insurance

YFP 329: Medicare Selection & Optimization: Common Mistakes, Tips & Tricks

Posted on October 12, 2023October 11, 2023 by Tim U

On this week’s podcast, sponsored by APhA, Certified Insurance Counselor, Insurance Agent, and Medicare Specialist, Josh Workman, joins the show to cover Medicare 101 and considerations for selecting your Medicare coverage plan.

Episode Summary

Many people (including pharmacists!) aren’t fully informed about Medicare, the options they need to consider, and the pros and cons of each option. That’s why, in this week’s episode of the podcast, we brought on Certified Insurance Counselor, Insurance Agent, and Medicare Specialist, Josh Workman to give us a Medicare 101! Tuning in, you’ll hear about Josh’s role in the world of helping seniors navigate Medicare benefits, options for coverage, and the five main differences between Medicare Advantage and Supplement plans. Finally, he shares some words of wisdom for pharmacists struggling to answer Medicare questions for themselves, family members, and even clients.

About Today’s Guest

Located in the Akron Ohio area Josh Workman has been an insurance agent since 2010 with Medicare planning being his main area of focus. He started his career with Nationwide, but then moved to an Independent agency in 2014. Aside from helping individuals who are new to Medicare, he also works with professionals such as care facility coordinators, doctors and pharmacists as they assist their patients with Medicare plan decisions. Medicare can be extremely confusing so instead of the salesman angle, Josh takes an educational approach when helping his clients with Medicare Supplements, Part D Plans and Medicare Advantage Plans. One of his favorite parts of the job is teaching Medicare 101 classes to people who are new to Medicare.

Key Points From the Episode

What Josh does in the Medicare world.
The basics of Medicare and the timelines for selecting coverage.
Two main options for coverage when going onto Medicare.
Five differences between Advantage Coverage and Supplement Coverage.
A quick summary of the two plans and the pros and cons of each.
The kinds of plans Josh sees people choosing and why.
Some of the dangers of being influenced by marketing when choosing a Medicare plan.
Mistakes that Josh sees people making when buying a plan.
Advice for leveraging the help of a Medicare agent for pharmacists.

Episode Highlights

“A lot of people make an assumption that original Medicare – Part A and Part B, includes prescription drug coverage. It actually does not. The only way you can get Part D is through an insurance company.” — Josh Workman [0:10:46]

“If you have to pay medical bills, if you have a network, you’re probably going to be paying less for your insurance because you’re subjecting yourselves to these medical bills and to this network.” — Josh Workman [0:15:21]

“Medicare Advantage is less expensive. There’s a network and there’s medical bills. Supplement is more expensive, but it doesn’t have a network and it doesn’t have medical bills.” — Josh Workman [0:20:20]

Links Mentioned in Today’s Episode

Episode Transcript

[INTRODUCTION]

[0:00:00] TU: Hey, everybody. Tim Ulbrich here, and thank you for listening to the YFP Podcast, for each week we strive to inspire and encourage you on your path towards achieving financial freedom. This week, I welcome to the show Josh Workman, a Certified Insurance Counselor, Insurance Agent, and Medicare Specialist.

Aside from helping individuals who are new to Medicare, he also works with professionals such as care facility coordinators, doctors, and pharmacists as they assist their patients with Medicare plan decisions. We tap into his Medicare experience to discuss five key considerations for evaluating Medicare benefit options. You’ll find this episode insightful and helpful, whether you are evaluating benefits for yourself or helping patients or other family members navigate this process.

All right, let’s hear from today’s sponsor of the American Pharmacists Association and then we’ll jump in my interview with Josh Workman.

[SPONSOR MESSAGE]

[0:00:50] TU: Today’s episode of the Your Financial Pharmacists Podcast is brought to you by the American Pharmacists Association. APHA has partnered with Your Financial Pharmacists 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 pharmacists.com/join and using the coupon code YFP. Again, that’s pharmacists.com/join and using the coupon code YFP.

[INTERVIEW]

[0:01:37] TU: Josh, welcome to the show.

[0:01:38] JW: Thanks for having me, Tim.

[0:01:40] TU: Well, this is a treat. You and I have known each other for a long time when Jess and I lived up in Northeast Ohio. Our families got to know each other well. I’ve always appreciated the work that you’ve done on the Medicare side. It’s taken us over 300 episodes, but I’m excited to finally bring this together to be able to tap into your Medicare experiences and knowledge. Thank you so much for coming on.

[0:02:03] JW: Yeah. Thanks again for having me, Tim.

[0:02:05] TU: Josh, as we were planning for this episode, and here we are in the month of October, we’re talking about all different aspects related to the health insurance part of the financial plan and we realize that Medicare really isn’t a topic that we’ve talked really much about, maybe not even at all, but it’s such an important part of the financial plan for those that are making that transition into retirement.

As we were planning for this episode, we were thinking about a few different groups that may find value in this, right? Of course, there’s individuals listening that are getting ready to make that Medicare decision for themselves and making sure that they’re optimizing that benefit selection. But perhaps, even a bigger group would be, “Hey, I’ve got aging parents that are going through this phase.” Or, “I work at a pharmacy and often I have patients that come looking for help in terms of Medicare selection and what are some of the things that I should be thinking about.” I know, Josh, in your work as well, you consult with individuals that are going through selection, but also work with other providers and facilities as well. Is that correct?

[0:03:05] JW: Yeah. Yeah, that’s correct. I’m working with individuals or maybe in a group setting, like a seminar setting is a lot of what I do. But then, yeah, working with pharmacists, working with doctors, working with assisted living facilities, all those types of professionals have questions and I’m able to help their patients as well.

[0:03:25] TU: Let’s start with some of the basics of Medicare, Josh. Pharmacists get really a slim amount of this in pharmacy’s glamour. We talked about health insurance at large. We talked about the different parts of Medicare. It’s been 15 years for me, perhaps more for others that are listening as well. Let’s start with some of the basics, Medicare 101, Parts A through D. Just break down for us what those different parts cover.

[0:03:49] JW: Yeah, sure. There’s two parts to what’s referred to as original Medicare. That’s Part A, like Adam. Part B, like boy. A would be hospital benefits. You’d use your Part A coverage, for example, if you were in the hospital staying overnight for a surgery. Let’s say, Part B, like boy, that’s going to be medical benefits. Think of that as more outpatient-related things, specifically, like just going to the doctor, seeing a specialist, an outpatient surgery, those kinds of things. But then there’s a couple other parts as well, Medicare Part D, like David, or I like to think of it as D for drugs. That’s the easy way to remember that one. That’s going to be the prescription drug coverage. Part C is another way of saying Medicare Advantage. We’ll get into this, I believe in a little bit, but that would be Part C, which combines A, B, and D benefits into one plan.

[0:04:47] TU: Awesome. Timeline for coverage. This is something that I remember learning about this and just having the takeaway of like, this is important. You don’t want to mess up in terms of when you’re selecting coverage, making sure you’re not missing a deadline. What is the timeline for selecting coverage?

[0:05:03] JW: Yup. There’s going to be three main election periods if you want to think of them that way. Three times when you will be signing up for your plan, making decisions on your plan. I will say, there’s a lot of narrative out there that makes this a little scarier than it needs to be. It’s not that intimidating, but the first one is what’s called your initial election period. This is when folks are turning 65, they’re new to Medicare.

Another thing when someone could be using their initial election period is if they’re been on social security disability for 24 months, or if they develop end-stage renal disease or ALS, that’s another time prior to age 65, they can go on Medicare. Let’s use the turning 65, example because that’s the most common. It’s a seven-month window. It starts three months prior to your birth month, runs the month of your birth, and then three months after. A seven-month window when you can sign up. Most folks will use the three months prior and then start their benefits, the month of their birth. That’s the most common.

[0:06:12] TU: That is a pretty – I didn’t actually realize it was that long in terms of the seven months or the three months prior, the month of your birth date, and then the three months after. Then the other piece I’m thinking about here would be the transition or change, right? I had initial coverage I selected here. We’re using the example of 65, but I’m looking at other options in the future in terms of renewals. How does that work timeline-wise?

