Personal Financial Planning

For Informed Physicians

Presented by:

Charles L. Nemes, CFP®,CPA

Senior Vice President, Investments Investment Management Consultant

Nemes Rush Private Wealth Management of Raymond James & Associates

(888) 298-9587 (248) 449-5436

Statewide Campus Practice Management Seminar

Raymond James & Associates, Inc. member New York Stock Exchange/SIPC

Keys to successful financial planning - Have a plan (Hope is not a plan) - Pay yourself first - Save regularly - Do it pretax - Start early - Never make your total debt load payments

more that 35% of your take home pay!

Asset & Financial Management

What is your risk tolerance?

Moderate Investor Conservative

Investor

30% stocks 70% bonds

50% stocks 50% bonds

Aggressive Investor

80% stocks 20% bonds

Asset Allocation Models are shown for illustrative purposes only. They are not intended as specific investment advise or as an official record of your account. The actual funds used and allocation to each fund will be different for each client depending on their suitability and risk tolerance and when the models are created.

What is Dollar Cost Averaging? A very powerful way to invest

The same amount invested at regular intervals - Pre-Tax: 401(k) Payroll deduction - After-Tax: savings only when pretax is maxed out

Forces a “buy low” strategy - If price is up, fewer shares bought - If price is down, more shares bought - Avoids “small investor” emotions ( 1.87% v. 8.77% )

Investment Concepts

Dollar cost averaging does not assure a profit and does not protect against loss. It involves continuous investment regardless of fluctuating price levels of such securities. Investors should consider their financial ability to continue purchases through periods of low price levels.

What is a stock (equity)

You are an owner of the company

You share in earnings of company through dividends

The value of your shares go up if company does well, down if it doesn’t

Many ways to own stock

• Shares (such as Apple and Google)

• Mutual Fund (i.e. Fidelity, Vanguard, etc.)

• Exchange Traded Funds (ETF’s) (i.e. GLD)

(unmanaged)

What is a bond - Being a creditor - No ownership of entity you loan

money to - Earns interest only - Principal paid back by a specified date

“Being a loaner (bonds) v. being an owner (stock)…”

The Advantage of Tax-Deferred Savings & Investment Increased Rate of Saving’s at No Additional Cost

($5,010) Federal Tax at 30% ($4,660)

($670) State Tax at 4% ($620)

($1,170) Monthly Post-tax savings $0

$9,850 Spending Money $10,250

Additional after tax cash per month $400

Saving Without 401(k)

Saving With 401(k)

Employee A Employee B

$16,700 Monthly Gross Pay $16,700

$0 Monthly Pre-tax Saving ($1,170)

Determine your starting point! All future progress can then be correctly analyzed

Net Worth Analysis - Example

When analyzing your debt/liabilities always consider:

Interest Rate You’re Paying • Gift? • Confiscatory?

Term Of Loan • Short/Intermediate Term? • Long Term?

Student Loan & Liability Management

Tax Effect Deductible

Mortgage Home equity loan Subject to Congress & president 6% is 4% after tax, which compares to a 4% non- deductible loan

Non-Deductible

Car loans Consumer debt (i.e. charge cards) Most student loans

WHEN ANALYZING YOUR DEBT/LIABILITIES ALWAYS CONSIDER

Example:

6% stated interest rate

33% tax rate

2% amount paid by government

4% net interest rate effectively paid by you

6% stated interest rate

Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James & Associates we are not qualified to render advise on tax or legal matters.

CATEGORIZE ALL LOANS AS FOLLOWS:

D e d u c t i b l e

Type of loan Interest Rate After Tax Interest Rate

Loan Amount Payment

Mortgage 4.12% 2.76% $125,000 $604

Home Equity 6.00% 4.02% $20,000 $384

Assumes a 33% tax bracket

Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James & Associates we are not qualified to render advise on tax or legal matters

CATEGORIZE ALL LOANS AS FOLLOWS:

N o n - D e d u c t i b l e

Type of loan Interest Rate After Tax Interest Rate

Loan Amount Payment

Car loan 4.00% 4.00% $22,000 $132

Student Loan xxx123

6.80% 6.80% $58,000 $440

Student Loan xxx223

2.30% 2.30% $72,000 $373

Student Loan xxx333

5.60% 5.60% $43,000 $296

Charge Cards 15.25% 15.25% $11,500 $185

Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Raymond James & Associates we are not qualified to render advise on tax or legal matters.

