Stephanie, M.D., 36
Stephanie is a neurosurgeon who has been practicing for just a few short years. She’s fortunate in that her parents paid for her college and medical school, so she does not have student loans and already earns a high salary. She is currently renting a nice apartment but is careful to keep her expenses below her means.
With a solid foundation in place, Stephanie is on track for success. She is already maxing out her retirement plan, is starting to build up a nice nest egg in her taxable account for savings, and expects to receive an inheritance from her parents. She also purchased disability insurance as well as a whole-life policy.
Recently engaged to a computer programmer, Stephanie is focused on planning a wedding, buying a new home, and beginning to build wealth alongside her new husband.
- Get guidance and help with building up a proper reserve for contingencies.
- Develop a monthly spending budget and systematic investment plan.
- Purchase a new home before the wedding.
- Make sure her income is secure for her and her new husband in the event that something happens.
- Become financially independent by age 55.
How Rx Wealth Advisors Helped:
- We developed a target amount she needs to build up in a cash “war chest” to guard against contingencies. Fortunately, she had already met her target.
- With the excess investment assets and monthly savings, we developed a tax-efficient investment strategy designed to grow over time.
- We quickly recommended she buy a large 20-year term policy at a much lower cost than her existing whole life premium and surrender the whole life insurance policy. We also recommended that she purchase a different disability insurance policy that would give her greater flexibility in her own occupation definition.
- We referred her to an estate attorney who put in place basic estate documents for her and her fiance.
- We also advised her to get a prenuptial agreement in place before marriage to protect her future inheritance, the assets she creates before marriage, and to avoid having to pay alimony should the marriage end in divorce. The agreement also addressed the equity in the home since she will be putting up her money to purchase it and will continue to pay the mortgage and taxes.
- A few years back, her parents reworked their estate plan and as part of the revisions decided to give her the inheritance outright because she was older and responsible. We had a discussion with her and her parents and advised them to put any assets she receives in a discretionary, lifetime trust to protect her inherited assets from creditors and unforeseen events. They agreed to rework their plan as they did not think about protecting the assets for her.
- We referred her to one of the numerous realtors we work with that we know will provide her with objective advice and guidance while keeping focused on the budget as she and her fiance search for a new home.
- We helped establish a reasonable budget for purchasing a new home. Through one of our numerous lending partners, we arranged a physician mortgage that required a low down payment and reasonable interest rate. She was able to keep her money working for her. We recommended she continue to own the home only in her name. After marriage, we will retitle the home in tenants by the entirety for asset protection purposes, but it will remain her property per the prenuptial agreement.
- We developed a monthly spending and savings plan that will create financial independence for her by her desired age of 55.
- We reviewed her employee benefits and given her healthy profile and low need for annual healthcare, we suggested that she change her health care plan to a high deductible plan, allowing her to max out a Health Savings Account each year.
- We implemented for her a backdoor Roth IRA strategy so she can begin building a tax-free pot of money. Additionally, we recommended she use a Roth 401(k) option for her deferrals while she is young.
- We moved her high-cost, commission-based mutual funds (purchased from her insurance agent who works for a large mutual insurance company) to institutional share classes where she had capital gains. We also liquidated other funds where the gain was minimal. We developed a low-cost, tax-efficient investment portfolio that should enhance her after-tax returns over her investing lifetime.
- We made sure her property and casualty insurance had the proper limits to ensure adequate coverage should something unexpected happen.
Stephanie is happy and has peace of mind that she has created a path toward financial independence. She appreciates the advice and has turned over the implementation and management of her finances to us so she can focus on her career and upcoming marriage.
She is confident that she can weather any unexpected event, and if something happens to her, her new husband will be fine. She and her fiancé are busy decorating and enjoying the new home.
The financial plans with her parents are now coordinated so as to not expose her inheritance to creditors and unforeseen events.
After engaging with us, Stephanie is more financially savvy about her overall fiscal health and situation.