[0:06:33] JW: Yeah. Great question. That would be what’s referred to as the annual election period or annual enrollment.

[0:06:39] TU: Okay.

[0:06:40] JW: That is a window of opportunity towards the end of the year, getting into it now. October 15th through December 7th of the specific dates. That’s for folks who, yeah, let’s say, for example, they’re 67, they’ve been on Medicare for a couple of years now, but they want to reevaluate and see if the plan that they’re on now is going to be the best one for the coming year. They can evaluate that during the weeks, again, of October 15th through December 7th. Then their change, if they do make a plan change, it would start taking effect on January 1st of the following year.

[0:07:17] TU: Okay. Those are the two main ones I’ve heard you mention so far. So, that initial election and then the annual enrollment process. Anything else important to remember around the timeline for selecting coverage?

[0:07:30] JW: Yeah. There could be a third election period. Just think of them as special election periods. We do run into these. I do run into them every now and then, but if someone moves, for example. Moves out of state maybe or it could even be a move to a different county within the same state, they would qualify for a special election period to make a change. If someone gains or loses Medicaid eligibility, we recently saw a lot of that with the COVID benefits that were extended for folks on Medicaid.

They basically, couldn’t lose their Medicaid eligibility, but that stopped. I believe it was in April of this year. That qualifies for a special election period to make a change or if there’s other things too, like you have a parent who moves into an institution for lack of a better word, where they’re moving into a long-term care facility or a nursing home. That would also qualify as a special election period to make a change outside of annual enrollment. October 15th through December 7th.

[0:08:31] TU: Awesome. With that background information, let’s spend most of our time here talking about evaluating benefit options, what to look for, what to consider. Before we get into five main areas that you’ve seen, five big differences based on your experiences. I think it’s important that we differentiate at least at a high-level Medicare advantage and Medicare supplement plans because when we talk about some of these areas here in just a moment, we’re going to be referring to both of those and the different sides to consider between them. Define those further, for us.

[0:09:00] JW: Yeah. So generally speaking, you have two main options for coverage when you go on to Medicare. I should say this is what most folks do. Most folks will either go with a Medicare Advantage plan or a Medicare supplement. Medicare advantages is much more heavily advertised. Sometimes folks think that’s the only option they have, but they technically don’t. Supplements are an option as well, but there’s going to be five major differences between those two plans that can really impact how you receive your care, what you’re going to pay out of pocket when you use your insurance, how you get your drug coverage, if it includes perks like dental, vision, hearing, all those kinds of things.

Yeah. There are some pretty major differences between those. That’s what I spend most of my time with my clients who are new to Medicare, so they can make an informed decision on what’s best for them.

[0:09:53] TU: Yeah. I remember Josh, you shared with me as we were preparing for this episode. The worksheet that you have of the two sides of the street, right? Choosing a plan. Advantage versus supplement and going through these, which I really like, because I think this can become very overwhelming, either as an individual choosing coverage, helping a family member, helping a patient, especially when so often, as you mentioned, especially on the advantage plan side, there’s just a lot of advertising, right? That’s behind this.

The mailings, the commercials, etc. so really being able to take a step back and say, “What are the options and how can we objectively compare these. What do we need? What do we not need to make an informed decision?” I think is so important, not only financially, but also just have the peace of mind and being able to navigate some of the nuances involved here. Let’s start with those five big differences. Number one, Josh, is Part D in terms of how one receives Part D insurance coverage. Tell us more there.

[0:10:44] JW: Yeah. It’s important to know a lot of people sometimes make an assumption that original Medicare, what we talked about before, Part A and Part B, that includes prescription drug coverage. It actually does not. The only way you can get Part D is through an insurance company. Now, how it would work on either side of the street. Yes, the way I like to describe it. If you go with a Medicare Advantage plan, most of the time, those are going to include prescription drug coverage at no additional cost. If you go with the Medicare Supplement plan, however, it does not include prescription drug coverage or Part D, you have to buy that separately. Advantage is included. Supplement, it’s not included. You have to pick it up separately.

[0:11:27] TU: Number two, it relates to the network here. We’re thinking of options for providers, access to hospitals, something that folks are familiar with from other experiences with health insurance, but what are some of the factors to consider here as relates to network coverage and the two sides of the street?

[0:11:43] JW: Medicare Advantage plans are going to have a network. Meaning there’s a list of specific doctors, hospital systems, specialists that you need to stay within in order to have coverage or to pay the least amount possible. Medicare supplements, one of the big benefits of them is they do not have a network of any kind. You can literally go to any provider in the country, in the whole United States, that takes original Medicare and they have to accept your supplement. It doesn’t matter what insurance company you have. You could be in the Northeast Ohio area like we are and have an insurance company that’s local here and receive care in California and they’ve never heard of your local company, but they have to take it, because it’s a Medicare supplement.

[0:12:32] TU: That network piece, obviously, very important to folks. The third area, which I’m sure is the one we’re often focused on is the cost side of it, the medical bills or the cost-sharing, ultimately what we have to pay out of pocket when using insurance. What are some of the key differences here between the advantage and the supplement?

[0:12:50] JW: With a Medicare Advantage Plan, you will have medical bills along the way as you use your insurance, or just you could say if you use your insurance. By medical bills, I’m referring to deductibles, co-pays, and co-insurance. You may have a deductible. Honestly, most plans I offer, Tim, don’t have a deductible, folks have to reach, but they could.

A co-pay, you know how that works, most likely you pay $25 to your primary care, 40 to a specialist, those kinds of things. Then co-insurance is a percentage, right? You may have to pay 20% for durable medical equipment or 20% for chemo and radiation. The nice thing about Advantage Plans is that they do put a limit on what your medical bills can be. Most folks have this with your current insurance, even if you’re not on Medicare, called an annual maximum out-of-pocket expense.

All of your medical bills for the year can’t exceed your plan’s annual maximum. But know that, again, you will have them along the way, medical bills, that is. Whereas Medicare supplements, they don’t really have any medical bills that you’re going to have to worry about. Okay. Really, the biggest medical bill for the most popular supplement that I write out of my office is the Part B, like boy, deductible. Currently here for 2023. It’s $226, so you pay that for any Part B service. Once that’s paid though, Tim, the medical bills are done for the rest of the year.

[0:14:26] TU: Wow.

[0:14:26] JW: So that $226 deductible is your medical bill and it’s also your annual maximum. If you want to think about it that way.

[0:14:34] TU: Okay. So, very naive on this topic, Josh, but you’re just describing the differences and obviously when you talk about the Supplement plan and the lower amount, what I seem to hear is not insignificant, but a much lower amount on the deductible, less potential out of pocket versus when you reference the Advantage plans more out of pocket. What we tend to think of from our experiences right now for many of us with the insurance. So, is it fair to say that cost-wise monthly premiums, you typically see a vast difference between these two, because of that or is that – it depends?

[0:15:11] JW: No, you’re right. There’s a difference in cost. So, that would be the fourth big difference here between these two. As I’m sure listeners are putting together, if you have to pay medical bills, if you have a network. Well, you’re probably going to be paying less then for your insurance, because you’re subjecting yourselves to these medical bills into this network.

Medicare Advantage is going to be your less expensive route to take. It could even be, and folks may have seen this advertised. You could even see that these Medicare Advantage plans are zero dollars per month. Okay. Those are actually some of the most popular advantage plans.

[0:15:46] TU: Interesting.

[0:15:48] JW: Some of my clients will choose is the zero-dollar premium plan. Okay. Now with supplements, though, these are going to have a monthly cost. There aren’t any zero-dollar Medicare supplements. This currently, I mean, it all really depends on the area that you live in. I just work here in the state of Ohio, but here in Ohio, a good rule of thumb for a turning 65 mail for a Medicare supplement, depending on the plan letter that’s chosen is probably going to be somewhere between $130 to $150 a month for a Medicare supplement. Female would be a little bit lower. Again, that’s a pretty rough estimate, Tim, just depending on the service area that you’re in.

