a projection. And then from there, figure out what is the amount that we should be looking at based on Q2. And the reason why that was really important in my own plan is, as we had suspected, I probably didn’t need to make a Q2 payment or a very big one, because of what we made in Q1 and what the liability was projecting to be for the rest of the year. So to your point, we’ve got to have that return, complete or near complete. We’ve got to have some idea of what may or may not be coming here in the second half of the year. And then you’ve got some cool software that you can run some analyses. And we can put a visual to this, which I think really helps people understand how the tax liabilities work and how we want to think about making these payments.

Sean Richards  11:02

Yeah, I agree seeing it visually and kind of understanding Ah, okay, that’s where that comes into the equation. And this is where this is going to kind of fall into it. And I mean, even something like that. My first question back to you is, you know, what do you expect? I mean, I guess the answer is coming from me as your accountant. But what do you expect your business to have in profit or loss at the end of the year? And a lot of people don’t even really think about the fact that they have to answer that question first before we can even get to that. So it really starts getting you thinking about all the different inputs that ultimately work their way into that one little line on your return.

Tim Ulbrich  11:05

And this is where you can see like, hey, if we pull the lever, and we max out the HSA, or we put money into more into the traditional 401k, whatever might be the outcome, like what does it actually change when we get to the bottom and we look at the tax liability. So really powerful if we can get that projection process in place. So that was number two on our list of 10 common tax blunders to avoid. Number three on list is undervaluing the power of the HSA. We’ve talked at length on this show about health savings accounts. We’ll link to in the show notes our previous episodes on HSAs. Talk to us, Sean, it surprises me a little bit to be honest, that we’re still seeing the HSA be underutilized.

Sean Richards  12:16

Yeah, I think it’s one of those things and I think you, you certainly don’t see it once you’re kind of working with us. And you’ve been able to kind of see the power, hear us talk about it, or visually show, hey, this is what could have been or anything like that. But I think it really kind of comes down to sort of just the education in the country broadly about some of these things like 401K, HSA kind of everything. You know, you get thrown into your first job out of college, and you have to sign 1000 pieces of paper in your onboarding stuff from HR and put you know what percentage of this you want and traditional Roth and all these numbers kind of get thrown out there, and you lose the benefits or you think, hey, maybe I’ll I’ll throw some percentage here and some percentage here and some percentage here. And that’s, you know, obviously a pretty good strategy as far as spreading things out and stuff, but HSAs have a triple tax benefit. Most if any other retirement vehicles have that. So by not maximizing that HSA, if you have that available to you, you’re really losing out, even if you are kind of spreading the love to other places first, I mean, you want to really be able to get that triple benefit there before you start going elsewhere. So when I say triple tax benefit, when you make your contributions this year, or if they’re coming out of your paycheck, that’s a tax deduction, or it’s coming out of your taxable income, reducing your taxable income, the growth of the investment tax free. And then when you take it out, assuming it’s for qualified expenses, also tax free. So usually you’re getting one maybe two of those, like you tax free now, but then you pay the tax in the future, or vice versa. This is the only one that has that that triple, so it’s awesome. The one thing I will say there is that on the flip side, I’ll see plenty of times where you know, you get excited and sign up for the first time and might miss you know, you’re working a couple jobs or something and over contribute. So it as long as it’s something that you catch, not a problem, we can fix that even if we get past the end of the year, you know, you can have those things returned. But something to try to get ahead of, as I say with great power comes great responsibility. So a lot of power with the HSA. But rules just like everything else to keep track of and limits and everything. So you just want to make sure that you’re staying on top of those two.

Tim Ulbrich  14:28

Yeah, tracking expenses, are they qualified, making sure you’re using it appropriately? All important things. You know, I like to refer to the HSA as a legal tax avoidance vehicle. Right. So that’s a good one. To your point, we don’t see that in other accounts. And so, you know, I think there’s always the debate of, Hey, am I actually going to potentially need these funds for qualified health care expenses, and if so great, we can get the tax benefits. If not, and or I’m not projecting that I’m gonna need it, then there’s some options to use this as, you know what we call kind of a stealth IRA potentially, another option when it comes to long term savings and investing. Alright, so that’s number three. undervaluing the power of the HSA on our list of 10 Common tax blunders to avoid. Number four is not optimizing retirement contributions. Tell us more here. 

Sean Richards  15:21

So, that kind of follows the HSA thing, as you were sort of alluding to there. And HSA is kind of like a retirement vehicle. It’s sort of intended as being used for health expenses, but it can also kind of be used as a retirement vehicle. So that is, can fall under this umbrella. But what I’m talking about here is, you know, you hear IRAs, 401Ks. Another great example of where you start your first job, they start throwing all these things out at you, you know that there’s tax benefits, you know that you should be putting money into these things, but how to actually optimize that. And not only that, but how to actually optimize it for whatever your broader financial strategy is. Because I’ll have folks come to me and say, Hey, should I max out my 401K? Well, first off, do you mean traditional 401k? Or do you mean Roth 401k? Traditional, you’ll have the tax savings now, Roth you get in the future. And you know, that begins to go back to well, though, the question that I’ll get is, Well, which one should I do? And the answer is, you know, what is your broader financial plan? Where do you think you’re going to be? I mean, I’ll tell you now, as the tax guy, traditional 401k is going to give you the tax savings now, you look good, I guess, when we do our returns, but is that really what’s going to be the best for you and your financial situation, given where you expect to be in the future. So knowing that breakdown, I mean, even just I talk about IRAs and 401K’s people use those interchangeably. They’re very, very different. They’re very, very similar. They have, you know, similar components, where you have traditional and Roth to choose from, you can have pre tax components and non pre tax components. But they’re very different in the sense that there’s different limits that apply to them. There’s different phase outs, whether you’re in, you know, make more income and everything. So just understanding even Hey, what, what options do you have? Let’s start with that. And then from there, what are your financial goals? And how can we make the options available to you best suit those financial goals? So there’s just a lot being left on the table there. And I think it all comes back to you know, not planning ahead of time. 

Tim Ulbrich  17:26

And Sean, your your example of you know, when somebody comes to you and says, Hey, should I do Roth? Should I do traditional? And you say, it depends without saying it depends, like Tim Baker says it depends. But that’s really what you’re getting to is it does depends, because we can’t make that decision in a silo. And this is why we believe so much in the value of having a CFP and a CPA on your team that can communicate and talk with one another and really look at these decisions, you know, as you’re making a decision on what investment contribution or if you’re approaching retirement, and you’re thinking about the withdrawal phase that has tax implications, has planning implications, you put those two together, and we can start to look at the whole picture and make that decision that’s optimal. Number five, I’m curious about this one, Sean. So you’re referring to number five as quote, wasting itemized deductions? I’m curious, because it feels like with the rise in the amount of the standard deduction, that itemized deductions maybe aren’t as prevalent or common. So what are you referring to here?

Sean Richards  18:27

Well, that actually is what you just said, is actually one of the things that I’m kind of getting at there. And that’s kind of not factoring in the fact that the standard deduction is getting higher every year, and it kind of continues to go that way. And so, you know, traditionally, we’ve all kind of had this idea of once you buy a house, you’re gonna itemize deductions, and you have all these sort of miscellaneous deductions that come into play. But a few years ago with the the tax law changes, and the Tax Cut and Jobs Act, a lot of that stuff went away, and a lot of the deductions were either limited or or outright removed in favor of that standard reduction going up. And when I say wasting, you know, there’s a couple of different things here, but particularly, what you just said is, if you have a lot of itemized deductions, but they don’t hit that standard deduction amount, and you end up still taking the standard deduction, which is what we would typically do, you know, barring any other kinds of reasons why we couldn’t, a lot of folks feel like they’ve lost their itemized deductions. They’re like, wait a minute, wait a minute. So you’re telling me I, I put $1,000 towards charity last year, I paid this much toward my mortgage, and I paid this much in taxes, and I’m not, I don’t get credit for that?

Tim Ulbrich  19:35

That’s what the standard deduction is! 

Sean Richards  19:36

Yeah. And it’s hard to say, you know, you don’t get credit for it. But the standard deduction is more, so we’re going to take that and, you know, that’s, that’s what’s gonna give you the best savings. Now, there are ways to maximize that if you do kind of look at it ahead of time. You might have the ability to do something that we call bunching where you say, hey, let’s try to pull itemized deductions into one year and itemize then and then have less than another year and take advantage of that higher standard deduction. Or you know, you have PSLF is a huge thing, right, of course, with pharmacists. And typically when we have folks that are doing PSLF, we want to look at filing status and potentially filing separately. And when you file separately, you that brings in new itemized deduction, when you itemize, your spouse can’t take the standard deduction, vice versa. So you have situations there where you have one spouse that’s paying a bunch towards mortgage interest. But at the end of the day, you both take the standard deduction, there’s just a lot of things that can kind of come into play there. And that’s one of the ones that you really don’t have a lot of flexibility with after the fact. I mean, that’s the case with a lot of tax stuff. But this in particular is one of those things that you really want to think about it ahead of time, like where what filing status, are we going to be possibly filing as, what’s the standard deduction, what do we have for itemized deductions and try to maximize it as best you can? Because there’s nothing worse than telling somebody, yeah, that money that you donated, I mean, it’s great for you morally, but it’s not gonna help your taxes this year.

Tim Ulbrich  21:04

So Sean, let’s talk about bunching a little bit more, I think this is something we’re seeing more common among our clients and questions, and maybe just an awareness and an education about who this might be a good fit for. So if I’m following this correctly, if we if we look to 2024, the standard deduction for married filing jointly is going up to $29,200. So if someone’s listening, and they were to itemize, which again, it wouldn’t make sense if it’s below the $29,200. But if they weren’t itemizing, it’s $25k, $26k, $20k. Somewhere in that range, or ish, like, that’s where you start to look at and say, Oh, are there opportunities that, hey, maybe some of the giving we have planned for next year, or other things that we could push into this year? Maybe we itemize one year? And then the next year we go standard? Am I following that? right? 

Sean Richards  21:50

Exactly. And it’s one of those things, this is an example where the visual, I think, makes the most sense, because we can put a couple examples next to each other and say, like, Hey, this is what it’ll look like if we take the standard deduction every year. But this is what it looks like if we sort of shift these things around. And for some folks, you might not even have the ability to make those changes, right. Like if you’re, if the primary driver of your itemized deductions is your mortgage interest, and you’re not really doing any charitable contributions, there’s only so much you can really do about your mortgage, that I mean, maybe you can prepay interest or something, but that’s not going to change a lot. You have other folks who may have, you know, mortgage or lower mortgage interest, taxes get capped at 10k, too, as of right now, with the with the law changes I was talking about earlier. But you also so you might have some people who have a huge number of charitable contributions, and they can pull that lever and like you were kind of saying, hey, maybe we pull them into this year, or defer to next year. But the big thing I’ll say there is that a lot of people will then kind of come back to me and say, well, that doesn’t fit my giving strategy. I, I do a certain percentage every month, and it goes that way. And I don’t want to change that because that would change, you know, the way that the church is able to use my money or something like that. And that’s perfectly fine. I just want to have those discussions ahead of time, and be all on the same page and say, Hey, we’re making this decision for a reason, not looking back and saying, ah wish we had done this, you know, last year, maybe next year.

Tim Ulbrich  23:20

As we talked about all the time on the financial planning side of the business, right? financial decisions, or combination of the math, and how do we emotionally feel about those decisions, right? Same thing here, we might look at the giving strategy and say, You know what, we’re willing to give up a little bit of potential tax savings, because we want to give in this matter, so be it. Let’s just look at the options and what we have available. Number six is not saving for taxes when earning additional income. I’m laughing because I know this comes up all the time where you know, side hustlers, new business owners, people that are launching something, they’ve got some revenue, and then there’s a oh, crap moment, right?