Long term More than 10 years

Long term More than 10 years

Short to Intermediate Less than 10 years

Short to Intermediate

Less than 10 years

H O M E E Q U I T Y L O A N

( 1 ) 4 % , 5 Y R S

(2)

S T U D E N T L O A N

( 1 ) 2 . 3 0 % , 9 Y R S

(3)

S T U D E N T L O A N ( 1 ) 6 . 8 0 % , 2 0 Y R S

C h a r g e C a r d 15.25%

(1)

M O R T G A G E

( 1 ) 2 . 7 6 % , 3 0 Y R S

(4)

Term

of

loan

Low High

Interest rate

(1) Always use the “after-tax” rate when comparing loans

Pay off highest AFTER TAX

interest rate loans first!

Then work your way to

the next loan, and so on.

Do not pay off low interest, long term debt early! See it as a gift. Save after tax

money instead!

After you have stratified your debt/loans:

REMEMBER: Do not pay off low, after tax, interest loans early, They are a gift!

Eliminate them one by one over time

Fill in applicable information you wish to apply to the high, after tax, interest loans

GO TO THE LOAN CALCULATOR ON WWW.NEMESRUSH.COM LOOK FOR THE LOAN CALCULATOR UNDER THE RESOURCES TAB

DISABILITY INSURANCE

Worst Case Scenario

48% of all foreclosures

Know the terms of the contract!!

How Long Does The Average Disability Last?

Your Age Chances of Suffering a Long-Term Disability before the age of 65

Average Length of Disability

30 51% 4.7 years

35 48% 5.1 years

45 40% 5.8 years

50 34% 6.2 years

This chart shows the average duration of disabilities lasting more than 90 days. Duration of disability is measured from the start of disability to (at most) age 65.

Terms to know and understand

Own Occupation___________________________________________ ________________________________________________________

“Transitional” own occupation_______________________________ ________________________________________________________

Any occupation________________________________________________ _________________________________________________________

Residual__________________________________________________ _________________________________________________________

Terms to know and understand

Guaranteed Physical Insurability (GPI)__________________________ _________________________________________________________ EliminationPeriod__________________________________________________________________________________________________________ Step Up/Update Option________________________________________ ____________________________________________________________

Offset Provisions (Social Security, Group Plans)______________________ ____________________________________________________________ Personal Pay vs. Company Pay____________________________________ ____________________________________________________________

3 Major Categories

• Whole Life • Term Life • Universal/Variable

Life Insurance

Term Insurance Level Term Whole Life Universal/Variable

Premium Increases every year

Stays the same for fixed number of years Stays the same Changes

Coverage

Term of the contract (usually year to year)

Until the term ends (i.e. 10, 20, 30 yrs) Whole life Can change

Cash Surrender Value None None Yes Possibly

Investment Vehicle No No Yes (?) Yes

Rent vs. Own Rent Rent Own Own

Advantages Fixes the death benefit for a number of years (say 10,

20, 30,40 years)

Premium guaranteed not to increase during fixed

period

Allows you plenty of time to accomplish your

financial objectives/goals

Disadvantages If you haven’t

accomplished your goals by term end, you may not

be insurable! No build up of Cash

Surrender Value in the policy

Premium costs will be substantially higher when

the term ends

LEVEL TERM

Paid Up Whole Life

You have paid so much in premiums that you no longer have to pay in anything else for the life of

the policy

DL 7 plans allow you to pay in a lifetime of premiums in 7 years.

Most are now “10 Pay”

Universal/ Variable Life Insurance

Premium changes depending on performance of the mutual funds you selected

Your death benefit can change based on performance of the mutual funds you selected

Policy could die before you do!

A copy of this presentation and other resources can be viewed by visiting our website at

www.nemesrush.com

Presentation available by viewing Our Clients tab under subtitle Physicians

Presented by: Charles L. Nemes, CFP® , CPA

Senior Vice President, Investments Investment Management Consultant

Nemes Rush Private Wealth Management of Raymond James

(888) 298-9587 (248) 449-5436