[0:16:37] TU: Yeah. It’s really helpful, though, Josh. I’m thinking about how this integrates back with the financial plan. It’s taking me back to episode 275. Tim and I talked about how to build a retirement paycheck, right? We’ve been accumulating funds. Hopefully, for the majority of our careers. Now we have to be able to replace what was coming from our income through the different retirement vehicles that we’ve built, right? 401Ks, IRAs, maybe we have some HSA funds that can come into play here, as well.

This is important, right? Because if you’re in the plans that you were just referencing on the supplement side, where let’s say you’ve got a monthly premium of $150 a month, and then you know what the deductible is going to be, like we can start to build those numbers into the monthly paycheck that we’re going to be receiving during retirement, essentially paying ourselves or if we’re on an advantage plan, and let’s just say there’s an advantage plan with the example you gave where there’s a zero-dollar premium, but we know what the out of pocket match your limit is, like, okay, we need planning for that, right, or planning for some of the other expected expenses from cost sharing of the healthcare.

You can really start to see how and understanding of the options and the plans and what the impact could be annually, as well as monthly when you talk about something like a monthly premium, could build into the financial plan, build into building that retirement paycheck as we make that transition into that phase.

[0:17:56] JW: Yeah, exactly.

[0:17:58] TU: All right. Number five, Josh. This is one that I didn’t think about that was really interesting when you were talking about this in our preparation for the show. With some of the variances between the plans, when it comes to things like dental, vision, hearing, or the extras, tell us more here.

[0:18:14] JW: When it comes to dental, vision and hearing, this is becoming a much bigger issue, I would say than it used to be. I’ve been doing this for several years now, and back when I started, folks weren’t that concerned about dental, vision, hearing. However, advertisements on TV, the mail that folks are getting that are turning 65 heavily focuses on this side of things. Medicare Advantage plans are going to include dental vision and hearing benefits, as well as other things too, like over-the-counter items, allowances that the plans give people several dollars a month that they are a quarter rather than they can use to buy Tylenol or Advil or Band-Aids and Toothpaste, that kind of stuff.

Advantage plans are going to include those kinds of things. Again, it’s usually at no additional cost. Even a zero-dollar plan would include these things. Whereas Medicare supplements do not include any of these kinds of things, but you can buy them separately, just like you buy the Part D, separately. You can pick up dental vision hearing benefits at an additional cost if you’d like them.

[0:19:17] TU: Josh, before we wrap up by talking about some of the common mistakes that you’re seeing, folks making when it comes to evaluating benefit options and selecting a policy. Summarize here for us the five points that we just talked about as, again, individuals may either be choosing their own policy, working with a family member or working with patients that they can take away this information.

[0:19:36] JW: Yeah. The easy way that I like to describe it is this. If you go with a Medicare Advantage plan, this is going to be your less expensive route to take. It’s going to include Medicare Part D. It’s going to include dental vision hearing. However, you are going to have a network and you are going to have medical bills along the way as you use it. Medicare supplements are your more expensive route to take. They don’t include drug coverage. They don’t include dental, vision, hearing, although you can buy them separately if you’d like. However, you don’t have the medical bills and you don’t have the network to be concerned with.

If you’re a pharmacist out there and you’re trying to quickly explain this to a patient, maybe just go about it that way. Medicare Advantage is less expensive. There’s a network and there’s medical bills. Supplement is more expensive, but it doesn’t have a network and it doesn’t have medical bills.

[0:20:29] TU: Great summary, Josh. I’m curious, like rough numbers. What do you see as like a distribution between these two buckets as you work with those going into Medicare enrollment?

[0:20:39] JW: Yeah. That is a great question. That’s one that’s become very common as my clients are sitting down trying to make a decision on what they want to go with. I’m finding now, Tim, and it didn’t used to be this way, that it is about a 60-40 split. About 60% are going the Advantage plan side and about 40% are going the supplement side. When I first started, it was probably 70-30 the other way or heavily weighted on the supplement.

I think one of the big reasons for this is the marketing. Advantage plans are much more heavily marketed to people who are new to Medicare. I said before, a lot of people think that they are the only option. Not that they’re a bad option, but again, folks are just having much more education, getting much more education about Advantage plans than they are supplements.

[0:21:32] TU: Let’s talk about that marketing because I think that’s one of maybe a little bit too harsh to call it a mistake, but I think the influence of the marketing can be real. I’ve seen many of these commercials, Josh. I think I know the ones you’re referring to and just the impact that whether it’s mail marketing, TV, radio, a combination of can have and sway in someone in one direction or another. Tell us more about that. Even some of the other common mistakes you may see folks making when they’re going through the selection process.

[0:22:03] JW: Yeah. Those commercials are becoming very popular. We’re talking about like the Joe name, this commercials guys that you can’t help but see, especially getting here into the fall into annual enrollment. Those commercials, the mistakes I see people making is buying a plan based off of what they’re seeing just on those commercials alone. If you actually pay attention to one of them, they are referencing primarily the perks of the plans.

The dental, vision, hearing benefits, they may even say things like call and check your zip code, because you could get a plan where you don’t have to pay for your Medicare premium and at all. The plan will pay for it for you. In my opinion, those aren’t the only things you should factor in when you’re buying health insurance. You should factor in other things too, like does your doctor take the plan? That’s a pretty big one.

Yeah, you might have a nice dental benefit, but when you need to go to your primary care physician and they say, “No, we don’t take this.” How valuable is that dental benefit now? Other things, folks don’t necessarily consider, especially on, and we can get into this more if you’d like, but these relatively new to the game Part B, give back plans that pay some or all of your Medicare premium. You got to think from an insurance company’s perspective, if they’re willing to pay your Medicare premium for you, what do you think that’s going to say about the benefits they’re going to provide in the plan?

[0:23:31] TU: Yeah.

[0:23:32] TU: Primarily translates to higher medical bills to you. These are just things that I feel like are important for people to consider that you’re buying a health insurance plan, you want it to be solid when you need it. You don’t necessarily want to buy a plan, because it gives you $100 every quarter and over-the-counter items limit. Those are some of the mistakes I see people making. They buy a plan based off of perks, not necessarily on the day-to-day usage of the plan that could be more important.

[0:24:04] TU: Yeah. Which is, it’s a different form of marketing, right? It’s not necessarily a commercial, but it’s a different form of marketing to hook someone into a policy. That’s a good a good call out. I think both of those Josh, to me highlight the value and you showed me that worksheet, that side-by-side worksheet of, “Hey, we’re looking at supplement plans, we’re looking at advantage plans.” We’re applying somebody’s personal situation. You’re sitting down with them one-on-one, talking through the benefits and the options.

That really brings the life to me, the value that an agent, especially someone specializing in Medicare, such as yourself can be helping, whether it’s the person directly that’s selecting the benefits, whether it’s family members that are involved, or for our pharmacist community, again, especially those working in community practice. I know these questions come up all the time in terms of, “Hey, I’m a patient, I go to the pharmacy, I ask my pharmacist about the policy or what should I be thinking.”

My question here is your work is obviously in Ohio. If we have pharmacists in Northeast Ohio, shout out to Josh, get connected with him for sure as well, but much of our listeners may be across the country. So, words that you would have to share in terms of what are some things that folks can look for in trying to develop a relationship with an agent as a pharmacist or for those that are looking to select a policy for themselves or a family member and partnering with an agent that way, as well.

[0:25:23] JW: Yeah. I mean, first of all, from the pharmacist’s perspective, I do work with several pharmacists and chains and whatnot. I would say from your perspective, don’t feel like you need to be the expert on Medicare Part D, specifically. You can say, “Hey, I don’t know all the answers on what plan you should pick, but here’s a guy you can call, or here’s a girl you can call, they know. They do this for a living.” The other thing too, guys, is it saves you time.

I mean, I see, I’m in and out of pharmacies a lot. I see how busy you are. I can imagine how stressful it is when you have 10 or 20 prescriptions you need to fill and somebody asks to go into the private room and say, “Hey, what prescription drug plan is going to be best for me next year?” It can just take up a lot of a lot of time I would imagine. Again, having an agent you can refer to, to handle those questions for you would save you a lot of time and alleviate that pressure of having to feel like an expert.