Sean Richards  23:52

Yeah. And this one is tough because I mean, no one has a crystal ball. Right? So as I was just saying on one of the ones before, my question to you, when we’re doing projections is where you expect the business to land in profit and loss this year, and you have a pretty good idea, or at least you hope you do. But that can always change for anybody, not none of us can see the future. But the point here is, at least giving it some thought and trying to come up with a number and planning accordingly. And the biggest thing I would say here is not only just thinking about it, kind of in a one track mind, really thinking about the many different implications that side income can have. If you have self employment income, you’re going to have regular ordinary income tax on that just like you would if you’re working a W2 job, but you’re also going to have self employment tax on that, which is basically the government’s way of saying hey, we want the FICA that you’d be paying, we’re withholding as an employee and the FICA that you usually don’t see your employer pay for you in a W2 job. And that’s, you know, 17%. So all of a sudden you have that plus your ordinary income tax rate and you’re looking at 30 something percent at the end of the year. And now again, there’s different deductions that come into play, there’s a lot more that go into the broader calculation, but at least you know, getting ahead of that and saying, Okay, I’m expecting my business to earn 50k this year of of net profit. I’m going to have to pay income tax on that, self employment tax on that, state tax on that, at least saying, Alright, this is what I expect my liability to be at the worst. And putting aside a percentage of that or something. Again, and I probably sound like a broken record, it all comes back to planning and projecting and thinking ahead, because nobody wants to get to the end of the year and have their accountant say, Awesome work. First time, you know, doing the side gig, you made a bunch of money, now you owe a bunch of taxes. So again, just getting ahead of that putting the money aside, doing the math on it, thinking about those other taxes. If it’s rental income, you don’t have self employment tax, but you have passive loss limitations. So if you have a rental property, and you have a lot of losses there, you’re not necessarily going to be able to take those against your active income because of different limitations. So probably now starting to put people to sleep. But it all goes back to really trying to think about where those other side income sources are, and what is possibly going to hit your return at the end of the year.

Tim Ulbrich  26:13

Yeah, and, you know, to be fair, we also have to be realistic, right? So for new business owners, new side hustlers, you know, you can only do so much planning. Now, once you’ve got a couple years under your belt, you kind of get an idea where things are going, you know, just like we do in the business, you do some projections, even then we get it wrong, but we’re within the realm, right, because we’ve done it for seven or eight years, when someone’s launching a brand new business, your side hustle, you know, they may think they’re going to earn $50,000. And they end up earning two. Or they think they’re going to earn two and earn 50. Because they just don’t know, right at that point. So I think in those cases, you know, you don’t have a great bookkeeping system, that’s going to take time for that to build up, of course, but the point being set aside a percentage of the income to be conservative, call it potential tax. And then as you get further along, there’s going to be more detail to be done and what those projections are, but just don’t spend it all and have nothing there for tax.

Sean Richards  27:08

Right. Just put something there. And the other thing that that you mentioned that I almost forgot about is the fact that I’m kind of just broadly saying, Hey, Tim, what’s your profit gonna be in your business at the end of the year? For a lot of folks, you know, just figuring that out is difficult, you might be able to say, hey, I have a client that’s going to pay me $10,000 this year. And so I’m going to $10,000 of income. Well, yeah, that’s true. But we’re also going to have expenses. And the first question I get are, well, what expenses can I deduct? So asking those questions now, and talking about the different things that are deductible, what fits as a legitimate business expense, all those things is much better than at the end of the year, sending me a 1099 and saying, Hey, I made 10 grand. I don’t have any expenses. Let’s try to figure it out. Right. It’s just trying to get ahead of those things and thinking about it now. That’s where you can start making decisions and not being reactive.

Tim Ulbrich  28:03

Number seven, on our list of common tax blunders to avoid, many of these coming from the 2023 filing year that we just wrapped up is not making estimated tax payments. And, you know, the question here being, I think, who does need to be making estimated tax payments and what’s the blunder here? 

Sean Richards  28:22

Yeah, and I probably could have reworded that a little bit. But estimated tax payments, it kind of follows right after the the question above in the sense that most folks here are probably going to be folks that earn additional income. And when I say additional income, I mean income from sources non W2 where you don’t have those withholdings. So typically you think you get your paycheck every two weeks. And the employer, the payroll company is withholding your share of FICA, federal income tax, state income tax and remitting that to the government. Because think about your least financially savvy friend at the end of the year, if they didn’t have that happening, would they be able to pay their taxes? Probably almost certainly not. Because I see a lot of financially responsible folks who are very, very well educated and great with their cash and they still struggle the to put money aside the end of the year, let alone you know, people who are completely struggling. So the government recognizes this. They want your your cash on a regular basis. And for most folks, that’s going to be withholdings. However, if your withholdings aren’t covering off for whatever reason, whether you’re not withholding enough at your W2 jobs, or as I said is more of the common case you have side income, you should be making estimated payments to supplement it. So the rough rule there is if you are going to owe $1,000 at filing time, you should be paying estimated taxes. The first question I would probably get from someone is am I expected to owe that? And then of course the answer is well, let’s do a projection and find out. But basically, yeah, once you do a projection if you’re looking at this, and you can do it multiple ways where you’re starting with your business, but whatever, you gotta you have to keep in mind all the different pieces, right? Like I, a lot of people will say, Hey, I have this business, how much should I put aside for it and just like the example we just talked about, if I told you to put aside 30% to cover off on your income tax and self employment tax or whatever, that’s not necessarily going to work for you because you might have a ton of credits from children or you might have, you might have bought an EV this year and are getting a big credit. So you have to think about all the components and then look at and say, All right, am I going to owe or am I not going to owe. And when you get to that point, if it’s if it looks like you’re going to owe more than $1,000, either adjust withholdings or you should be paying in regularly. So estimated taxes is basically whatever that balance is that you expect to owe. They just want you to pay that in evenly quarterly throughout the year. It’s not perfectly quarterly because the IRS can’t be that easy about things. But it’s basically saying, Hey, we don’t have withholdings, so send us in that piece that you’re missing, that you should be withholding every few months to supplement. The one big thing I will say here is that a lot of folks will assume, hey, and especially with extensions, right? If you and I’ll say this till the day I die, if you file an extension, it gives you six months to file, but not to pay your ta liability. Like a lot of folks will say, as long as I pay my tax liability by tax day, I’m good to go no matter what. I mean, even if I do an extension, as long as I pay that money, then I’m fine. But the piece that I try to hammer home for folks is that even throughout the year kind of thing, the quarterly thing I was mentioning, so if you’re expected to owe 10 grand, and you go at the end of the year and pay that in April, when you file, the IRS is going to be angry and say hey, you should have been paying that in the year here. And they’re going to slap you. Yeah. So again, broken record, all comes down to planning. But to the extent you’re able to identify any kind of gaps in where you expect to owe money at the end of the year and can close them now whether that’s making estimated payments directly to the IRS or adjusting your withholdings, it’s much better to fix it now and get ahead of it. Then the flip side and trying to you know, request a penalty abatement in the back end.

Tim Ulbrich  32:18

Yeah, just to reinforce a an important point you made, Sean, is that if you do file an extension, which to be clear, like is not a bad thing. 

Sean Richards  32:26

Not at all whatsoever. 

Tim Ulbrich  32:28

Yeah, we really believe as we say over and over again and right over rushed. And there’s a value in the extension process. But that is not a pass on paying your tax that is due. So there’s work that has to be done, when you go to file that extension to figure out like, Hey, do we have a tax liability due, so we can make that payment, but we’re giving ourselves an extended time to be able to finish everything up and actually get the return in.

Sean Richards  32:52

And I mean, that might have even been an extreme example, like if you didn’t file an extension, even which again, I think extensions are one of the most underutilized things in the tax code. But if you didn’t do that, and you still owed at the end of the year and paid all that money in on December 31, the IRS is still going to be mad because they’re still going to say you should have been paying it in January, February, March, April. So the name of the game here is just making sure that you’re not ever getting too far away from where you expect your tax liability to be and what you’ve paid in any given point in the year. 

Tim Ulbrich  33:26

Which is why for the small business owner listening, this is why it is so important to have a system that is operationalized in your business where you have books and records that are being kept, whether it’s quarterly, whether that’s monthly, whatever your business needs, and you’re able to then use that information to feed into what you need to be making in terms of those estimated payments. So I’ll preach that. And I’ll preach it saying, Hey, we have it’s taken us a while to kind of figure this out. And to get into this rhythm and it’s not going to be perfect. It’s going to be you know, messy as you’re developing it. But so important over time as you get some stability in the business to have that type of system and predictability. Number eight on the list is overlooking investment, activity. Activity being the key word here, right?

Sean Richards  34:11

Yeah, so this is a lot I could you know, another example of one where I could spend a whole session or whole podcast going through this. But really, the big thing here is just thinking about the different types of investment activity that you may have. And right like you just said activity is kind of the name of the game here. So just because you have investments doesn’t necessarily mean that you’re going to have a tax liability or any kind of tax implications associated with it. But thinking about what types of activity you had going on in a particular year and making sure you’re getting ahead of that is going to be crucial, especially now with all these different types of types of stock performance incentives that folks have so restricted stock units, RSUs; employee purchase, employee stock purchase programs, ESPP; ISOs, incentive of stock options. All these different things, they’re all great. It’s just one of those things where you want to make sure you’re at least understanding the tax implications beforehand, because for some of those, you know, you won’t actually have a any kind of thing to do necessarily, or liabilities to take care of until you actually go and sell some of those shares. Typically, that’s the case. But again, just understanding how that works, knowing that you might need to get additional information to your accountant, hopefully us, to be able to adjust basis for taxes that you’ve already paid. I’ve seen a lot of people who paid double on some of these things, because they already paid when they were when some of the stocks vested. And then kind of paid taxes on that a second time when they sold those, those stocks. So lots to think about there. I mean, there was higher interest rates last year across the board. So a lot of folks had higher investment income, like interest income and stuff, which is great. But again, just something you want to plan for, there’s usually no withholdings there, you start making good money, the net investment income tax comes in. So that’s just a little additional tax on investment income. But it’s one of those things where the more I talk about it, the more people are probably spinning their heads. But a lot of folks have a lot of different types of investments, whether you think you do or you don’t, you know, even just having a few bank accounts and a couple shares of stocks here and there is enough that if you’re making moves on those, those can really affect your taxes. So just making sure you’re taking advantage of anything. And again, really think about the activity that you had in a year. What did I do? Did I sell anything? Did I buy anything? Did I convert anything? That kind of stuff.

Tim Ulbrich  36:36

We don’t typically think about, you know, interest in high yield savings accounts as being significant enough, right, that we have to plan for it. As you mentioned, we don’t have withholdings, right, that come out of your high yield savings account interest. However, when we think about this past year, especially people may have higher amounts in those accounts for people listening to that $50, $100, $150,000 across high yield savings accounts, earning four and a quarter, four and a half percent. That adds up pretty quickly.

Sean Richards  37:01

That’s literally what it is like, and, you know, we would do projections and get really, really close for folks, but be off by you know, a few $1,000 at the end of the year and looking at and saying, Hey, what what was often our, or what did we miss in our in our assumptions when we were looking at this? And a lot of the times we’re under estimating just simple interest income because people had cash sitting in some of the high yield savings accounts. But if you’re in high tax brackets, and you have that net investment income tax coming in, all the sudden a few $1,000 of income is a few $1,000 of taxes. So yeah, not a bad thing. But just something you want plan for.

Tim Ulbrich  37:39

Number nine on our list of 10 Common tax blunders to avoid from the 2023 filings is misunderstanding some of the tax law changes. What what are you referring to here?

Sean Richards  37:49

Yeah, so this one is going to be a little kind of twofold. So typically, when I’ve been saying tax law changes, the biggest things in the past few years have been energy credits. So the Inflation Reduction Act that Biden signed a couple of years ago, really expanded a lot of EV, green, other types of energy efficient credits. And those have been awesome for many folks, lots of good tax savings there. Again, it expanded a lot of things that apply, and it got rid of a lot of the limits that used to apply for some of these things. So there’s a lot of savings to be had. And tax credits. This is that’s what all of these kind of EV and green credits are, they’re their credits, those are dollar for dollar savings against tax liability, as opposed to a deduction, which just reduces your taxable income and really only reduces your tax by the percentage of your of your rate. These are credits. So it’s bang for your buck, the big deal. The only thing I’ll say on the energy credit side is as much as there’s a lot of room to save, there’s a lot of misunderstandings of, hey, I bought a plug in or a hybrid last year. So where’s my tax credit? Well, some plug in hybrids count, but not all hybrids count. Or, you know, I did this work on my house. And I was expecting to only get this much of a credit, but oh, actually, it was solar. So it’s a 30% credit with no limit, you know, you can have the opposite side of that, and planning accordingly with those things. Again, not that it’s necessarily the worst thing in the world to have a big refund. But if you can think about it ahead of time and say, Hey, I’m buying an Eevee this year, and you know that you’re gonna get 7500 bucks back as a credit. Yep, there’s a pretty good chance you can adjust your withholdings this year and get some of that cash back now and not have to worry about it at the end of the year. The flip side, and this might begin to scare folks, but it is thinking about other kinds of broader tax law changes. And when I think about this, I think of the Tax Cuts and Jobs Act sunsetting. Which it’s supposed to be doing in 2026 or at the end of 2025. So a lot of the was things I was talking about the itemized deduction changes, but one that people might not really even have remembered is the fact that tax brackets all went down when that happened. And in a couple of years, those are supposed to go back to the rates that they were. Will that happen? Who knows, we have no idea who will the President will be what, Congress’s makeup will be. But having an eye on that, and knowing at least now, hey, in two years, we’re expecting these rates are going to go up. So being able to plan accordingly and knowing that, hey, in two years, itemized deductions are going to change quite a bit, or the standard deduction is going to change. Getting ahead of those things. I know, it sounds crazy to be thinking a couple years out in the future. But when we’re talking about projections and thinking about pulling levers, those things actually do start to come into play. So I don’t want to scare folks. But it’s one of those things where, you know, all of a sudden, there’s sweeping tax changes, and it’s kind of swept under the rug because of all the other political turmoil and everything going on. So something Yeah, I just don’t want lost on folks. 

