Dr. Melissa
Dr. Melissa is a successful neonatologist in her early 40s who has established herself as an expert in her field. While Dr. Melissa loves what she does, her profession is highly stressful and demands long hours. Recognizing the importance of staying mentally grounded, she makes it a priority to fill her time with things she enjoys, one of which is travelling; this allows her the opportunity to decompress and stay connected with her family who lives abroad.
She is currently earning an annual salary of $220,000 while living and working in Virginia. Dr. Melissa has been diligent in building her net worth. Our doctor is very close with her family, although as a single individual in a high stress profession, she worries about protecting her hard work should anything happen to her. She has made wise financial decisions that has led to the accumulation of a $1.7M net worth with $1.2M in investable assets. She also has $70,000 in outstanding student loan debt.
As a young medical professional, Dr. Melissa wanted to feel assured in two primary areas:
- Her current lifestyle and travels would not impact long term investment goals.
- As an unmarried person, she would have someone she trusted to act in her capacity in an unforeseen event.
Dr. Melissa is still relatively early in her retirement planning, so we wanted to be mindful about creating a plan to reach her goals while maintaining the current lifestyle she enjoys.
Here we can see a few of the recommendations we made to provide for Dr. Melissa’s needs:
Easing Her Estate Worries
- With questions around the future of Dr. Melissa’s estate, we identified the need for a Durable Power of Attorney. Our client chose to work with one of our partnered female estate attorneys who helped navigate the establishment of a Living Trust and ensured POA documents were properly updated.
- With the attorney’s recommendation, the estate responsibilities were split between the strengths of familial skills and capabilities. Dr. Melissa’s brother was placed as Durable Power of Attorney with control over financial needs, while her sister was placed as the Medical Power of Attorney managing the physical matters; both siblings were listed as successor co-trustees over the trust. These appointments gave Dr. Melissa the peace of mind that her assets would be taken care of if anything happens to her.
Optimizing for her Age
- During our analysis of Dr. Melissa’s existing financial activities, we found that she was contributing a sizable amount to her 401(k), but could increase contributions from $18,000 to new annual limit of $19,500; total qualified contributions resulted in $7,605 in annual tax savings.
- During data gathering, we uncovered that the current asset allocation, while diversified, was carrying excessive weight in a stable-value fund. We advised to rebalance the portfolio into a more appropriate risk-adjustment profile that better fit the needs of our doctor.
Paying Off Debt
- Recognizing a fall in interest rates and that our client’s financial position had improved, we advised to refinance the mortgage from a 30-year to 15-year term. The refinance increased her base monthly payment from $3,000 to $3,800, but it saved Dr. Melissa over $235,000 in interest paid over the life of the loan. This decision will pay off her home before age 60.
- We devised a plan to accelerate total student loan payoff within 5 years. This goal was purely centered around the emotional stress created by the looming student loan debt. In Dr. Melissa’s case the best decision was to update her payment schedule to support her emotional well-being more appropriately, eliminating that stress and debt from her youth as quickly as possible. By redirecting an additional $850/month, total interest saved was approximately $30,000.
For Dr. Melissa, her lifestyle and taking time to enjoy traveling away from her high-stress career is just as important as financial wellness. Implementing a well-grounded life estate plan covering all areas of concern, adjusting her retirement plan to appropriate risk-adjustments for age, and committing to paying off debt early has awarded Dr. Melissa the freedom to focus on the things she cares about most – her patients and her family.
If you’re still years or decades from retirement age, it’s not too early to start planning and preparing. Additionally, starting to plan now will actually give you the peace of mind to enjoy your current lifestyle knowing that you’re not jeopardizing future goals. We always take a lifestyle approach to financial planning, and can help you balance paying off debt and preparing for retirement while still enjoying your youth.
This is a hypothetical case study provided for informational purposes only and is not intended to be a projection of current of future performance or indication or future results. The information provided is not based on actual current or past clients. All situations are unique, and results will differ depending on individual situation. Past performance is not indicative of future results.