[0:26:26] TU: Yeah. Well, this was great, Josh. I really appreciate you coming on the show sharing your expertise. As I mentioned at the beginning, it’s been a long time in the making covering the topic we haven’t done much about before. We will link in the show notes. Josh’s LinkedIn profile, email. If folks have questions, as well as a link to the insurance firm that he works with right now. So, you can check all that information out in the show notes. Josh, thanks so much again for coming on. I really appreciate it.

[0:26:51] JW: Yeah. Thanks for having me, Tim. Go Bills.

[0:26:53] TU: That’s all. This is the year. Let’s do it.

[0:26:55] JW: This is the year, Tim. It’s the year.

[0:26:57] TU: Awesome. Thanks, man.

[0:26:58] JW: Yup.

[0:26:59] TU: Before we wrap up today’s episode of the Your Financial Pharmacists podcast, I want to again thank our sponsor, the American Pharmacists 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 forward slash join using the coupon code YFP.

[DISCLAIMER]

[0:27:39] TU: 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 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 Pharmacists, unless otherwise noted, and constitute judgments as of the dates published. Such information may contain forward-looking statements, which are not intended to be guarantees of future events. Actual results could differ materially from those anticipated in the forward-looking statements.

For more information, please visit yourfinancialpharmacist.com/disclaimer. Thank you again for your support of the Your Financial Pharmacist Podcast. Have a great rest of your week.

[END]

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YFP 071: Ask Tim & Tim

Posted on October 25, 2018November 2, 2022 by yfpadmin

Ask Tim & Tim

On Episode 71 of the Your Financial Pharmacist Podcast, Tim Ulbrich, Founder of YFP, and Tim Baker, YFP Team Member and Founder of Script Financial, tackle 10 listener questions that were posed in the YFP Facebook Group, covering a wide array of topics like investing, refinancing student loans after pharmacy school, taxes, and more.

Have a question you would like answered on a future episode of the show? Make sure to join the YFP Facebook Group to pose your question to the YFP community or shoot us an email at [email protected].

Summary

Tim Ulbrich and Tim Baker field 10 questions from the YFP community. The first question asks about the pros and cons of a traditional 401k versus a Roth 401k. Tim Baker explains that “Roth” means after tax (Roth 401K, Roth 403B, Roth IRA) and a traditional 401k means pre-tax. He explains that there are different participant contribution amounts to 401Ks and that you are able to have a traditional IRA and Roth IRA that you can put aggregate money in each year in separate systems. Question 2 asks, what is something you wish you would’ve started in pharmacy school based on what you know now? Tim Ulbrich says first become educated, especially around student loans, work in school to help set yourself up for a career to to form connections and skills, and, lastly, look at the amount of money you are borrowing as real money that you’ll need to pay back. Question 3 asks how to start earning interest on monetary gifts a child has received. Tim Baker responds that first you need to know the goal of the money. From there, you can put it in a high yield savings account or CD or put it in an index fund. However, a 529 is probably the best vehicle for the money to be put in, as it offers tax advantages. Question 4 asks about unconventional pharmacy jobs. Tim Ulbrich says that 45% of jobs are in community pharmacy and 30-40% are in residence training, however there are still many different avenues of unconventional pharmacy jobs to explore. The best advice is to find a mentorship, either within your college or outside, to help you see other possibilities. Question 5 asks about online banking and suggested companies other than Ally. Tim Baker says that it’s important to gauge the ease of use, customer service, and fees charged. These online bank accounts are best used for separate emergency funds or storage accounts.

Question 6 asks if there is any benefit to staying with the same home and auto insurance or switching companies for a better rate. Tim Ulbrich suggests that you should assess the price with the service you receive. Nickel and diming policy coverage over a company you are happy with should be avoided as it’s important to put value over relationship. However, if there is a significant savings, then, of course, switching makes sense. Question 7 asks what should be taken for an initial appointment with a financial advisor and what questions should be asked. Tim Baker says it’s important to ask good questions, such as how would we interact and how often, are you fee only or fiduciary, how is the fee calculated and how are you compensated? If you are going to a financial advisor strictly for guidance with student loans, be aware of how much knowledge they have. Question 8 asks if anyone has repaid their student loans through the federal government with income based options, such as IBR or PAYE, and if the better option is refinancing student loans after pharmacy school. Rim Ulbrich says that you have to assess what the best repayment option is for you. Run the numbers, look at the feelings you have toward carrying student loan debt for 20-25 years, assess your financial goals, and lay our all of your options. From there, you are able to make a decision. Question 8 asks if it’s better to file taxes married filed separately when a spouse is eligible for PSLF. Tim Baker explains that there are situations that married filed separately is the right way to go, however, it depends on the repayment plan. He suggests to do a tax projection and student loan analysis to see if you’re approaching the situation in the best way possible. Lastly, question 10 asks if someone should stick with federal loans to keep a minimum payment down or refinance to lower their interest rate. Tim Ulbrich suggests that as the interest rate market rises, refinance offers may not be as attractive. If you refinance on $100,000, a 1-2% interest rate change in refinancing may largely affect how much you are repaying. Regardless of the math, refinancing is off of the table if you are pursuing PSLF.

Mentioned on the Show

CommonBond
YFP Facebook Group
Have a question about investing? Ask us!
YFP Episode 70: Pre-Planning for Tax Season with Paul Eikenburg
Nate Hedrick, Real Estate RPH
YFP Episode 69: Carissa Explains It All: How One Pharmacist is Accelerating Her Financial Goals Through Rodan & Fields
YFP Episode 63: Intro Into the Side Hustle Series
YFP Episode 38: The Happy PharmD’s Journey to Becoming Debt Free with Alex Barker
Tony Guerra’s Pharmacy Leaders Podcast
YFP Episode 53: One Pharmacist’s Journey From Financial Ignorance to Financial Independence with Tony Guerra
Nuts and Bolts to Hiring a Financial Planner Guide
YFP Episode 15: Financial Planning Series Interview with Tim Baker (Part 1)
YFP Episode 16: Financial Planning Series Benefits of a Financial Planner (Part 2)
YFP Episode 17: Financial Planning Series Questions to Ask – Hiring a Planner (Part 3)
YFP Episode 62: The ‘Other’ Forgiveness
YFP Episode 18: Maximizing the Benefits of Public Service Loan Forgiveness
YFP Student Loan Course
Schedule a Tax Review
Student Loan Refinance Calculator
Have a question and want it featured on the show?

Episode Transcript

Tim Ulbrich: Hey, what’s up, everybody? Welcome to Episode 071 of the podcast. Excited to be alongside Tim Baker as we dive into an Ask Tim & Tim episode where we take a wide array of questions, 10 from the YFP community that were posed in the YFP Facebook group. So Tim Baker, how you doing?

Tim Baker: Doing well, how about you, Tim?

Tim Ulbrich: Good. So you’re back from Iceland. Welcome back. How was the trip?

Tim Baker: Oh, it was awesome. Yeah, it was great. You know, I feel like the last few weeks has been crazy, but it was good to get away. I think I literally didn’t touch my phone for about a week. So now I’m trying to get back into the swing of things, but Iceland is an interesting place to visit for sure.
Tim Ulbrich: It seems like I’ve noticed a lot of friends from college and coworkers are taking that trip, it seems like on the East Coast here. I know Cleveland has direct flights over to Iceland, I’m guessing something similar by you guys. Seems like a popular destination to begin to see that part of the world.

Tim Baker: Yeah, it’s funny because like prohibition ended like for beer, I think in like the late ‘90s — don’t quote me on that — which was interesting. But I think since then, the tourism has become the biggest staple in Iceland, moreso than fishing. But you have a combination of just like incredible scenery, like almost where you’re on a different planet. And of course, beer drinking and things like that. So yeah, it was great. It’s one of those vacations where you’re out in the country, but it’s somewhat affordable. It’s expensive when you get there in terms of like food and things. But oh man, it was great. Just good to get away and reset and, you know, I’m ready for the final quarter of the year.