Tim Ulbrich  41:02

It’s interesting. You bring up Sean the tax cut and jobs, I remember the passage of that, and 2016, you know, I filed graduated 2008. So I graduated, filed several years before that was in place, but you don’t think about that, right? As well, when when it’s going in the favorable direction of what that means to cash flow. But it’d be interesting, and we’ll see politically what would happen. You know, you can imagine some of the turmoil if that were to go in the other direction and impact on what could be.

Sean Richards  41:29

Exactly and you know, for most folks, your withholdings likely will adjust accordingly. So you’re probably not going to end up with like a huge tax bill, so to speak. But there’s a pretty good chance that in a couple years, you’re going to be paying in more of every paycheck towards the government. Or even worse, if you have a side gig, you might be having a liability building up that’s bigger than it has been in previous years. And if you don’t have a system for saving, you’ll be in trouble.

Tim Ulbrich  41:30

All right on the homestretch number ten on our list, what would it be if we didn’t talk about some of the real annoying stuff under estimating state and local tax complexities. This is your favorite topic, Sean? 

Sean Richards  42:08

Yeah, it is, because we’re probably what I will maybe not one of the few firms. But you know, there’s not a ton of firms probably that are virtual like we are and work with clients across the entire country, a lot of tax and accounting firms tend to be kind of specific to a regional area. So I’m probably you know, in a smaller minority, in a minority of CPAs that deal with this, but it definitely comes up quite a bit with our client base. And I think that’s a notion of, you know, just people doing a lot of traveling and moving. But especially with a lot of the careers now and being able to work remote. You know, you have people working from home part time, full time you have people doing traveling nursing or even pharmacy related gigs like that. And anytime you’re doing work and you’re crossing state borders, there’s most likely tax implications associated with that. And does that mean that you’re going to necessarily have to pay tax in another state, if you were working there briefly, maybe, probably not. But just understanding the different rules around those things and being able to maximize them too. If you’re living in a state where you’re you’re working in a state and living in a state and one has a higher income tax rate than the other, but you have the ability to kind of choose your residency based on the tax rules, you know, that’s something that you’d want to do ahead of time. So just thinking about those different types of things, making sure you’re withholding enough. Local taxes. There’s other states besides Ohio, but Ohio being the biggest one there. I don’t understand how, folks, you know, just working a job down the street can keep up with all those things, but local taxes, understanding where you live, what the school district taxes are versus the residence town tax versus the city town, you know, all these different taxes, it can be overwhelming, just under estimating how complex some of that stuff can be not having a hand on the wheel. I just talked about all those nine things. And those can all be applied to the federal income tax return. We’ll apply them all to the state and local returns as well. So I’m sure folks living in Florida, Texas, Washington, New Hampshire all shut off. But people in Ohio probably crank the volume on that last one there. So definitely not something to take too lightly. 

Tim Ulbrich  44:22

This is timely, and I was knocking on RITA earlier, but we are dealing with a RITA issue this week. And you know, just some lingering things and it feels like every once in a while we’ll get random notices from them for those that have a business that you sell product, you got sales tax. I mean, there’s just so many layers of things to keep up with. 

Sean Richards  44:39

Exactly and it goes back to kind of understanding the tax calculation and how all these things go together. Yeah, and sometimes visually really is the best way to do that and seeing like if I send an email to someone and say, Hey, in Ohio, you have this federal tax you have this schedule C, you have self employment tax. You also have Ohio tax, that you RITA and then you have a tax where you work, but also where you live. And then you also have a school district tax. People are like, What are you talking about? But when you actually look at where it falls into returns, it makes a lot more sense. So doing that only once a year to me just isn’t sufficient given how complex I see these situations becoming.

Tim Ulbrich  45:19

As Sean mentioned, at YFP Tax, we work with pharmacists, households, and others all across the country. So we have a virtual paperless firm that we’re very proud of. We also obviously supplement that with our financial planning services, which most of our listeners are well familiar with that. If you want to learn more about our comprehensive year round tax planning, what’s involved with that, I think we’ve laid out the case of why that is a good fit and a service that many people should be thinking about. But if you want to determine if it’s a good fit for your situation, you get a YFPtax.com You can learn more and book a free discovery call with my partner, Tim Baker to determine whether or not that’s a service is the right fit for you, Sean, great stuff as always, we’ll be talking more tax throughout the year. Thanks for taking the time to come on.

Sean Richards  46:04

Yeah, thank you. Have a good one.

Tim Ulbrich  46:06

You too.

Tim Ulbrich  46:08

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

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YFP 368: How Much is Enough for Kids College?


Tim Baker helps parents navigate saving for their child’s college education, from projecting costs and balancing goals to 529 plans.  

This episode is brought to you by First Horizon.

Episode Summary

Most parents desire to contribute toward their child’s college tuition; however, knowing how much to save and plan for can be a bit of a moving target. How much is enough to save for college?

Tim Baker, YFP Co-Founder and Director of Financial Planning, lays out the financial roadmap to help parents navigate the complexities of college savings. Tim emphasizes the importance of prioritizing college savings, projecting future costs, and balancing these savings with other financial goals. He also breaks down the benefits of starting early and making consistent contributions to make the goal more attainable.

Learn more about education savings options, including 529 plans and Coverdale education savings accounts. Tim also shares the ⅓ rule for funding college education that listeners may find make the reality of saving for their child’s future education more attainable. 

This episode is brought to you by First Horizon.

About Today’s Guest

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

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

Key Points from the Episode

  • Saving for kids’ college, prioritizing investments, and mortgage options for pharmacists. [0:00]
  • Saving for kids’ college, varying opinions on approach. [2:13]
  • Prioritizing investing for kids college amidst other financial goals. [6:05]
  • Financial planning for education costs, including 529 plans and other options. [11:13]
  • Education savings options for kids, including 529 plans and UTMA/Coverdale accounts. [15:41]
  • 529 college savings plans with potential tax benefits and flexibility. [21:08]
  • Saving for college, including 1/3 rule and assumptions. [25:23]
  • Saving for college using 1/3 rule and financial planning tools. [30:02]
  • College savings for a 9-year-old girl, with current balance and projected needs. [34:39]
  • Saving for children’s education expenses. [38:39]
  • Saving for college and financial planning with a certified financial planner. [42:56]

Episode Highlights

“So your retirement should come before your children’s college tuition. There’s no financial aid in retirement, and there’s still a good amount of that, you know, for your kid’s schooling.” – Tim Baker [9:54]

“The further we go in the future, the more uncertainty. But we can make some educated guesses and conjectures. Again, it goes back to the whole idea of, it’s more about planning than the plan, because life happens, things change.” – Tim Baker [13:36]

“Saving for your kid’s college is just like your retirement. It’s like when I say to clients, hey, you need $2 million to retire, you are looking at me like I have 2 million heads. It’s a big number, way in the future. The same thing holds true with education. It just feels more than what it actually is.” – Tim Baker [43:01]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week, Tim Baker and I revisit saving for kids college, a topic that is top of mind for both of us in our own financial plans. Before we answer the question how much is enough when it comes to saving for kids college, we discussed the priority for investing, including where kids college savings fits among other goals, and the differences between common vehicles that are used for saving for kids college. Let’s hear a message from today’s sponsor, First Horizon, and then we’ll jump in our discussion of how much is enough when it comes to saving for kids college. 

Tim Ulbrich  00:40

Does saving 20% for a down payment on a home feels like an uphill battle?  It’s no secret that pharmacists have a lot of competing financial priorities, including high student loan debt, meaning that saving 20% for a down payment on a home may take years. For several years now we’ve been partnering with First Horizon, who offers a professional home loan option AKA a doctor or pharmacist loan that requires a 3% downpayment for a single family home or a townhome. For first time homebuyers, has no PMI and offers a 30 year fixed rate mortgage on home loans up to $766,550 in most areas. The pharmacist home loan is available in all states except Alaska and Hawaii, and can be used to purchase condos as well. However, rates may be higher and a condo review has to be completed. While I’ve personally worked with First Horizon before and had a great experience with Tony and his team,  don’t just take it from me. Here’s what Emily from Prattville, Alabama had to say about her experience with First Horizon: “Clear communication and excellent guidance from Gail and Cindy throughout the entire process. I greatly appreciated the fact that everything was digital, because I’m allergic to paper, the ability to upload inside everything digitally made the process very efficient, which I prefer. This was by far the best mortgage process I have experienced. This is my seventh when counting refinances.” So to check out the requirements for First Horizon’s pharmacist home loan and to start the pre-approval process, visit yourfinancialpharmacist.com/home-loan. Again, that’s yourfinancialpharmacists.com/ home-loan. 

Tim Ulbrich  02:13

Tim, it’s good to have you back on the show.

Tim Baker  02:15

Good to be back, Tim, how’s it going?

Tim Ulbrich  02:16

It is going well, this is gonna be a fun one. We’re discussing a topic that is top of mind for both of us in our own financial plans. I’ve got four kids 12 and under, you’ve got three kids nine and under. And we’re in that prime window where saving for kids college is getting real, right? We look at our older children and say, Hey, that’s not too far off. And it really begs the question, are we on track? And I don’t know about you. But for me, it feels like early on when the boys were much younger, younger it was this concept of hey, let’s start putting money away. And we’ll worry about that later. Worried about that later is right now.

Tim Baker  02:55

Yeah, life comes at you fast, right, Tim? So, you know, a lot of a lot of people, you know, they might say, hey, I’ll get to that, or, you know, I talk to prospective clients all the time and it’s like, yeah, I really want to, I really want to put money away for my kids college. And I’ve been thinking about it for a while. And, you know, I’m like, Well, how old is your son or daughter? And it’s like, oh, they’re eight? You know, so how long did you think about this? For eight years. So it is one of those things that sometimes that’s true, that holds true for retirement too, Tim so, you know, it’s it’s one of those things where the sooner you bet, you know, the sooner you do it, the better. You know, it makes, it makes the amount that you are, you know, your what you’re trying to do easier to kind of achieve. So, yeah, we’re right in the thick of it and and hoping that, you know, the cost of college, you know, doesn’t continue to kind of inflate at what it has in the past. But you know, no control over that, obviously.

Tim Ulbrich  03:48

Yeah, and we’re going to talk about that specifically because when we get to the part of trying to determine how much is enough, we got to make some assumptions on what is going to be the cost of college into the future. Now for those that are listening, that have kids that are butting up against college, we know what those numbers are going to be or likely be. But for those that have kids that are much, much younger, trying to project out 15, 16, 17 years, what college costs may look like, can certainly be more more challenging. Tim, I want to get your perspective on what seems to be a varying philosophy around saving for kids college. I recently published a poll on LinkedIn asking individuals how are you approaching saving for kids college and there was over 260 people that responded and here Here are the results. 30% said that they plan to fully fund their kids college. 61% said they plan to partially fund and just shy of 10% said you know what? They’re on their own. Kids got to figure it out on their own. So when you hear that and interactions you’ve had with clients and anything surprised you there?

Tim Baker  04:54

Um, I am surprised, I am a little surprised. I feel like, I feel like the 60% of like the partial would have been a lot more. Like that would have been closer to like 80. And they may be like 10 and 10. On, you know, the they’re on their own, or I’m going to do 100%. So that that’s probably the only thing. Because yeah, I talk to clients all the time. And it’s, it’s, it’s, it’s those three things. It’s like, Hey, I went through this. So my kid has to go through it, I went through this, I never want my kid to go through it. And then that in between of like, I want to provide something but I just don’t know what that is. So little surprised by the percentages, honestly, how big of a sample size was that?

