Money Minutes for Doctors #20 - Financial Wellness in the Time of COVID

One of the many memorable lines from the movie The Big Short came as the actors sought to express confusion relative the way markets were reacting to pressures that “should” have caused a specific result. The line, “two plus two equals….fish!”, could aptly describe how many of us feel about what the markets are currently doing in the face of obvious external pressures - things just don’t make a tremendous amount of sense! And while this cynical, and oft funny, work set from 2005 to 2008 is a wonderful cautionary tale; it also serves as a solid reminder that financial wellness is a strategy of stability designed to weather the most unpredictable and unexplainable storms. And to help us design a strategy designed to successfully navigate the inclement weather, it is our pleasure to welcome back Ms. Katherine Vessenes, JD, CFP®, RFC, Founder and President of MD Financial Advisors.

About Ms. Vessenes:

Ms. Vessenes works with over 300 physicians and dentists from Hawaii to Cape Cod. Her firm uses a team of experts to provide comprehensive financial planning to help doctors build their wealth and protect their wealth while reducing taxes now and in the future. Katherine is a longtime advocate for ethics in the financial services industry; and has written three books on the subject of investment strategies. She has received many honors and awards including: numerous tributes from Medical Economics as a top advisor for doctors, multiple 5-Star Advisor Awards, honored as a Top Woman in Finance, in addition to being selected to be on the CFP® Board of Ethics. Katherine can be reached at: Katherine@mdfinancialadvisors.com or 952-388-6317. Her website: www.mdfinancialadvisors.com.

Quick Summary

Steps you can take now to help prepare for the future and stabilize your portfolio:

• Back Door Roth IRA

  • A direct Roth IRA does not work for all doctors as most docs make too much money however can transition up to $6k from an IRA then immediately convert that into a ROTH IRA.

  • Benefit: The taxes are paid up front and thus puts money into your “tax free” bucket.

  • An extra benefit now as stock market is down so you can buy more stocks for your purchase. If you are > 50 yo can do $7k.

  • Down Sides: Can’t pull out before 59 ½.  If you have an existing IRA this may not work for you.

  • The younger you can start this the better! 

  • Can also be an option for children that have income – babysitting jobs, etc and can be a great savings tool for children! 

•  Roth Conversion

  • Congress allows limited Roth conversion – take money from an existing IRA and converting to Roth IRA.

  • Must pay tax on that money that is converted to a ROTH.  Good now as market down and overall low tax rates. 

  • Works for any physician but must consider your tax budget as the taxes cannot be taken out of the account rather must be paid from another account.

  • Timing is everything! 

• Rebalancing.

  • Stocks and bonds tend to run inversely to each other. 

  • In general stocks have higher rates of return than bonds.  Allows buying and selling of stocks/bonds to keep portfolio in the desired rates of risk and investment.

  • Allows you to take advantage of market fluctuations and to make gains when the market

  • Helps to minimize investment risk.  

  Take home: if you stay on track for your retirement goals then the market fluctuations have less impact!  Stay on track with your retirement plan.