Tim Ulbrich: Yeah, welcome back. We’re excited to jump into this episode. And we’re actually getting together end of this week in West Palm Beach, Florida, where Tim Church lives. We have a YFP retreat, so excited to be jumping into all things YFP. And actually, as a part of that time that we’re together — to our listeners, we’re going to be recording an episode that’s taking all questions related to investing. So if you’re listening to this episode and you have a question, all questions investing, shoot us an email at [email protected] or jump on the YFP Facebook group and pose your question and we’ll make sure to feature that on the upcoming episode where we do that Q&A session. Alright, so here’s the format. We’re going to go back and forth. We have 10 questions, great questions from the community. We’re going to read the question, we’re going to answer them between the two of us, and then we’ll jump in with some feedback that the community has provided as well. So Question 1, Tim Baker, comes from Nidhee (?), and he asks, “What are the pros and cons of a traditional 401k versus Roth? Currently, I’m trying to maximize my traditional 401k. Any suggestions would be helpful.” What do you think?

Tim Baker: Yeah, such a great question. And you’re starting to see more and more 401k’s offer a Roth component. So just kind of to break this down for listeners who are kind of a little murky about this, anytime you see “Roth” before 401k, 403b, IRA, you’re going to think after-tax. So the money that gets thrown into that account is after-tax. Now, if you see a traditional 401k, traditional IRA and traditional 403b, you’re going to think pre-tax. So the money goes into that bucket pre-tax. And typically, the opposite is true when the money comes out. So it goes in pre-tax, it usually grows tax-free, and then it comes out taxed. And then the opposite is true if it goes in after-tax, it grows tax-free, and it comes out tax-free in the after-tax world. So to get back to the question, I think the Roth component is actually a great component to the 401k because a lot of pharmacists because of their salary, they make too much to actually contribute directly to a Roth IRA. So when you sign up for your 401k or when you’re adjusting your 401k, you’re going to want to see if there is a Roth component and if that makes sense for your particular situation. In our last episode, we kind of talked about all the different levers to pull when it comes to, you know, should I pay the tax now? Should I defer the tax? What does that look like? And this is actually one that you can do. So a lot of people get confused by kind of the Roth 401k because it really, you can’t commingle those accounts. So it actually looks like you have two accounts when you’re funding this. So basically, you go in and you would see a balance for your traditional 401k. And if there’s a match, that’s where all your match dollars are going to go from your employer. But for your Roth, if you’re deciding to fund that, you know, those are basically funded with after-tax dollars. So you would go in and you would set up an allocation similar to your 401k, your traditional 401k. And essentially, the difference would be just if those dollars are taxed or not. So that’s essentially the basics there.

Tim Ulbrich: Tim, one of the questions I often get here — and I think it’s good just to clarify for our listeners because the term “Roth” gets confusing when they see it as a Roth 401k versus a Roth IRA. Does the Roth contribution towards a Roth 401k go towards or impact the total of the $5,500 that you can contribute in a Roth IRA? Or are those completely separate buckets?

Tim Baker: Yeah, to kind of draw the lines around the 401k and the IRA. So you as a participant in the 401k, you can put in $18,500 — these are 2018 numbers — per year in aggregate between a traditional 401k and a Roth 401k. In the same breath, you can also have a traditional IRA and a Roth IRA that you can put an aggregate $5,500 per year. So these are, they’re essentially separate systems. So if you put money into a Roth IRA, it doesn’t necessarily affect how much money you can put into a Roth 401k.

Tim Ulrich: Got it, thank you.

Tim Baker: So the next question for you, Tim, is a great question from the Facebook group. “My name is Steven. I recently joined the group, and I really enjoy all of your posts about business and financials. I am in my third year in pharmacy school and wanted to ask you this question. Knowing what you know now, what is something you wish you would have done or started in pharmacy school?” That’s a great question.

Tim Ulbrich: Yeah, great question, Steven. And first of all, kudos to you for being proactive as you’re in pharmacy school. I think so many in this community — and I think some even commented in the feed of the question that you posed saying, “Hey, I wish I would have been thinking about this sooner,” and I know that’s something, Tim, that I often think back of, wow, what would have happened if I would have actually dove into this topic, been a little bit more proactive instead of reactive where looked up, had a ton of debt and then tried to figure it out and felt the pain. And that was the beginning of trying to figure this out. And I think that gets to the point of my answer to Steven’s question. If I had to go back and do it all over again — and this is not a sexy answer — to me, it’s all about being educated, specifically probably around student loans for many of the students that are listening. You know, I think as I look back, I was trying to dabble in the Roth IRAs and learn some other things here or there. All the while, I had student loans that are accruing above $152,000 at 6.8% interest, I didn’t have really a solid emergency fund, and I was just doing things out of order because I didn’t have a good education and understanding of what it meant to have a solid financial base. And that even, to me, trickled into new practitioner life where I was getting ahead of myself in some areas around kids’ college saving and other things at the expense of having, again, a solid emergency fund, the right life insurance protection, making sure I had end-of-life planning documents, all the things that we’ve talked about before around having a solid financial plan. So Steven, the one thing I would do, which you’re obviously doing, is getting involved in this topic, being educated. And hopefully you can inspire your peers and your friends and your coworkers to do the same. The other thing that I would do — and I know a couple people had responded, and actually, we had a response from Steve, who is another fourth-year student. And one of the things he mentioned was definitely work in school. And I would advocate for that. And I know I had a lot of faculty members who would tell me, “Hey, don’t work in school. You’ve got to focus on your academics.” Of course you have to graduate, otherwise your degree and not having one is counterproductive. But many students who can balance these things — I’m not saying you need to work 30-40 hours a week. But obviously a little work experience is going to, you know, provide a little bit of a financial component. But probably more important, it’s going to set you up for career components, going to allow you to begin to form those connections in your network, and I think as I now see new practitioners coming into the workforce, I think it gives you those skills that you just aren’t going to get in school, right? Dealing with difficult customers and time management and coworkers and understanding all of the things beyond the books and what you’re learning in school. So Steve, if you haven’t yet too, make sure to take a look at the responses from your peers and some of the group because there was some great feedback around — you know, I really like what Vbar (?) had to say about “borrow only what you need for tuition and fees because these student loans are killers.” And we say this over and over again on the podcast that if you look at the average indebtedness of a pharmacy graduate, those numbers are often double what are the numbers for tuition and fees. And that’s because of the borrowing that’s happening for cost of living expenses. So do everything that you can, especially in the interest rate market we’re in for student loans, everything you can to minimize the costs you’re borrowing while in school.

Tim Baker: And I think just to piggyback on that, Tim, one of the things that I think I hear quite a bit is it’s almost like Monopoly money, you know, like the loans you’re taking out. So I think if you can, you know, in your mind, make it real. And I think the best way to do that is to, you know — I know that with the average debt load being $160,000, I know that a standard — that equates to a standard payment of like $1,800 and change. So if you have loans that are $320,000, then you’re looking at a $3,600 payment. So obviously listeners, if you’re P3, P4, you’re going to know more or less where you’re going to fall in that, so I think — like you said, if you can work — anything you can do to kind of make it more real. And I think once it becomes more real, then you’re more likely to actually be intentional, I think, with what you’re trying to do, whether it’s working or just being more frugal as a student. I think the sooner you do that, I think the better you will be as you enter into repayment.

Tim Ulbrich: Great advice. Great advice. Our third question comes from Rachel in the Facebook group, who says, “My husband and I just had our first child and want to start earning her interest on the monetary gifts we have received for her. Any advice and suggestions?” So Tim Baker, I’m guessing maybe there’s a question behind the question here around college savings for kids or just investing money long-term for a child. What are your thoughts? And what do you do with clients typically in this arena?