Tim Ulbrich  05:37

Over 260 people. So pretty large group that responded. And there was a couple of comments that I think really, you know, drive home some of the differing opinions, and everyone obviously is there on their own journey. One person said, quote, they want to partially fund they referring to the kids, they need to have skin in the game. I’ve also heard of parents giving their kids cash directly for any scholarships they get. That’s a neat way of incentivizing working hard for them. Someone else said, Hey, would love to fully fund, but also need to look at my future and retirement. We’ll talk about that here in a little bit as it relates to the priority of investing, and how we want to think about kids college among other competing financial goals. So we’re going to break today’s discussion into three parts. Part one is going to be just that we’ll talk about the priority of investing, where might kids college fit into the broader part of the financial plan? Certainly, this is not investing advice, but some considerations there. Part two, we’ll talk about the common vehicles. And we’ll spend the most time on the 529 plan. And then part three will really spend time answering the question how much is enough. And I’m excited about that part because this is a piece that we haven’t drilled down into the details as much as the other two and for reference will link to these in the show notes. But we have talked about kids college previously, on the podcast, episode 195, we talked about how to save for your child’s education, and Episode 211, we talked about the ins and outs of the 529 college savings plan. So again, we’ll link to those make sure to check those out for more information. Tim, let’s start with that first part, which is the priority of investing. And I’m gonna go back to the comment that you made that, you know, for some people, especially when they came out with six figures or more of debt, you know, I’m thinking about my own journey of a couple $100,000 of debt, there can be a reaction of, hey, I never want my child to have to go through that either at all or something along those lines. And therefore, I’m going to start shoveling money into kids college savings accounts as early as possible. And not necessarily think about, you know, where that might lie in context with my own retirement savings or emergency funds or other parts of the financial goal. So it begs this question of where does kids college savings fit as a priority as we think about other investment vehicles or options? So what are your thoughts on that?

Tim Baker  07:56

Yeah, so, you know, I’ve had these conversations where people are like, I really want to get started and, you know, save for Jonny’s education or whatever. But you know, we’re looking at $25,000 in credit card debt, right. So not something that should be a high priority. We have to get through the consumer debt. So obviously, like, if we talk about the baby steps, we want to make sure that consumer debts in check, Tim, we want to make sure we have a proper emergency fund. Still a lot of people don’t, you know, come to the table with that. And that’s something that we have to work on. And what is a proper emergency fund? Where should we put it? It’s not an investment. Those that are based on I think, are the the big things, I’d be looking at it. You know, I think beyond that, you know, I think what most people would agree is shift into retirement and looking at what that looks like, you know, do we have a match? At least get the match? And then I think based on that, and again, I would be doing a retirement projection and a nest egg projection, I’d want to make sure that like some of the wealth protection stuff is sure enough, like, do you have the proper life insurance disability, that we have the state planning documents in place, all that kind of stuff, to then get back into the conversation of okay, what’s the next step after this? So a lot of people again, and the analogy that I like to use is like when you’re on the plane, and, you know, they say, Hey, if we lose cabin pressure and the mask come from, you know, that’s a really crappy situation, that’s not going to be fun. But put your mask on first, right? Put your mask on first before you you, you know, handle your your kids. So that’s going to be the same when we’re talking about retirement and an education plan. So your retirement should be should come before your children’s college tuition. There’s no financial aid in retirement, and there’s still a good amount of that, you know, for your kid’s schooling. We might get to a point Tim, where we’re not going to see the money flow as much for you know, for college loans and financial aid and things like that could be a real thing. reckoning that’s happening. However, I think there will always be alternatives, whether that That’s, you know, community college or trade schools are things that you can do that or at least get started. So that, to me is the big thing. I think when you get into the nuance of, of retirement, you know, the question I would I would ask to that person that clients like, are we on track for retirement? And if we are, obviously, like, let the money flow from an education perspective. If we’re not, that’s where I would want to, you know, and I think what a lot of people to Tim, they, what they do is, it’s not even really a question about what bucket they should fill. Part of it, part of what drives us is the tax benefits related something like a 529. So in Ohio, you can get up to $4,000 per student, regardless of filing status that is per year off of your Ohio State income tax. So a lot of people see that be like, boom, that’s what I’m going to do, or I want to get a portion of that without kind of doing the ABCs of where that should go. So I think outside of the match, I would say get the match. But then there’s probably a little bit more nuance in terms of like, okay, how do we then go from here, in terms of, are we putting more into the retirement? Are we are we putting more, are we starting to kind of, you know, flow monies into education planning.

Tim Ulbrich  11:13

Yeah. And what you’re sharing right there to me is such a good example of the benefit, one of the benefits of comprehensive financial planning. Because at the end of the day, we only have so much income to work with, hopefully, we can increase that income. We can only cut our expenses so much, and we’ve got a certain amount of cash flow, that we’re going to be able to assign to different financial goals, right. That could be building up an emergency fund that could be paying down debt, that could be a real estate purchase, that could be put money in a 529, that could be retirement savings for the future. And so we’re left with this decision of, hey, I’ve got all these balls potentially, to juggle in the air. How am I going to do that? And then what order? Second to it depends, probably the most common thing that we say on this podcast is you can’t make decisions in a silo when it comes to the financial plan. We’ve got to be able to take a step back and look at all the different factors so that we can see, okay, well, if I pull this lever, then what’s the impact of this part of the plan? Right? Because by pulling that driver putting money in a 529, that means we’re not probably doing something else. And are we okay with that or not? Okay with that. And if we project that out, what does that mean, for us in terms of achieving our financial goals? The other thing I would mention, and I know this episode is not focused on what we think is the future of higher ed. But because I spent over a decade in that space, I feel the need to comment, like, when you talk about something like the contraction, potentially, of access to financial aid and student loans, man, you’ve got to believe that if that were to happen in the future, there would be a significant shift in the business model of higher education at large, right? It’s already on the brink, I would say of some level of disruption, if that’s not already happening. And if there’s less resource going into the system, what does that mean, in terms of what the actual infrastructure looks like? The degree offerings, the supply and demand. So I think that is a relevant comment because one of the lingering questions behind all of this, especially for those very, very young kids is, what will this model look like in 15 to 20 years? What will the cost be? And that we need to know, or at least project out to some level to be able to do some assumptions? 

Tim Baker  13:20

And sometimes with uncertainty, Tim, like, we can do one of two things, you know, it’s like, Well, I haven’t seen people do this with retirement, it’s like, I don’t really even know. So they maybe they over save? Or perhaps they just kind of throw their hands up there. And like, okay, whatever I have, I have. So, you know, it is a little bit you know, the further we go in the future, the more uncertainty we have, again, we can make, make some educated guesses and, and conjecture, but again, it goes back to the whole idea of, you know, you want to be you want to, it’s more about planning than the plan, because life happens, things change. And the reason I’m kind of, you know, distracted, like, I’m looking at my numbers, Tim, and we’ll go through this later, but like the numbers for like, Olivia is four year like, they went up from the last time I talked to talked about it. So I’m like, Oh, I gotta update these numbers, because they’re a little bit out of date. And what that means is, like, when I looked at these last month, the inflation numbers associated with education were higher than what they were a month ago. So the tool that I’m using was updated. So I’ve kind of updated my calculator to kind of back into that. So like, it’s planning now again, like for Olivia, who’s going to turn 10 This year, I still have eight years to kind of, you know, plan and figure this out, which makes it easier. The closer we get, obviously, you know, when she’s 16 We’ll have a little bit more of a picture of what education looks like but a whole lot less time to kind of change and plan you know, plan for that. So yeah.

Tim Ulbrich  14:48

So let’s shift gears and talk about the common vehicles. Again, we’ve covered this a little bit on previous episodes that will link to in the show notes, but there are various options out there right when it comes for saving for kids college everything from 529 plans which we’ll spend the majority of our time on, to the Coverdell Education savings accounts, UTMAs, Roth IRAs, heck, you could just open a brokerage account and save that way if people wanted to do that, but there’s clearly some pros and cons to these accounts and perhaps why the 529 has risen to the top for many, as you know, I guess if we get picked the most popular among this group, so tell us at a high level about those common vehicles that are out there and then we get into the 529s more specifically. Yeah,

Tim Baker  15:30

So the Coverdales, and the like the UTMAs and UGMAS are very similar. These are just custodial accounts that are like brokerage brokerage accounts, but they have the minor’s name on there. So the reason the Coverdale is aren’t as popular anymore, it’s because the amount of money that you could put in per year was like two or $3,000. I’ve actually I’ve never I might have seen one Coverdale account in my career in financial planning, so I don’t see them very, very often, the UGMAS and UTMAS, I see more often and actually have one for all three of my kids. And then all of my nieces and nephews is kind of my, like my nephew, Timmy just turned 10 yesterday. So I put money into as you know, he’s, he’s he lives out in Oregon, so I don’t see him as much I don’t really know what he’s into from a from a gift perspective. So I just put some cash into that. And the big thing for that, it’s like, I’m managing the account. I’m the, I’m the guardian on the account, once they age, once they reach the age of majority. So in certain states, that might be 18, other states that might be 19, or 21, that money is theirs, right? So so that for me is going to be a gift when all of my nieces and nephews and my kids like turn that they can use now they could use that for school. But they could also use that for something else, right? There’s not the strings attached like a 529 has where you have to use it for qualified education expenses. So with my daughter I’ve talked about it could be for school, it could be she’s talking about a gap year, I’m like, How do you even know what a gap year is you’re nine. It could be it could be to start a business, whatever that is so and that, and that, for me is a little bit more of a in your face vehicle for me to talk more about money on a long term basis, like right now we talk we have allowance and we have a save, spend and gift, this is kind of in the next thing. So that is a powerful tool, but not necessarily not necessarily just you know, for the purpose of education. Now, the big thing with that is like when they go to spend that money, capital gains tax is going to be a big part of that. So you have to you know, and that’s the same thing with, you know, like a brokerage account, if you’re just managing that for your kids, but their kid’s name isn’t on there. The other one that a lot of people will use is the Roth IRA, because you can take out the basis, you know, tax free penalty free. So you could use a Roth IRA, again, you could use your own Roth IRA, if your kid has like income, you could set up their own Roth IRA. So there’s a little bit of nuance there in terms of how you how you use that. I know a lot of people will use a Roth IRA, just because they don’t like the restrictions of the 529 just being used for qualified education expenses. So that’s something that people could use, I don’t personally use that, like I feel very comfortable with a 529, I feel very comfortable that the it’ll continue to continue to expand in terms of what you can use it for. So that really leaves a 529 in terms of vehicle. So the 529, Tim, is it’s a think of it as like a retirement account, except for education. So you can put after tax dollars in there, it grows tax free, you might get a state income tax deduction, like I mentioned, you can get $4,000 per beneficiary per year per person per beneficiary, in the state of Ohio. Every state’s going to be different, some states don’t have anything, some states have very generous, all all 529s are not created equal. So like you’re just some of them are gonna be really great. We were actually looking at the expenses the other day, and we were surprised that Ohio is a little bit higher than we thought. So you have to be cognizant of that. So you put the money in there, it grows tax free. And then if it’s used for qualified education expenses, which is typically tuition, fees, books, supplies, equipment, room and board, computer or like peripheral equipment or software, internet, that can all be you know, kind of, you know, part of that distribution. So, just like in a in a retirement account, you are kind of saving for, you know, 18 years or 10 years depending when you start so you have that accumulation period, and then that the accumulation period typically in retirement might be 10, 20, 30 years as you know until you until you die if you’re it’s typically four six, maybe eight years depending on what your goal is, you know from from an undergrad to, you know, masters, etc. So, that’s the big thing you put the money in, you invest it, a lot of them have target date funds, a lot of them you can you know you can pay the S&P 500. They grow the that tax free. And again, just to kind of reiterate that is, you know, when you buy when I buy XYZ ETF for my daughter in her in her UTMA account, we buy it at 100 shares, or $100 per share when she goes, You know, when she’s 18. And she’s now cashing that out, maybe that portion of her investment is $400 per share, which is great. But we have to pay the $300 per share capital gains and is going to be long term capital gains on that gain that we have. In the education account that you don’t have that. So that’s one of the benefits along with the state. So the UTMA, and the Coverdale gives you in the brokerage account gives you more flexibility in terms of what you can use it on. But there’s tax consequences, that’s the string. And I feel comfortable Tim, and we can talk about that a little bit more that there are enough outs for me from a 529, you’ll feel comfortable, you know, put in a good amount of money and into that to you know, to have for education, expenses. And if Olivia doesn’t need it, maybe my next kid or even grandkids.