Tim Baker: Yeah, I think the question with the question would be like, well, what’s the goal? What are we thinking we want this money for? If we want something that’s a sure thing and we want to be able to access this when the child is growing up for whatever reason, then something like a high-yield savings account or a CD might be the best bet. If it’s more of a long-term goal and we don’t really have an education goal in mind, maybe it’s just sticking the money in an index fund. But more acutely, I think the 529 would probably be the best vehicle to put money into that these monetary gifts, even some of these 529s are getting pretty creative. Like I know the Maryland 529, you know, I can send out links to grandparents and aunts and uncles and say, “Hey, contribute to Olivia’s 529.” I think the big advantage there is you typically, most states will give some type of tax deduction. And even with the new tax code we talked about a little bit last episode, you know, the 529 can now be used for kind of secondary school, high school, middle school, that type of thing. So you can actually use it as a pass-through to get a state tax deduction. But then longer term, you can invest it similarly like you would your 401k, your IRA, where you’re putting money in there and as it accumulates over 15, 16, 17 years, it provides a return on the investment that you can apply towards your child’s education. So you know, there’s a lot of I guess different sides to the answer. And same thing with 401k’s and IRAs and things like that, not all of them are created equal. So you’re going to want to really pay attention to fees and the investments that are there for you. But obviously, your state is going to play a role in that. But those would be kind of the top things that I would rattle off in terms of advice and suggestions.

Tim Ulbrich: Yeah, just a couple things to add there, you know, especially knowing where we are in the year and coming up on the month of November, if Rachel, if her and her husband are thinking 529 — and I don’t know, I’m guessing this is every state in terms of the income tax deduction, I know here in Ohio I think the limit to that is $2,000. And so depending on the amount that they’re looking at doing, there may be a play there to divide some between the 2018 and some between the 2019 year rather than going above that $2,000. And I think you and Paul did an awesome job last week talking about that in the context of tax. The other thing I think about here, Rachel and to the broader community that’s listening — and Tim Baker, you helped I think Jess and I realize this, that not only the why of what the goal is, what you’re trying to do, what you’re trying to achieve, but I think for those of us that graduated with tons of student loan debt, we tend to probably be compensated a little bit too much on the other side when it comes to kids’ college because we want to avoid that, naturally, for our own kids, right? And so I’m not suggesting here that Rachel, you and your husband take your child’s money that was received for your child, but I am just bringing up the point that as you and your husband talk through this going into the future, making sure that college savings for children is done so in the appropriate context of your own financial plan. And I’ve seen a lot of new practitioners, myself included, who, again, to my point earlier, maybe don’t have those foundational items like the right insurance and emergency fund, etc. but are running off saving for kids’ college, and that’s 18+ years away. So again, just thinking about the priority and the order of things within a financial plan.

Tim Baker: Yeah. I’ve actually had some clients like stop at a certain amount of kids because their goal was to pay 100%. And I mean, obviously, it’s a personal choice. But there’s different ways you can go about funding education, it’s important to kind of talk with your partner and maybe a planner to kind of work through that. So great question by Rachel. So Tim, next question for you is — this is from Elise. “With the ever-changing pharmacy job market, I’m starting to think more about unconventional pharmacist jobs, i.e. not in hospital or retail. I think in school, we’re kind of programmed to believe that those are our only two choices, so it’s hard to even know where to begin looking for what else is out there. I’m wondering if anyone has experienced doing something other than hospital or retail that they really enjoy and is financially stable, offers good perks and benefits. Thanks.”

Tim Ulbrich: This is a great question, Elise. Thanks for taking the time to pose it. And I got fired up when I saw this question, Tim, because in my former day job at Neomed, I did a lot of career counseling, advising with our students. And I cannot tell you how often I heard from our own students, even as a P1 or a P2, even before they’ve really been getting along that path of looking for jobs, there tends to be this mindset that Elise is describing of, I’ve got one of two options, right? I’ve got retail community pharmacy, and I’ve got hospital pharmacy, which more often than not means residents to train.

Tim Baker: Right.

Tim Ulbrich: And really, if you look at the workforce data, the reason people think that is valid. If you look at the last workforce survey that was pushed, 45% of all pharmacists’ jobs are in the community pharmacy sector. Now, that can be obviously retail chains, CVS, Walgreens, etc. It could be independent pharmacies, but that’s almost half of the workforce. So that’s why I think you see — and depending on the school that graduates, you’ll see these numbers upwards of 50, 60, 70% depending on the region and the job that they have available. And then I know at Neomed, we saw 30-40% of our grads every year would go into residency training. So you put those two together, and that’s 80% or so of a graduating class. And so I think it’s easy for students and new practitioners to think these are my only two options. And for those listening that also have this question, please make sure to go check out the Facebook group and look at the answers because there’s some great examples out there that were highlighted of people that are doing different things. Somebody’s working for a hospice, pharmacy benefit manager on the side. People that are in pharmacy informatics. Nate Hedrick, who we’ve had featured on the show, the Real Estate RPH, during our September series on home buying, talks a little bit about his job working for a pharmacy benefit manager as a sales team clinical liaison. So very unique, niche position. And he actually I know did an in-patient hospital residency. So there’s many different paths and options, and I think the advice I would have to somebody asking this question is begin to find the mentorship and the people that are going to offer you this viewpoint, if you don’t feel like you can get it as a student at the college that you’re at. So are there new practitioners, are there people with an organizations, associations that you’re connected with that have these positions that are the “nontraditional” or unconventional positions that you can begin to form those relationships and networks and get them to help you along this process because the reality is we all know pharmacy’s a small world and we know that when it comes to these niche markets, it’s all about networking and building those relationships. So if you want to find something beyond the hospital, community pharmacy world, go find those practitioners who are out there. You know, you’ve talked before on this podcast, Tim, the 1,000 cups of coffee. You meet with people, have them introduce you to three more people, and keep going and going and going. And it may take 10 or 20 or 30 conversations, or it may take two, but doors will open over time. And you’ve just got to put the work and effort into doing that. The other thing I would just highlight, Elise, in response to your question, is if you haven’t done so already, check out the side hustle series that Tim Church has been doing on this podcast, episodes 069 and 063, also in episode 038, we had Alex Barker from the Happy PharmD on talking about his journey. He’s got some great context — or excuse me, he’s got some great information on the unconventional jobs that are out there. And then Tony Guerra, pharmacy leader and podcast host, we had him on in episode 053 as well, did a great job of talking about some of these other options. So Elise, thanks for your question. Alright Tim Baker, question 5 here comes from Lane inside the Facebook group. “What other banks do people use besides Ally? A Google search showed Northfield Bank offers higher APY.” And I think maybe we’ve brainwashed our audience unintentionally about Ally because you and I are Ally users, and we get giddy when we get the rate increase emails that come. I think they usually come on Friday afternoons.

Tim Baker: Yeah, and I think I missed the last one because when I was researching a bit for this question, I saw that Ally’s now at 1.9%, so I think I missed that last bump, which I’m pretty excited about.

Tim Ulbrich: So what — and maybe, so Lane is asking here what other banks do people use? But maybe there’s a better question here — not to hijack her question — is what should people be looking for when they’re choosing a bank specifically for more of that long-term savings, you know, emergency fund and whatnot.

Tim Baker: Yeah, so I think that having a bank set aside for kind of your long-time savings like emergency fund and storage account, which might be like a travel fund, a car maintenance, a home maintenance fund, I think what you’re really trying to find is something that there’s ease of use, there’s an app, there’s a website, that doesn’t charge fees, that you can move money in and out fairly easy. And for me, like when I started kind of recommending, I found that when I started working with clients, this was kind of a topic that came up over and over again. Where should I bank? And where should I put money? And again, it’s not something that most financial planners I think even think about because it’s very much investment-centric, and we’re not really thinking about budgeting and debt and things like that. But this was kind of a key question that came up over and over again, so when I did research on this topic awhile ago, those were some of the things that I was trying to figure out. OK, where is the best bank to park money and get a little bit of return and not be charged fees and all that kind of stuff. So I actually tested out Ally, Synchrony Bank, Capital One, and I think Barclays was the fourth one I looked at. And although Synchrony at the time was kind of providing a little bit more return, I just found that from a great experience across the board, Ally was far and away better in terms of opening accounts, moving money in and out of it, just the app, all that stuff. To me, I think Ally was head and shoulders, even I think above Capital One 360, which obviously is a huge bank. So again, I’m a big proponent of kind of keeping this type of banking kind of separate from your everyday kind of monthly expenses. So if you bank with BNC or Chase or something like that, I like kind of a separate entity that is going to park kind of your emergency fund and kind of those storage accounts for those particular goals. So that was just my experience in testing these out. And obviously, you know, it’s a little bit of an arms race because these companies are putting money into their apps and things like that. But at the same time, I think Ally — and even for me, I know, Tim, you and Jess are using Ally. And again, we don’t get any type of benefit from talking about Ally. I just think that they have a great solution.

Tim Ulbrich: You know, it’s funny how far we’ve come in this online banking. Do you remember when Ally came out and it was kind of like, really? Are we going to do banking online? I remember those days. And you know, great customer service and I think you can obviously find that with other banks as well, but I think looking at some of the components you mentioned is great advice.

Tim Baker: OK, so next question comes from Kara. “Home and auto insurance question. Is there any benefit to staying with the same company? We have had the same company forever, but I called MetLife to get quotes because I can get a corporate discount through my employer. For the same exact coverage, auto policies are almost half as much. Switch and save money?”

Tim Ulbrich: Yeah, this is a great question. And actually, I just went through this in the move of getting a re-quote on home and auto. And you know, obviously as Kara mentions, the number half as much, it’s hard to not say, switch. But I think you always have to consider this in the context of price versus the service that you receive. And obviously, there’s a point where you’re going to be able to save a significant amount of money. But don’t — I guess what I’m trying to say here is don’t nickel and dime policy coverage for a company that you’re happy working with that you have a quick connection if you need it and that is responsive, obviously, in the times that you need them to be responsive. And Nate Hedrick really highlighted this for me as I asked him for his input as I was shopping around on home and auto. And that was his advice back to me is, you know, look at the total cost of the policies. And if you’re talking about saving $20 or $30 and you have somebody that’s an email or a phone call away that you have a relationship with, you have to put value to that relationship. Now, obviously if you’re talking about a policy that’s half as much, unless it’s just atrocious customer service and you’re not going to be able to get that same coverage, then obviously there’s a point where switching makes sense to save some money. The other thing I always encourage people to do is make sure you look side-by-side, whether it’s a home or auto insurance policy, look side-by-side to see the coverage that you’re getting is the same because if your deductibles are changing or coverage isn’t as good, obviously that may explain the price difference. But if you loko side-by-side and say, “OK. All coverage is equal,” now you’ve got to really weigh this against what is the level of the relationships and the customer service and how much am I going to save on this? Kelsey also makes a good point. In responding to Kara, she says, “I think it depends on the company. Some will now give you money back after x amount of years you don’t have a claim. My sister is an insurance agent, and the company she had me switch to will give us back 25% of our payment if we have no claims for three years.” So obviously, that policy is built in a way that incentivizes that relationship over time. So different factors that you have to consider as you’re looking at these different companies. Alright, Tim Baker, question No. 7, Devin asks, “Hello everyone, I’m meeting with a financial advisor tomorrow, and I was wondering if there was anything I may forget to bring them that you all think would be helpful. I’m a recent graduate.” So recent graduate, going to meet with a financial advisor, what information should they be bringing? Or what questions should they be asking? What do you think?

Tim Baker: I think typically when I meet with a kind of a prospective client, I don’t have them bring anything except for questions. I know some people’s process is different. They might start kind of getting down to some of the details of kind of the work they would do and everything. But for me, I think it’s just a matter of like do I have a connection with this particular person? Do I see myself working with them for a long period of time? And in Devin’s case, it might not be a long period of time. It might be I’m just trying to get a few questions answered and then I’m going to move on. So that would be kind of the question that I would ask first is how would we interact? And how often? I think the big thing is — and again, I’m biased here — is are you fee-only? Are you a fiduciary? You know, how is your fee calculated and compensated? Can I clearly see what I’m paying you? And nine times out of 10, these will send financial advisors squirming. And I think if you see that, then it’s probably a good indication to kind of go in the other direction. You know, just a lot of financial advisors, they have minimums. So you have to have — it’s kind of like, hey, I can help you, but only if you have a quarter million dollars or something like that.

Tim Ulbrich: Right.

Tim Baker: Or I don’t have minimums, but typically when you don’t have minimums, typically that particular client is maybe ignored more so than someone who does a quarter million dollars. So I think there’s a variety of questions. I think some of my FAQs that I would give a person to ask their financial planner — and I think a big one is around like what are the conflicts of interest? Are you a fiduciary? Are you fee-only? And from my experience, the majority of financial advisors out there — and I can say this with confidence that the majority of financial advisors out there are not going to be keen on a lot of the issues that pharmacists deal with, and the big one being student loans. A lot of — one of the reasons that I decided to kind of move on from my last firm was because there wasn’t a whole lot of understanding or process around student loans, which obviously is a major pain point for pharmacists. So if Devin, if this is one of the big things that you’re going to talk with a financial planner about, ask good questions because I would suspect that a lot of people in our Facebook group, a lot of our listeners, know more about student loans than some of my counterparts, sad to say.

Tim Ulbrich: Mhm. Yeah and Devin, make sure to check out YourFinancialPharmacist.com/financial-planner if you haven’t yet done so. Again, YourFinancialPharmacist.com/financieal-planner. We built out an entire page really getting to the gist of your question. We have a free guide that answers a lot of what to look for in a financial planner. We have a list of questions that you can ask inside of that document. What are the qualifications you should be looking for, some of the things that Tim talked about there. And then also on that page, we have referenced episodes 015, 016 and 017, where Tim Baker and I talk through a lot of this as well. And on that page, for those that are interested, you can also schedule a free call with Tim Baker if you’re interested in learning more about working with a financial planner and the value that he can provide. Alright, Tim, I think we’ve got three more, right?

Tim Baker: Yeah, let’s do it. So this question is from Sabina. So the question is, “Has anyone repaid student loans through the federal government and utilized the income-based options such as PAYE or IBR, both of which list forgiveness after 20 years as an option. Any recommendations on that approach versus refinancing with private companies?”

Tim Ulbrich: Yeah, thank you, Sabina, for your question. And what really she’s asking here about is what we called in Episode 062 “the other forgiveness.” So we’ve talked a lot on the show about Public Student Loan Forgiveness, PSLF. In Episode 018, we talked about that. I think we’ve mentioned it probably in 15 other episodes, right?

Tim Baker: I think so, yeah.

Tim Ulbrich: And I’m glad we did because I posted in the group last night, there’s a lot of negative news coming out about PSLF, and I’m not going to get on the soapbox right now. News article that 99% of borrowers that applied for forgiveness didn’t get it. And while you and I think we both agree that the federal government and the loan servicers could do 1,000,000% better job than what they’ve done in terms of the PR or the press and all of this, if you really dig into the details of why people aren’t Public Student Loan Forgiveness, most of it if not all of it really isn’t a surprise. It’s either they haven’t consolidated to the right loans, they’re not in the right repayment options or they’re not working for a qualifying employer. So as I mentioned on that episode, dotting your i’s, crossing your t’s is critical. If you have questions, let us know. But what Sabina is asking is about the other forgiveness, non-PSLF forgiveness. So if you stay inside the federal student loan repayment system, and she mentioned two of the income-driven repayment plans, PAYE and IBR, after a certain period of time, 20 or 25 years, depending on the plan, there is an option for forgiveness. And the key here is you do not have to work for a qualifying employer, which is different than PSLF. However, the amount that’s forgiven is taxable, unlike PSLF, where it’s tax-free. So there’s some planning that has to be done with tax. All that we covered inside Episode 062. And so I’d reference our listeners to Episode 062, Sabina the same. And also, she’s asking about refinance. And I think the question here behind the question is what is the best repayment option for Sabina? And I know many of our listeners and followers have that question. Should I refinance? Should I stay in the standard 10-year repayment program? Should I choose one of the income-driven repayment plans? Should I go PSLF? Should I not? If I do refinance, is it five years? Seven years? Ten years? Fifteen years? And we talk a lot about choosing the best repayment option, and we’ve got a full course around that topic, specifically that I would point our listeners to as well. So Sabina, without being able to dig into the numbers, this really comes down to lots of different factors such as running the numbers on each of these options, what’s the math? What are your feelings towards having these loans around for 20+ years? What are other financial goals you’re trying to achieve? What’s your progress in those goals? And I think at the end of the day, what I’m trying to encourage you and our listeners to do is to lay out all of the options, refinance, no refinance, forgiveness, no forgiveness, PSLF, non-PSL Forgiveness — and then from there, look at all the numbers, consider some of the non-math factors, and you can move on and make that decision to ensure that you’ve got this big decision and you’ve made the best decision for your financial plan. Tim Baker, question No. 9 is from Blake, who asked, “My wife is a PA, and I’m a pharmacist. She’s eligible for PSLF, and I am not. She’s set up on an income-based repayment plan, but this will be the first year where we both have a full year of income when we go to file our taxes. We’re wondering if there is a best way to file taxes to keep her payments low to maximize the amount that’s forgiven. I didn’t know if we filed our taxes as married filing separate, would it be more beneficial than filing together?” What do you think?