Tim Ulbrich  21:10

Let’s talk about that flexibility for a moment. Because I do think that that is the probably the number one objection. Right. And and, you know, you mentioned the tax differences for those who choose to stay in a savings, you know, UGMA, UTMA or another type of custodian brokerage account. So the way I think about the 529 is this is like a Roth for college, right? It’s after tax dollars going in, it has the potential to grow or lose, right? Anytime we talk about investments and we can lose, but growth, hopefully long term tax free, then we could pull it out use it for qualified educational expenses, which there’s been an expansion of over the last decade or so. And that’s what I want to talk about flexibility because I agree with you. I think there are several things that maybe in the sense of of 529s were more restrictive that they’ve expanded upon. So right you think about what is considered to be a qualified educational expense, that would be one area that comes to mind. The expansion several years ago to allow these to be used for K through 12 private education, that’s a second one I think about. And then more recently, would be the Roth conversion opportunities, which is the third one. So it feels like all signs are pointing in the direction of more flexibility, not less when it comes to the 529s. 

Tim Baker  22:22

I think I think eventually, one of the things that got kicked out, was at the very at the very last minute with the Secure Act 2.0 was like homeschooling like that’s not that’s not you can’t use funds for homeschooling. I do think that, you know, again, like when I started advising people on 529s is back in the day, like you couldn’t use a 529 dollars to buy like a laptop for college. Like that was a restrictive thing. And they’ve they’ve improved upon that. Right now, like before, you couldn’t pay if you had, if you had money in your 529, you couldn’t take that money out and pay off a student loan without a penalty. Yeah, they they changed that now, it’s still restrictive. Like, it’s, I think it’s a $10,000 maximum limit, which is silly, in my opinion, just just use that that’s what it’s for, is that kind of, you know, minimize education expenses, like pay off the loan. Yeah, to your point, the Roth was a big thing that they put in and, and there’s, there’s a lot of, there’s a lot of hoops you got to jump through it has to it has to be open for at least 15 years or longer before you can move those dollars from a 529 into a Roth, right? The last five years worth of contributions are ineligible, right. So like, if you’re, if you put that if you put dollars in at 18, you have to wait until you know they’re past 23 to move those dollars over and the maximum lifetime transfer to a beneficiary is capped at 35,000. Which again, I also think is silly. 

Tim Ulbrich  23:49

Might change. We’ll see. 

Tim Baker  23:50

Yeah. And I think they will, I think I think there’ll be again as as I think it’ll adapt it more as like, if higher education looks a lot different. I think they’ll adapt that. They’ve shown that they will be able to and again at the end at the end of the day for me, Tim, and again, not everyone’s going to think this. But like if my kids don’t need it. Like I’m going to cascade that down to Liam to Zoey and if Zoey doesn’t need it. I’ll probably just let it ride for a grandkid. Or, or grandkids. So to me like I don’t, I’m okay I’m okay with that. Like I don’t need I don’t need to go to like, you know, every kid equally or or even my kids can kind of go down a generation. Not everyone’s okay with that. I had a I had a couple last week, Tim, that we talked about education hadn’t started anything and right off the rip they’re like I don’t want to do a 529 and I said like keep your keep your mind open. And part of it is like the tax, part of it is like are you okay with you know, everyone’s everyone’s like, I don’t know if you know, my kids are going to college, you might be different. We’re just all that’s all like fair, right? So it’s yes, we’re you know, a lot of us are open needs, when they’re one they’re toddler, who knows what they’re gonna grow up to be? But for me, you know, I think and again, I’m not looking at 100% solution. So I don’t necessarily need hundreds of 1000s of dollars, like, you know, if I was doing 100% solution. So this is kind of I look at this as kind of a coupon, you know, for future spending from the from the aspect of college tuition.

Tim Ulbrich  25:23

Yeah, and I think too, the other scenario to consider is, you know, when you talk about keeping options open, it’s like, what is the worst case scenario? It’s a 10% penalty, right, when we look at non qualified withdrawals. And the other thing I would add to the discussion, which by the way, nobody wants to pay a 10% penalty. So let’s be clear. But I would add to the discussion that there has also been an expansion beyond the what we think of the traditional four year degree, right. Trade school, certificate programs, apprenticeships like so I think we’re, that’s another example, we talked about flexibility. And I think, you know, for a lot of people, it feels like in the circles of discussions we have with other families of age around our boys about higher education, it seems like the trades is coming up more and more, as there’s some clear demand and in certain areas. So again, keep the options open. And as you begin to think about what what this looks like for you and your family, certainly there are options out there. And if you do look at the five to nine, we’ve got a great resource on our on our blog, seven things to consider before starting a 529 plan. Or if you already have one open, it’s a good refresher. We’ll link to that blog on the show notes as well. Tim, let’s shift to part three, as I mentioned in the beginning of the show, I’m excited about this. We haven’t really talked about this at length beyond the educational part of where does kids college savings fit and the priority of investing? What are the options available? And part three here is all about how much is enough? Now, just like we talked about when it comes to saving for retirement, same question we got to answer here and shout out to you in the planning team, you’ve built a really cool resource and calculator that we use with our clients that we’ll talk through at a high level here to really answer this question of as I’m saving for my four boys. I’m not flying in the dark, hopefully, because we can put some assumptions in place and determine how much is enough based on those goals? And ultimately, am I on track? Am I not on track? And what should we be doing each and every month to get on track? If that’s the case of where we’re heading? So it feels like Tim, the first step in being able to answer this question of how much enough is to figure out what the goal is? What the goal is back back to the poll question. Right, we started the episode with is, what’s the plan? Is it cover all expenses? Is it a partial fund? Is it a no fund, which I guess we could end the episode right there if that’s the case. But if it’s a partial or full fund, at what level? And we’ll talk about the third, a third, a third rule here in a moment at what level the funding is to be desired, is an important assumption we have to make in these calculations, correct? 

Tim Baker  27:52

I mean, and again, I think a lot of people, it probably is, I’m trying to think, you know, of all the hundreds, if not 1000s, of meetings I’ve had with with clients and prospective clients over a lot of people are like, I don’t know, I want to save something. What is that? And there’s, there’s, there’s a little bit lack of like structure there. It’s rare, where people are, again, it’s going to be on the tails there where it’s like, I’m not worried about at all or like I want to do 100%. So I think in the absence of that structure, it’s just a conversation of like, okay, like, like, here’s a framework. And that’s what we talked about the 1/3 rule, here’s a framework does that sound like? Because the beauty of the 1/3 rule, or at least the way you think about it, is you’re talking about what can I do today, but then you’re also pushing it off to tomorrow, because part of like, your funding is going to come in like future earnings. But then also there is that skin in the game, which I love. I think having skin in the game with this decision to go to college is huge, or even like, you know, giving money to your kids for college is huge, because we’ve seen how wasteful is probably not the correct term, but like how wasteful it can be. When you’re looking at schools out of state, private, when you’re, you know, maybe jumping around in majors, I think having some type of you know, some type of realization that like, Hey, you’re going to be on the hook for some of this. And obviously, pharmacists know this very well, is needed. At least that’s the way that I look at it. So I think in the absence of any type of structure, I think introducing that 1/3 rule is important. 

Tim Ulbrich  29:32

Let’s talk about that rule because I think that if we use that as the baseline, you can adjust whatever you want, right? We’ll talk about the three buckets and we’re gonna assume a third, a third a third, but you know, it could be 40% 20% 40% Right. So once you understand the concept, I think from there you could determine Hey, do I like that? Do I not like that and what adjustments you want to make. So walk us through what that third rule is. 

Tim Baker  29:55

So off the rip, a lot of clients we like they look at the look like what their education costs. And they’re like, no, like, like, this is impossible. If I have a couple dollars, you know, that can, you know, rub together, that would be great. But when you kind of break it down, it’s, it’s not as bad as it as it looks. So like the 1/3 rule basically looks at, okay, when your child goes off to college, the sources of that a paying for college is going to really come from three places. A third of that a third of the of that is going to be come from, like, we say, past income or past savings. So today, in 2024, I’m saving out of my paycheck into my kids 529, and it’s going to grow. So that’s the 529. It could be a Coverdale it could be a Roth, you know, whatever it looks like but it’s, it’s you’re doing something today to spend in the future, just like we talked about with retirement savings. The other bucket the another third comes from what I would say current income. And again, this is this would actually be future income, but like when Olivia is 18, and she’s looking at colleges in, you know, eight years, I’m hopefully still working that YFP, I’m making money, and I’m part of the part of that tuition bill is going to come from the cheque that I’m receiving in eight years. And then the last bucket. And the last third would would be that skin in the game, it would be that outside outside funding, where this is going to be grants, scholarships. And last but not least, loans. So this is where you know, and again, we we talked about it with our kids that they’re going to have some money, but we don’t let them know what that is. My parents were like, you’re on your own. And then they helped us like later it was kind of like a surprise. So we kind of talked about it, but they don’t necessarily know what they’re getting. But that’s those are the three buckets. It’s what you’re you’re saving and investing for future college expenses. And then when your kid is in college, using your your part of your paycheck to pay for tuition. And then the last third coming from grants, scholarships, and student loans.

Tim Ulbrich  31:57

Tim, we’ve had several, I think, at least a couple I can think of episodes we featured where pharmacists have really worked, you know, throughout school, sometimes really aggressively to help pay down. Now, you know, if you’re working at $15-$20 bucks an hour, you can only make such a dent and a couple $100,000 of debt. But that has been a significant contributor to minimizing the debt that they’re having to borrow in any given semester. So in that case, when you think about a child working, would you put that in the final bucket? Or where how do you how do you think of that portion?

Tim Baker  32:33

I would put it in the in the final bucket. Again, I think it’s kind of like their skin in the game. It’s like, Hey, you could you could not be a great student and not get anything or you know, I know a lot of people, there’s money to be out there for you know, we just gave out our first scholarship, you know, obviously on the back end for YFP Gives. But there’s a lot of people that don’t take that, you know, go through that legwork. You know, Olivia’s goal, she wants to swim collegiately that’s her big thing right now. And she just missed her JO time yesterday by a couple of seconds. So she’s, she’s, she’s doing well. And again, I think for her, I think my wife would love it if she got a scholarship for that. But I’m like, you know, if happens, great. If it doesn’t, but to me, it’s a little bit of their, their participation in this whole process, because it is a lot of money. You know, when we look at the numbers we’ve go through, if we kind of go through this calculator, the numbers are staggering, right. And like I just said, like, when I was looking at it, you know, as we were jumping on here, the the four year instate for Olivia went up, you know, when I looked at it last month, and I guess they’re just refreshing their their numbers and then in the tool that I’m using, but you know it, these things go up. So I think having a plan in place is is is the way.

Tim Ulbrich  33:44

So with the third plan of the third rules, a framework of where we get started, obviously everyone can adjust that accordingly. Talk us through then the calculation and how we ultimately get to this point of Hey, are we on track? Are we not on track? Or what do we need to be doing each month to get on track? 

Tim Baker  34:04

So I’m using a combination of our financial planning tool called Right Capital and kind of a calculator I built. And part of it was because I wanted to kind of adapt it to the 1/3 role. So I rely on the calculator really for or the financial plans will really for the likely in the inputs I just, I just looked at so in the tool, you can say hey, I want to send my kid to a two year commuter, a four year in state, a four year out of state, four yearr private school, you can actually put in the school that you want or you can I think it’s hard unless you’re right right up against it. So we we put in a four year in state so like, hey, Ohio State’s right down the street, that would be great. So essentially like when I’m looking at Olivia so Olivia was born on Halloween of 2014. Today’s the 15th of July 2024. So her current age is 9.7 so she’s almost a 10 year old, I think she would say she’s, she is a 10 year old. So we’re saying that at 18, she’s gonna go to college. So what that leaves is essentially 8.3 years before she’s got to move out and get out, and I can turn her bedroom into a man cave. Which she doesn’t like that joke.

Tim Ulbrich  35:18

Second whiskey storage unit.

Tim Baker  35:20

Exactly, exactly. So 8.3 years is our accumulation. That’s what’s left of our accumulation. So we make some assumptions about asset allocation. So in my calculator, I put in like an 80%, equities, 20% in bonds right now, she’s all equities, we have a lot of time. But as we get closer, we’re going to be, you know, to avoid sequence risk we’re going to be more conservative when we get to that five ish years. So maybe when she’s 13, 14 15, that’s when we’ll start to really kind of get more conservative until we until we have to spend it. So I’m using kind of a blended, you know, she’s not, she’s not 100% equities the entire time. So I put 80/20, you know, we use, so that real rate of return is about 4.6%. So that’s kind of some of the, you know, if I change that to 90/10, or 70/30, it would change the calculus. So the input that I was changing, you know, that I was mentioning, when I looked at this last month, a four year in-state for her would be $183,653. 

Tim Ulbrich  36:26

With room and board?

Tim Baker  36:27

Yes. So that’s the need. So in what that means is in, I think right to the end, like today, it’s something like $28,000. But when they extrapolate that out 8.3 years in the future, that’s what’s going to cost that $28,000 With the inflation times four years. So that’s where we get the $183,000. So just as an example, my son, who is five years younger than Olivia, so Liam is five will be five next month already. His four year instate will be $234,393. So it goes from $183,600, to $234,400. Four, and then I don’t have Zoe’s calculated, but her four year end state is $284,900. So $100,000 difference between my oldest and my youngest, there’s essentially a 10 year gap for that between them. But that’s, that’s significant. And that’s why like, we’re hoping some of this changes. But that’s the number that I’m using, you know, to kind of say, Okay, this is what I this is what we need. So, if I were to fully fund it, if I needed to fully fund it, I would essentially need $183,000 in eight, eight years. Or you could say 12, and I’m still, you know, saving during that, but typically, that’s not how it works. So currently, currently, today, Olivia has, I guess it’s called a share. That’s right. So currently, Olivia has $28,629. So and we’re we we put in not quite the $4000, we put in $300 a month or $3,600 per year. So we’re on pace to save $103,000. So if you look at that, I need 183 we’re on pace to save $103k. So that our our percentage now was we’re on track to say 56% of her college. Now, that’s not 100%, which is not our goal, but it’s also a lot higher than the 33%. So like we there’s some delta there. So you know, so I kind of break down if we did want to pay 100% percent, you know, what we would need if we, for us to be on pace to save for 100%. To get to that $183k, I would need $67,634 today. I don’t have that I have $28,000. If I if I lost all the monies in her 529 today, I would essentially need to be saving or investing $1,260 for the next 8.3 years to get to that to get to that 183,000. So because I have that, it’s actually I need to increase my essentially increase my savings from $300 a month to $854 per month to get to that. Now obviously, that’s not something that we want to do. So and then I had the same thing broken down for the 1/3 rule. So 33% of 183,000 is $61,212. So again, when you break it down like that, I’m like that’s actually not that bad. $61,000, like that’s doable. Now, the conversation I had just had with Shay when I ran this was she’s like, well, we should should we start saving less and I’m like, essentially, like the argument could be you could save less or we could we could kind of stick to the status quo. My thought is is like that’s one less bill that I have to worry about in 8.3 years like it’s almost. so there’s a tricky one is correct. So like, I part of me is like, do I just get it too, and maybe we’ll talk about this in the next iteration. So like, do I go to 67%, you know, to get to my to like my two thirds of post and present income for that. And then she has a 1/3. So just to break down the math for 33%, I need $61,212. What you currently need today to be on pace would be I would need $8400 and I have $28,000. So we’re beating that. And then if I had $0, like, if I lost all that money, I would essentially need to be saving so $420. So if you have a 10 year old, and you want to send them to a four year in state and you haven’t saved anything, and you want to save at least a third, you would essentially need to be saving $428 per month, between now and when they go.

And then the last column is kind of the choose your own rule. So if I were to if I were to say, hey, Shay, like, let’s, let’s, you know, we have some room in our budget, you know, retirement looks good, etc. If I were to say, hey, let’s let’s go to that 67, that kind of checks off both for us, I would need $123,000.  I would need today $38,000. We don’t have $38,000, we have $28,000. So that lump sum to get us on track would be putting $9700 and I’m on track. And then we would essentially be needing to pay or invest $438 so I’d need to increase my monthly contribution by about $138. And then I go through the same thing with Liam. So Liam, just in broad strokes not to go through every every every calculation. He has, so his, what we need for him and for four year in state 13 years from now, since he’s five is $234,400 essentially. He has currently $13,800. We’re currently putting in $225. So not as per month, so not as much as Olivia. And then we’re on pace to save one, it will we’ll call it $109,000. So we’re 46% of the way there. We’re on track to be at $46, which is still beating our 33% roll. So we’re I look at this and we were in good shape. I think with Zoe, it’s too early to tell she only has a couple 100 bucks in hers. But that’s kind of the calculus that we’re doing from hey, are we on track or not from a from an education perspective. And again, like if the market if the market loses 30% today, Tim like right now it’s been on a bull market. But if loses 30%, and all of a sudden he doesn’t have $13,800, he has $10k, that changes thing. Right now, over the long period of time, we’re still assuming, you know, a nominal rate of return of 8.8%, which is an 80/20 portfolio, and then we adjusted down for inflation. So that’s kind of the math. I know, it’s kind of hard to follow over the podcast. But hopefully that made sense as I was going through the, the numbers line by line.

Tim Ulbrich  42:56

Yeah, what I love about it is it makes kids college savings much more practical. 

Tim Baker  43:01

And patatable, right? Like you hear those headlines. It’s just like your retirement. It’s like, you know, when I say to clients, it’s like, hey, you need $2 million to retire, you are looking at me like I have 2 million heads, but it’s a big number, way in the future. It’s the same thing holds true with education. It’s just, it feels more than what it actually is.

Tim Ulbrich  43:20

Yeah, makes it digestible with a third rule or some variation of that. I mean, it really it’s a compressed nest egg calculation.  And that’s what I love about it is we’re not flying in the dark. What what do we have saved right now? What’s the goal? We’re gonna put some assumptions in place just like we do with retirement planning. And then what do we need per month to achieve that goal. And that last part, is the piece that is so often missing when we talk about long term savings and investing, right? Whether it’s 10 years or 30 years, some of these numbers, as you mentioned, too, feel big, they feel overwhelming, they feel scary. And what we can relate to and put our arms around is what do we need to be doing per month? Or what is the goal? And then we can look at the rest of the plan, the budget all those things and figure out, can we make this happen? Or can we not make it happen? And then what does that mean, in terms of what they have saved? What does that mean for other financial goals? So yeah, I think if we think about it, in that sense, we really can start to implement this and put a game plan in place and make some adjustments if need be. And context matters, right. So I would think, how you think about this for Olivia versus your youngest, Zoe is very different, right? When you get to the potential for over saving with Olivia well, that’s different with your first and your third because option to transfer, so I think a lot of details to be considered as we look at the individual components of how you approach the 529. 

Tim Baker  44:39

I’ve really enjoyed you know, I’ve been trying to get Olivia kind of more interested in like money and the value of money and, you know, she told me the other day she’s like, you know, when I go back to school, can I buy these like $100 like Nike shoes and I’m like, No, you can’t like it’s like, we’ll spend some money and then you can save some with your money, and there’ll be a cap on what you can do. And even my wife said, like, oh, like she gets money, you know, should we put that in a 529? I’m like, I actually, like when we, when she does her allowance, I say like, Hey, any money that you want to put into your UTMA account, like, I’ll match it. So, and I did the same thing like she, she’s going to, she’s going to donate to YFP Gives. And I’ll match that, right? So I want to I want to incentivize that behavior. But I kind of want the 529 to be like, funded by me and mom, right. So like, I don’t want her spend money to go to the 529. So I’d rather have that money go into an UTMA that she can use it, she could use it for school, which she could use it for a car, a business, a gap year or whatever. But I’ve enjoyed kind of like having some of those conversations with her and kind of seeing some of the lights go on. In terms of like, investments and that’s the thing, like I’ve always struggled with like, should I kind of key them into like what we’re doing on the 529 or should be more of like, a mystery because I really don’t want her to like say like, oh, like mom and dad have it paid for like I don’t, you know, I don’t need to work. My mom took the opposite route. She’s like you have to work because we’re not going to help you at all. But I think I think these types of discussions with your kid, even when they’re young, like mine are is, is positive. And again, like, I grew up, we didn’t really talk about too much about money, like outside of like you’re on your own. But I think building some of those behaviors and kind of mindset around money is important because a lot of people that come through the door to work with us. They’re kind of an image of their parents, right. A lot of them is like, you know, if they had consumer debt issues, it’s probably because their parents did. If they were oversavers, its probably because their parents were. You know, some people look at the parents and say, I don’t want to be like that. And they’re trying to fix it, but like the natural inclination is to spend or save. So I think it’s a good opportunity to at least start the conversation around money with kids. 

Tim Ulbrich  46:58

Great stuff, Tim. And that’s a topic we’re gonna talk more about on the show. One because we haven’t talked about it enough. And two, we’re living it firsthand with our own kids. We’re excited to share that journey as well. Let me wrap up by saying for those that are listening, yes, talking about kids college, but also other parts of the financial plan, saving investing for the future, retirement planning, tax planning, debt pay down and so forth. We’ve got a team of certified financial planners, and Sean Richards, our CPA and tax professional that can help you in working one on one as it relates to your own financial plan. If you’re interested in learning more about the services, you can visit yourfinancialpharmacist.com. From there, you can book a discovery call with Tim to learn more about the services and determine whether or not they’re the right fit. Thanks so much for listening. If you’d like what you’ve heard on this episode, other episodes of the podcast please do us a favor and leave us a rating and review on Apple Podcasts or wherever you listen to the show. Have a great rest of your week. 

Tim Ulbrich  47:51

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

Tim Ulbrich  48:37

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

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YFP 366: Your Medicare and Long-Term Care Questions Answered


Tim Baker, YFP Director of Financial Planning, breaks down Medicare and long-term care insurance and what to consider when deciding on a policy.

Episode Summary

Tim Baker, YFP Director of Financial Planning, breaks down the importance of long-term care insurance in retirement planning, highlighting the need to carefully consider the cost of these policies and how they fit into one’s overall financial plan. 

Tim also discusses Medicare parts A, B and D and the importance of understanding the enrollment period to avoid paying penalties.

About Today’s Guest

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

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

Key Points from the Episode

  • Medicare and long-term care insurance with questions from the community. [0:00]
  • Long-term care insurance costs and factors that affect premiums. [4:10]
  • Long-term care insurance policies, including elimination periods and riders. [10:23]
  • Long-term care insurance policies and their importance in retirement planning. [17:28]
  • Medicare penalties for late enrollment, including Part A, B, and D. [23:15]
  • Medicare changes and penalties, with tips for avoiding them. [29:40]

Episode Highlights

“Start assessing what kind of policies you want and what you want to do and what your plan for long term care in your 50s. The sweet spot to purchase a policy is in that 55 to 65 year old range. If you’re too early, you’re paying premiums for a long time and you may not reap the benefit for 20 or 30 years. If you’re too late, you’re paying much more in premiums or you could even be denied. So unlike most health insurance, you can be denied for pre-existing conditions. There’s really that zone, that sweet spot – the Goldilocks zone where you really need to kind of get this just right.” – Tim Baker [4:32]

“A lot of people think you need a 100% solution to put my kids through college or you need 100% solution for this. It’s not about that. It’s really about providing a baseline benefit for you that you can then pull the levers on other parts of your financial plan to form a fully comprehensive plan with regard to long term care.” – Tim Baker [9:58]

“I think the main misconception about long term care is that Medicare is going to cover this and it really doesn’t.” – Tim Baker [23:51]

Links Mentioned in Today’s Episode

Episode Transcript

Tim Ulbrich  00:00

Hey everybody, Tim Ulbrich here and thank you for listening to the YFP Podcast where each week we strive to inspire and encourage you on your path towards achieving financial freedom. On this week’s episode, we take questions from the YFP community on Medicare and long term care insurance – two critical, yet often overlooked, and might I say boring, parts of the financial plan. We discussed when it makes sense to purchase Long Term Care Insurance, what policies typically cost penalties for late enrollment in Medicare and policy changes and trends for both long term care and Medicare that listeners should be aware of when planning for the future. Now as we crossed the midway point of the year, it’s a good time to check up on your financial progress for the year and dust off those goals that you set back at the turn of the new year, which perhaps feels like a distant memory at this point. Whether you’re focused on investing in the future, paying off debt, saving for kids college, or growing a business or side hustle, our team at YFP is ready to help. At YFP we support pharmacists at every stage of their careers to take control their finances, reach their financial goals, and build wealth through comprehensive fee-only financial planning and tax planning. Our team of certified financial planners and our CPA work with pharmacists all across the US and help our clients set their future selves up for success while living a rich life today. You can learn more and book a free discovery call by visiting yourfinancialpharmacist.com. Again, that’s yourfinancialpharmacist.com. 