Tim Baker: Yeah, it’s a great question. And it’s kind of similar to our last question. It’s kind of difficult to dig into without all of the nitty gritty details. But you know, I would say that I think that there are situations where with student loans and spousal income that married file it separately is the right way to go. And I actually have a few clients that are doing that. It also depends on what repayment plan you’re in. So if you’re in a REPAYE — and if you’re in PSLF, those are going to be the two that you are really going to want to look at is Revised Pay as You Earn and Pay as You Earn. One of them, REPAYE, it doesn’t matter how you file. It’s going to count both spousal income. Pay as You Earn, it does matter how you file, depending on if you do file married filing separately will only account for the one spousal income. So I think you have to actually sit down and maybe do a tax projection, so we talked about that last time. If you’re interested, YourFinancialPharmacist.com/tax, we’re doing tax projections right now. And maybe actually couple that with kind of a student loan consult, student loan analysis, just to see am I approaching this the most efficient way as possible. Now, it is a pain in the neck to file with your spouse to file separately for 10 years. That’s not fun. And for nine out of 10 scenarios, just strictly from a tax perspective, married filing separately offers few benefits. But if you look at it, and your benefit or your payment is hundreds of dollars a month or even equate to thousands of dollars per year, the tax benefit might not equate to that in terms of married filing jointly. So again, I think that your question, it does, Blake, it does have legs. And there are scenarios where it does make sense to actually not file jointly with your spouse, especially if you’re looking at PSLF. And it kind of just depends on some of the income and the underlying numbers with the loans themselves. Alright, Tim, last question here is question No. 10. This is from Joshua. So Joshua says, “I’m on course to pay off student loans in a relatively short period of time. I noticed that refinancing my federal loans to a private lender would decrease my interest rate, as expected. But because I’m set to pay off the loans in a small period of time, the amount saved in interest is relatively small for a pharmacist’s salary. Would it be wise to stick with the federal loans with the option of utilizing a graduated repayment option to keep my minimum payment low in case something unexpected happens that doesn’t get paid for by insurance, like having a baby, etc.?”

Tim Ulbrich: Yeah, this is a great question, Josh. And Tim Baker, I don’t know your thoughts on this, but I have a feeling we’re going to get more of this question as we see the interest rate market rise. You know, I think a year ago, we had our student loans that were hovering around, what, 6-7% fixed rate? And some of our listeners were getting refinance rates in the 3-4% and obviously some a little bit higher depending on your credit and all those types of factors, debt-to-income ratio, etc. But I think as we see the interest rate market rise, then obviously we’re going to see refinance offers become maybe still attractive but not as attractive. Would you agree with that?

Tim Baker: Yeah. Absolutely. I mean, the interest rates on here are a huge thing that’s hanging out there. I think it will always be competitive in the five-year or the seven-year, but if you’re doing like a 10-year and you’re at 6%, I think eventually that market will dry up.

Tim Ulbrich: Yeah, I mean, obviously when you’re talking about potentially refinancing $150,000-160,000 and you look at 1-2% interest rate change, that can be huge, you know.

Tim Baker: Yes.

Tim Ulbrich: And we’ve done the math before on some fairly conservative numbers, and we estimate that somebody who has the average indebtedness can definitely save around $25,000-30,000 in refinance, depending on your individual situation. So and I like the way Josh asked this question because I can tell he already did the math. And that was the first suggestion I would have for our listeners is go to YourFinancialPharmacist.com/refinance, shoutout to Tim Church, who worked hard to build out a refi calculator, so you can look exactly to see as you get quotes from different lenders exactly what is the difference? How much are you going to save? Is it worth it? And based on those savings, you can then make the decision — or projected savings — you can make the decision to switch or not. Now, I must clarify, any time we talk about refinance, you know, regardless of what the math says, if anybody’s pursuing loan forgiveness, obviously refinance should be off the table because once you refinance, you’re taking yourself out of the federal system into the private system. You’re then making yourself ineligible for a refinance — or for forgiveness, excuse me. So for those who are not pursuing forgiveness who are then doing the math on a refinance, now the question becomes what am I giving up by getting out of the federal system? And how much am I saving? And is it worth whatever I am giving up? And you’ve talked about before several times on this show that 10 years ago or so, there was some vast difference between the benefits of the federal program and the private system. And those really have gone away because as you’ve made the point, when you have such a lucrative market, those private companies have to be competitive against whatever the federal system is offering. And so I think as we now look at some of these major lenders that we have, obviously pumped on our page as well, SoFi and LendKey and Common Bond, etc., you know, they really are becoming apples to apples with the federal system, with of course the exception of the forgiveness clauses. Now, there’s a couple lenders that are still out there that do not offer a discharge on death and disability, so of course you need to look at that as a factor. And if you’re going to get a much better rate from them, you have to weigh that against the risk that you’re taking on there. But for me, it’s starting with doing the math, seeing what the savings are, and then making the decision as to whether or not you’re going to switch. And again, YourFinancialPharmacist.com/refinance, we’ll give you the information to get started. The other thing I want to add here, which is the second part of Josh’s question, is would I just be better off with a smaller minimum payment in an extended or graduated plan in case something unexpected comes up? Now, I think this goes all the way back to budgeting and financial planning and really trying to get a feel for what are you locking yourself into month-to-month. And the thing I would say here to Josh is don’t forget that you can refinance more than once. So if you’re looking at your monthly budget, and you’re saying, “Oh, I’d be really squeezed by a five-year refinance, but I feel really comfortable about a 10-year, and then I’ll reassess in 12 months or 18 months or whatever,” you can always refinance into a 10-year, and then you could reevaluate that into the future. Or you choose a lender that allows you just to make those extra payments, right? Which are all of the ones that we have listed on our website. So don’t feel like you’re locked out of that because of a refinance. You could choose a longer term period and then you could obviously make extra payments or you could reassess and re-refinance at a later point in time. Alright, Tim Baker, good stuff. This was fun to take on these 10 questions. I think we’ll be doing more of this. So again, as a reminder to our listeners, if you have a question that you would like featured on the show, shoot us an email at [email protected] or jump onto the YFP Facebook group if you’re not already there, join the 1,700 other pharmacy professionals, great conversation, great community, and certainly you ask a question, you’re going to get a lot of good feedback in addition to Tim and I — Tim, Tim and I jumping in as well. As we wrap up another episode of the podcast, I want to again take a moment to thank our sponsor of today’s show, CommonBond. CommonBond is a on a mission to provide a more transparent simple and affordable way to manage higher education expenses. There approach is no big secret…lower rates, simpler options and a world class experience…all built to support you throughout your student loan journey. Since its founding, CommonBond has funded over $2 billion in student loans and is the only student loan company to offer a true one-for-one social promise. So for every loan CommonBond funds, they also fund the education of a child in the developing world through its partnership with Pencils of Promise.Right now, as a member of the YFP community you can get $500 cash when you refinance through the link YourFinancialPharmacist.com/commonbond. Again, that’s YourFinancialPharmacist.com/commonbond. And one last thing if you could do us a favor, if you like what you heard on this week’s episode, please make sure to subscribe in iTunes or wherever you listen to your podcasts. Also, make sure to head on over to YourFinancialPharmacist.com, where you will find a wide array of resources designed specifically for you, the pharmacy professional, to help you on the path towards achieving financial freedom. Have a great rest of your week!

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