Tim Ulbrich  01:29

Tim, welcome back to the show.

Tim Baker  01:34

Good to be here, Tim. Let’s do this thing. 

Tim Ulbrich  01:36

All right. So at the time of this going live, we’re actually on our annual YFP mid year break, it’s a week that we take off every year as a team around the Fourth of July a week that we can pause, reflect, get some time with family and friends. So Tim, any any big plans for the family this year? 

Tim Baker  01:52

No, it’s interesting, Tim, I am reading Michael Hyatt’s Free to Focus and he’s like, the way to kind of become focused is to is to do less. So I think it’s a good time to kind of stop and reflect on you know, the the first part of the year and then think about, you know, what’s ahead for the second half of the year, we have some friends coming in town that have young kids, so we’ll be spending the Fourth with them, but kind of just staying home and hanging out. How about you? Any big any big plans for the Ulbrich family?

Tim Ulbrich  02:22

Yeah, we’re hitting the road. We’re going to see Jess has family up in Bowling Green, to do some fireworks, Fourth of July stuff, see her grandma, and then we’re making a trip to Buffalo. My brother and his wife put in a new pool. So we’re gonna we’re gonna enjoy that with them for a couple days and make make the most of the week. Boys are super excited, great, great age for traveling. And it should be. It should be a fun week. So hey, when you when you figure out the Free to Focus, let me know how that works. I need to figure that out. So the genesis for today’s episode is, Tim, you led a webinar for us a couple weeks ago on Medicare and long term care insurance. And you know, this is a topic that I think we often think about, of course, we know it’s important, but it’s one of those topics, both of these topics where we’re like, ah, kind of boring, like, how much do I have to really think about this part of the plan. But as you shared, I mean, the engagement, the questions, the interest was, even exceeded our expectations, which is great. And so we decided, hey, let’s do an episode that focuses specifically on the community members questions around Medicare and long term care. Now, we have talked about both of these topics on the show before. We’ll link to these in the show notes. Episode 329 I brought on Certified Insurance Counselor Josh Workman to talk about Medicare selection and optimization. He had some great insights to share from his experience helping people with Medicare selection. And then episode 296, Tim, you and I talked about five key decisions for long term care insurance. So we’re not going to rehash the background of these topics, make sure to go back and listen to those but rather jump into questions that our community had on these two topics. So, Tim, let’s start with long term care. First question, which is probably I think, the most common question, which is, when do I need this policy? Right. So what is the ideal age range to purchase a long term care policy? 

Tim Baker  04:15

And in the presentation that we did in early June, the I kind of talked about this as like the Goldilocks zone, right? So if you’re too early, it’s not great. If you’re too late, it’s not great. So the way that I have broken this out, Tim, is you start discussing this in your late 40s. Start assessing kind of policies and what you want and what you want to do and kind of what is your plan for long term care in your 50s and then really kind of get the sweet spot to purchase a policy is in that 55 to 65 year old range. If you’re too early, you’re paying premiums for a long time and you may not reap the benefit for 20 or 30 years. If you’re too late, you’re paying much more in premiums or you could even be denied. So unlike most health insurance, you can be denied for pre-existing conditions. So there’s really that, that zone, that sweet spot, so to speak, is the Goldilocks zone where you really need to kind of get this just right. And again, if you’re, you know, if you have chronic issues, maybe you do that earlier. But I think one of the questions we’ll talk about, what do these premiums look like, and I kind of have these different age bands, so we can kind of talk about that. But, you know, started discussing in your late in your late 40s, kind of start assessing, you know, your plan and 50s. And then and then have a policy that meets that plan, you know, in that 55 to 65 year range.

Tim Ulbrich  05:42

So, Tim, we’re officially in the decade, you said end of forties. So something we’ll be thinking about here in the not not too distant future, which is hard to believe. But let’s talk about costs, right? Because I think sometimes these policies certainly can have some sticker shock. Everyone’s situation, of course, is different. But what are we looking at in terms of average premiums of a standard long term care policy?

Tim Baker  06:06

Yeah, so before I get into that, like, I think one of the I think this was Lincoln Financial, you know, did it did a study that that showed, like, what couples are willing to spend on long term care insurance, I think, I think the number was like $2500 to $3,000 per year in premiums. So I had that in the back of my mind, as I was kind of researching, you know, this. So according to the 2023 Long Term Care Insurance Price Index, that’s put out by the American Association for long term care insurance,  AALTCI. General estimates, and this is for this is for a policy that has an initial benefit amount of $165,000, it grows at 3%, compound inflation. So that’s kind of the general baseline. At age 55, for a single male individual, those premiums range from $1700 to $2,100 per year. So obviously, you’re in that that range of $2500 to $3000. Single females, unfortunately, ladies, your premium jumped quite a bit, you tend to live longer than men. Single female, it’s actually $2675 to $3,600. And then a shared benefit, so a couple that kind of combines their benefit together is is $3,000 to $4,800. So that’s at age 55. It jumps age 60, for a single male goes from $2100 to $3000. So that’s up from $1700 from $2100, single female jumps from $2675 to $3600, to $5000. And then the couple $3800 to $5500 combined. And then lastly, it’s 65, single male $2600 to $3135. So that’s a jump from the $2100 to $3000, single male $4230 to $5265, and then the couple $5815 to $7150. So, and I would say, Tim, that the factors are influencing these premiums, the probably the big one here is going to be the inflation protection. So it’s probably the most the most expensive rider that’s out there. And if you actually tie it, I don’t even know if they sell them. I don’t think they sound like this. But they’re they’ve been insurance products in the past to actually tie it to the CPI. I think they don’t necessarily do that. It’s like how you pick a 1% 2% 3% 4%. That’s going to drive the biggest cost to the to the you know, to the premium. Age of purchase, obviously, as we kind of outlined here is a big factor your health so health are healthier individuals will qualify for better rates, the benefit amount and duration. So a highly highly daily benefit or a bigger benefit pool. And a longer, you know, longer period won’t increase your premiums, elimination periods. Will I think it talks about this another in another question, the shorter the elimination periods and think about this as a time deductible or a deductive deductible that’s in time, results in higher premiums. I mentioned the inflation protection and then additional riders so, you know, other things that could be outside of inflation, shared care will increase the cost. So these are kind of the factors but you know, I think almost all being equal, you know, if we were to strip away the 3%, which again, that’s a major rider, I think they’d become a little bit more affordable. And I think if you’re looking at a baseline policy that that will allow you to age in place, meaning like age in your home as long as humanly possible. I think if you can look at these policies almost as like a coupon for that care. Not that you know, we talked about this. A lot of people think like oh, I need 100% solution to put my kids through college or I need 100% solution for this. It’s not about that it’s really about providing a baseline benefit for you that you can then pull the levers on other parts of your financial plan other other, you know, assets that you have to then, you know, form a fully comprehensive plan with regard to long term care.

Tim Ulbrich  10:22

Yeah. And Tim, as you share that, it reminded me of bringing Cameron Huddleston, on the show who wrote mom and dad, we need to talk we had her on episode 321. Navigating some of those financial conversations with aging parents, and some listening might might be thinking about this as the coverage for themselves. Some listening might be thinking about this as, hey, what about my parents, right, that are aging? What what do they have in place, and obviously, there can be a direct line from their coverage or lack thereof and their own financial plan. And so, you know, when you’re talking about the different factors that can affect the cost to me, but I also hear in there is like, we’ve got to zoom out and understand, like, what are the desires and the needs? What what is the goal in terms of long term care, obviously, things may happen or not as we would like them to happen. But having some clarity on you mentioned, like care in the home versus a facility type of care, like, those conversations are going to be really important for us to think about individually, but also with our parents to then look at some of these policies and determine, you know, what we want these policies to be doing in the coverage.

Tim Baker  11:25

Right. Yep, exactly, right.

Tim Ulbrich  11:28

You mentioned riders a couple times before we go to the next question. Can you can you just define that for those that may that may be a new term as they’re looking at insurance policies?

Tim Baker  11:37

Yes, riders are things that they’re like, the kind of like, add on features. So when an insurance writer, you know, wanting like, like for a life insurance policy, a permanent policy, or a disability policy could be like a waiver of premium. So like, if you have if you’re deemed disabled, you could put a rider in that policy that basically says, if you are disabled, the policy will remain remain in force, however, you don’t have to pay the premium. For for the what we’re talking about is cost of living. As you know, things increase every year and inflation goes up, the policy kind of keeps pace with inflation, or at least there’s a flat rate. So all a writer is is a additional feature that’s bolted onto the policy that makes it more enticing to the policyholder holder. However, it often comes with expense, you know, it comes with an additional premium that’s tied to that. So that’s all rider is.

Tim Ulbrich  12:43

Great stuff. So we talked about what’s the ideal age range, we’ve talked about the average premiums, what goes into that costs, several different factors. You mentioned, some of those riders, age of purchase health, what the actual policy entails elimination period. Let’s talk about elimination period. That was one of the other questions that came through is, you know, is there an elimination period with a long term care policy similar to what folks might be familiar with with a long term disability policy? So if you could first define elimination period? And then answer that question?

Tim Ulbrich  13:11

Tim, as you’re sharing all of these nuances and details regarding long term care insurance policies, you know, as can be the case with buying insurance, right, you pull back the onion. And there’s another question to consider, another question to consider what the policy should be made up of which all informs the cost, right? And what we have to answer the question when it comes to insurance, whether it’s long term care, or long term disability life, whatever we’re talking about is, what do we need? And what do we not need? Right, because obviously, we want to have a certain level of protection, that’s going to protect the rest of our financial plan. But we also don’t want to be overspending on premiums so there’s an opportunity cost that those dollars can be used elsewhere in the financial plan. And I think this is important point to selfishly plug, the work that we do and other fee-only financial planners were when you’re engaging in that work in a fee-only relationship, meaning that you’re paying the advisor for the advice that they’re giving. And there’s not a compensation stream coming from the recommending of products that may or may not be in your best interests, we really can sit down and have these conversations of what do you need, what you not need, without there being a bias in the advice that’s been given. So important.

Tim Baker  13:11

Yeah, so the elimination period, as I mentioned, is kind of like, think of this as like, when you get in a car accident, and you are, so your deductible is $500, or $1,000. You have to pay that, you know, as part to kind of access the policies policy. So if I have a, you know, an accident, and I need work on my car, that cost, you know, $2000, for that, for the policy to pay out that $2000, I have to actually pony up the deductible, which is, you know, 500, or whatever it is. So it’s it kind of what it what it what it’s meant to do is create somewhat of a barrier to care, they don’t want these policies don’t want to be accessed or have claims against if they’re if they’re nominal or minimal. So in a long term care insurance policy, you pay that in time. So to back up, when we talked about when you know, the process of purchase and long term care, I kind of broke this up into five steps, it’s actually deciding when to purchase a policy which we talked about, it’s to choose kind of a monthly benefit. The third one is a truce of deductible, which I’ll break down here in a second and then four and five is that decide how long the benefit will be paid. And then the fifth one is decide, you know, what is what riders you want? Do you want an inflation rider or not? So, to go back to step three of choose a deductible, deductibles come kind of in all shapes and sizes. So in terms of a time you can get a deductible, that is, you know, the elimination period I should say that the deductible and time that is 30, 60, 90, 180 or 365 days out. The most common is 90. So the idea behind this is, once once a professional physician says, you know, Hey, Tim, you need help with assisted daily living, like the task of transferring or eating or whatever, then that’s when the clock starts. So if I have a 90 day elimination period, and the doctor determines that July one, then essentially on October one, and sometimes it takes another month to actually get the benefit, you know, October one or November one, that’s when actually the policy starts to pay out. Now, what I just described was a calendar based a calendar day elimination period, there’s really two types, there’s calendar day. And then there’s service day. So the calendar day is based on the total number of days from the start of needing care, i.e. that physician says, hey, Tim, you need care, regardless of how often you use services, as opposed to a service day elimination period, which is based on the actual number of days he received paid care. So think about when you think about long term care, it’s often intermittent care, you don’t have someone around the clock, maybe they come in, you know, three days a week to clean and help you do some things around the house. So there’s pros and cons on each on each, right. So if you have a service day, service day care, if you have a 90 day service day elimination period, and you receive care three times a week, it would take approximately 30 weeks to meet the 90 day. So we’re versus like, if you have you know, on that first example, July one, I need care, you know, October 1, I’m getting, you know, I’m getting my policy to pay. So, you know, there’s pros and cons of each, you know, typically the calendar days going to be more expensive than the service day. You know, if you if you only need intermittent care, and it’s it’s maybe even less than, you know, weekly, you need it, you know, once a week or whatever it is, and the maybe the service day, you know, works. So this, these these elimination periods is all about trying to find, again, the Goldilocks zone for what type of care you need, what you what you want to pay for your policy, and then adjusting it for that. So that’s the elimination period, Tim. So again, most common is the 90 day. I think, I’m not sure what is more common between service and calendar day, I think if you want more of a known timeline, then calendar is kind of what you want. But then, you know, again, that’s probably going to be more expensive when it comes to paying the premium. That you have the the overlap between advice and the sale of a product, there’s going to be a conflict of interest, because often often that sale of a product, you know, means there’s a commission that’s in place. And yeah, and I’ll bring up one of the things. You know, I feel like when I was presenting, you know, I think the the latest data says that a couple, a couple that’s age, age 65, see if I can bring up the number. A couple that’s a retired couple age 65 can expect to spend after tax $315,000 on health care and medical expenses during retirement.

Tim Ulbrich  19:14

After tax. 

Tim Baker  19:15

Right. So and I think you might look at that be like, Oh, that’s not that bad. But like, a lot of people I look at that. I’m like, that’s a that’s a significant chunk of my, you know, traditional, like portfolio. Right? So and then the thing with this is that, you know, the last time I looked at this a year or two ago, like these numbers, they’ve jumped significantly. So, I think again, you know, if you’re and this is like if you think about like the biggest cost in retirement is really not like health care and medical expenses, it’s housing. So you know, if you think about this plus housing and that’s a significant chunk of a lot of people’s, you know, retirement nest eggs. So the the idea of behind, you know, long term care is to provide a baseline, again, you know, simple math, you know, you could spend $3,000 for 30 years and you know, spend, you know, $90 grand and give you that baseline, and again, you know, it can change. But to me, it’s about, again, getting those products in place for the plan that you’re trying to design without kind of some of those strings that you mentioned that are attached to that. So. Yeah. 

Tim Ulbrich  20:27

Yeah, this is you’re talking, it’s all good reminder for me, you know, my conversation with my parents. We’ve had an open conversation. I know they have a long term care policy, I don’t know the nuances of the policy. I know they’ve been diligent in that work. I know, it’s something they’ve talked about, they’ve they worked through intensely. But obviously, the the next level of that is to really ensure that my brother and I have a understanding of what’s there as well. Before we move on to Medicare, last question, related to long term care is, are there any recent policy changes or trends in long term care insurance that our listeners should be aware of when planning for their future?

Tim Baker  21:06

Yeah, I kind of see three, the big one I mentioned already, is, I think there’s a big push towards the aging in place initiatives, the the longevity of a person of a patient increases, when they can age in their home for as long as possible. And actually, a lot of these policies, Tim, are really designed to provide as much care and benefits to do that. So whether that’s setting up things like ramps or handrails or modifying the home to make it better, to, you know, again, have more of a focus on in home care than in a facility, once you pivot to a facility. You know, it’s it’s, it’s, it’s better for you to stay in home as long as possible. So there’s, there’s a growing focus on aging in place programs. And also that include kind of like wellness interventions like home modifications, and, you know, use of technology to monitor health and provide care remotely, so kind of more of a telehealth type of stuff. The second one is shift into more like hybrid policy. So there’s an increase in preference for hybrid long term care policies, which are often combining long term care benefits with life insurance or annuities. So, you know, if you were to decide to peel off, you know, a couple $100,000, a quarter million dollars of your, of your retirement portfolio to create a baseline floor, so you know, what you get for security plus, what this annuity pays you for the rest of your life, there’s, there are riders that you can put in that also provides long term care. So these policies policies offer more flexibility. And it’s, it’s, it’s less about, like, a lot of people with really annuities and long-cares, like, you know, you kind of lose it if you don’t use it, right. So making them more attractive to consumers, compared to kind of a traditional policy. Right. So that’s, that’s, that’s another one is kind of that hybrid approach. And then the third one, is, we’re starting to see more chatter and action initiatives for public long term care programs. So states, like Washington have introduced public programs, called Washington’s called the Washington Cares Fund, which began payroll contributions in July of 2023. And the basically what they’re trying to do is provide basic long term care benefits to residents. So they have something in place, because I think the the main misconception about long term care is that Medicare is going to cover this and it really doesn’t. So I think certain certain state governments are looking at this as a way to set aside money for residents to have some type of benefit in place for the purpose of providing, you know, long term care.

Tim Ulbrich  24:15

Great stuff, Tim. A topic, we’re going to continue to come back to, as I know, there’s lots of questions out there from the community. And since you mentioned annuities in that second update, and you know, we’ve talked before about that concept of creating a retirement paycheck, creating a floor between social security and annuities, whether or not that’s the right fit is another discussion, but we did talk about annuities on episode 305. Understanding annuities, we did a primer for pharmacists. So if folks are hearing that are like, oh, I want to want to learn more. We’ve covered that before we’ll link to that in the show notes. Tim, let’s shift gears to talk about Medicare. And again, we’ve discussed this briefly on the show before, Episode 329 with Medicare selection and optimization. Many pharmacists are aware of the different parts of Medicare from the work that they do every day. So let’s jump into some specific questions. The first one being for Medicare Part D, is there, (D as in dog), is there a penalty if you delay applying?

Tim Baker  25:14

Yeah, so so Medicare Part D is for a prescription drug plan. So yes, there is a penalty if you delay enrolling in Medicare Part D, the late enrollment penalty is an additional amount added to your Part D premium. And it’s calculated based on the length of time you went without Part D. The big thing here, Tim, is that it’s permanent. So once that penalty hits, it’s gonna hit as long as you have a Part D. So the way they calculate it, this, it’s 1% of the national base premium beneficiary premium for each full month, you went without coverage. So, and this goes up and changes every year. So as an example, the in 2023, the National base beneficiary premium was $32.74. So it’s not a ton of money. 1% of that is 33 cents. But you know, if you miss three months, that’s a whole whole dollar that you’re permanently paying on top of that. So it adds up, it’s one of those things that you don’t want to miss. So this is again, if you if you forego enrolling in Part D, you want to make sure that you do that when you’re you know, general enrollment comes up. So that’s that’s the penalty for part D. 

Tim Ulbrich  26:29

I think getting out in front of this, I’ve observed this time with my father-in-law and in my conversations with Josh, that we had on the show, Episode 329. This is just a big decision. You mentioned the permanent penalty, but also, this is people getting flooded with all types of information. Right? You know, I think there can be a paralysis just with the overwhelming amount of information. So starting this process early, making sure you’re doing research working with professionals that really understand this and have your best interests in mind is, is huge. The second question is what are the potential penalties for late enrollment in Medicare Part A, B, and D, we talked about D already. And are there any exceptions or circumstances where these penalties can be waived?

Tim Baker  27:09

Yeah, so so for Part A, most people don’t pay a premium for Part A, that’s kind of what your, you know, your payroll taxes already where you pay into Medicare while you’re working. However, some people do, do and if that’s the case, you have a monthly premium that may go up by by 10%. And you have to pay the higher premium for twice the number of years, you could have had Part A but you didn’t sign up. So again, most people, they’re going to, they’re going to dodge this because they’re not going to pay a premium for Part B. Again, just like Part D is that there is a penalty, and it’s permanent. So if you don’t sign up for Part B when you’re eligible. So this is your Part A is your hospital insurance, Part B is kind of easier is your outpatient, the penalty is added to your monthly Part B. So you calculate the this by looking at the penalty is 10% of the standard Part B premium. And I think in 2023, that premium was essentially $165, $164.90. So 10% of that, that that can add up, right. So and then the duration, you have to pay this penalty for as long as you have Part B the penalty is permanent and will be added to your premium. So if you delayed signing up for Part B for two years, your penalty would have been 20%- two years times to 10% of the standard premium. So in this example, your monthly premium would be a penalty, it would have been $164.90. But then, because you waited two years, the new premium is $197.88 cents. So more dire than prescription higher premiums, probably more punitive penalty. So this is really important as you are approaching your window. So just a reminder, you know your window, it’s the month before and after your eligibility date, so I should have this here. Here we go. So individuals that age 65, it’s a seven month period. So it’s three months before you turn age 65. The month you turn 65 and then three months after you turn 65 is your general or is your initial enrollment period. And that’s where you really want to make sure that you enroll in A, B and D at a minimum to avoid the penalties.

Tim Ulbrich  29:40

Great stuff there. Last question we have on Medicare, same one we heard on the long term care insurance side. Are there any recent policy changes or trends in Medicare that individuals should be aware of when planning for the future? And I guess we should say as we talked today, there’s a presidential debate tonight. I’m guessing this will become a topic in the presidential elections as it often is. So some of that will be hearsay, but anything that has been solidified or any changes that folks should be aware of?

Tim Baker  30:07

Yeah, and I’m going to answer this, Tim. And I want to go back to some of the exceptions that I didn’t answer for the question before. So the really the only things that I’m seeing for part D in for Medicare is related to part D. So starting this year, the 5% co-insurance requirement for Medicare Part D enrollees will be eliminated. So, I think what they’re what they’re trying to do is, is really go after high cost medications. So this is meant to reduce out of pocket. Beginning in 2025, though, there’ll be a $2000 annual out of pocket spending cap for part D, which will also provide significant savings with regard to high prescription drug costs. And then the two other trends that I’m seeing, is ones around consumer protection. So they really want the government really wants to kind of crack down on deceptive marketing practices. And so they don’t, they don’t want you know, companies that, you know, talk about these plans to kind of mentioned specific plans, and more oversight for like agent and broker monitoring to kind of, to kind of reduce predatory behavior. So kind of, you know, they want to prevent seniors from being pushed into a plan that they don’t necessarily want or need. And then the expansion of telehealth and digital health education is another thing in Medicare that they’re trying to, to focus on. To go back to the second part of the question that I didn’t answer, where the penalties can be waived. There are certain circumstances where the penalties can be waived. So if you are if you or your spouse are still working, and you have health care coverage through your employer, you can sign up for Part A during a special enrollment period without a penalty. And the special enrollment period typically lasts for eight months, after employment ends, or the group health coverage ends, whichever happens first. For part B, it’s the same thing. If you have, you know, coverage through an employer, that that can be, you know, something that, you know, avoids the penalty. And then Part D, if you have if you have like, coverage through your employer or TRICARE, or you’re a veteran, that, that that will waive the penalty. And then if you are in a disaster zone, like a disaster, like they’ll give you like a waiver for the penalty, if you can kind of prove that you were there or the extra help. It’s kind of a low income subsidy. If you didn’t sign up for Medicare, that’s another waiver. But you know, typically, outside of those, you’re gonna you’re gonna see that penalty. So that the kind of round out that second question there, Tim.

Tim Ulbrich  32:49

Great stuff. Tim. Lots of questions and engagement from the community on this topic. Be on the lookout – we have more webinars coming throughout the year, you can always find information on our website, yourfinancialpharmacist.com. If you’re subscribed to our newsletter, you’ll get updates there as well. We’d love to have you attend one of our future webinars covering a wide array of different financial topics for pharmacists at all stages of the career. And if you have a question on these two topics or another question, feel free to send us an email [email protected]. Again, [email protected]. And we’ll try to tackle that on an upcoming episode of the podcast. Now as we cross the midway point of the year, it’s a great time to check up on your financial progress for the year and dust off some of those goals that you set back at the turn of the new year. If you’re like me that perhaps feels like a distant memory at this point in the year. Whether you’re focused on long term care insurance and Medicare like we talked about today, or investing for the future paying off debt saving for kids college growing a business or side hustle. Our team at YFP is ready to help. At YFP we support pharmacists at every stage of their careers to take control of their finances, reach their financial goals and build wealth through comprehensive fee-only financial planning and tax planning. You can learn more and book a free discovery call with Tim Baker by visiting yourfinancialpharmacist.com. Again, that’s yourfinancialpharmacist.com. Tim, great stuff. We’ll be again back again next week.

Tim Baker  34:12

Yeah, sounds good.

Tim Ulbrich  34:16

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

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