First Ever AMA: Your Financial Questions Answered
Today’s blog post is special. It’s our first-ever “Ask Me Anything.” From the moment I wanted to create a YouTube channel, this has been a dream. We finally have enough questions to create an entire video based on your inquiries. It’s exciting to see a surge in questions. Today, we’ll walk through five fantastic questions.
If you’re wondering how to contribute your questions for future videos, it’s simple. You can right here.
🎥 Prefer video over the blog? We’ve got you covered!
Watch our YouTube video as we dissect this blog post for you 🎥
Overview of the AMA Format
Introduction to the AMA Concept
The Ask Me Anything (AMA) format is engaging and informative. It allows you to get direct answers to your pressing questions. The concept centers around building a community where your concerns and inquiries drive the content.
Importance of Audience Engagement
Your engagement is what makes this format exciting. When you ask questions, you help shape the discussion. It’s a more interactive way to get the information you need while also helping others who might have similar questions.
Surge in Questions
Recently, we’ve seen a huge spike in questions. This is fantastic because it means more of you are actively participating. Your curiosity fuels the content, and I already have enough questions for the next cycle of videos.
If you’re wondering how to contribute your questions for future videos, it’s simple. You can right here.
Let’s jump into the questions!
Question 1: When and How Should I Start Putting Money Aside for Current or Future Children?
529 Plan
When thinking about saving for your children, the 529 plan is a go-to option. It’s an easy way to save for college expenses. The funds grow tax-free, and withdrawals for qualified education expenses are also tax-free.
Basic Bank Account
Another option is a basic bank account, which could be in the name of the parents or the child. Consider online banks like Ally, which offers decent yields, so your money actually earns while it sits.
Taxable Account
A taxable account makes sense if you’re putting away money that you won’t need for a while. It provides flexibility and can be a good alternative to 529 plans.
UTMA/UGMA Accounts
UTMA and UGMA accounts are custodial accounts that give the money to the child at a certain age. The downside is that once the child reaches the age of majority, they have full access to the funds. Additionally, these accounts can affect financial aid eligibility.
Question 2: Should I Consolidate My 401k from a Previous Job Before Medical School or Residency?
Evaluate Current 401k
First, review your current 401k. Look at the investment options and fees. Are they low-cost and good quality?
Evaluate Future Plan
Next, check your future plan. Does it offer good low-cost options and low fees? If both are similar, consolidating makes sense. It helps keep everything organized.
Spring Cleaning Concept
Think of this as financial spring cleaning. Consolidate your accounts to make management easier. Whether you had a research job or fellowship, getting everything in one place simplifies your financial life.
Exceptions
If your new 401k isn’t great, you can leave your previous 401k as is. Another option is rolling over to an IRA, but this could impact your ability to do a backdoor Roth IRA, especially for physicians.
Special Considerations for Physicians
Physicians often avoid IRAs to keep the Backdoor Roth IRA option open. If you decide not to pursue a backdoor Roth, rolling into an IRA gives you more control over investments.
Question 3: What Steps Can I Take if I Accidentally Over Contributed to My Roth IRA?
Remove Excess Contribution
If you accidentally over-contributed, you must remove the excess amount. Your custodian, such as Fidelity or Vanguard, will help you with this process.
Calculating Gains/Losses
Your custodian will also calculate any gains or losses on the excess contribution. This can be a bit tedious, but it is necessary.
Starting the Back Door Roth IRA Process
Once the excess is removed, you can start the back door Roth IRA process. This involves making a non-deductible contribution to an IRA and then converting it to a Roth IRA.
Question 4: Should I Hold Off Paying My Student Loan Until a New Job Negotiation?
Current Financial Situation
If you have less than $50,000 in student loans and the capability to pay it off, you’re in a good spot. Consider holding off for negotiation benefits.
Negotiation Leverage
Employers might offer assistance with student loans or a sign-on bonus. This could be a significant financial advantage.
Federal vs. Private Loans
Federal loans have lower interest rates, making it easier to hold off. Private loans generally have higher rates, so be cautious.
Risks and Benefits
Weigh the interest accumulation against potential negotiation gains. If your employer offers loan repayment assistance, it could outweigh the cost of interest.
Question 5: Can You Discuss Disability Insurance in More Detail?
Why is Disability Insurance Expensive?
Disability insurance is costly because it insures your future earnings, which can be substantial. For physicians, this means millions of dollars over your career.
Disability Insurance During Residency
Policies bought during residency often cover 100% of your current salary. Look for a future increase rider that allows you to increase coverage without additional health questions.
GSI (Guaranteed Standard Issue) Policies
GSI policies don’t require health questions and are vital if you have any health issues or are a female physician. These policies can cover you through residency and into your attending years.
Additional Insights on Disability Insurance
Unisex Plans for Female Physicians (GSI Plans)
Unisex plans offer cost savings for female physicians. Locking in a unisex rate can be beneficial long-term.
Caveats and Pitfalls
Avoid insurance sales pressure and always check for a GSI policy first. If denied through traditional underwriting, you can’t opt for a GSI policy later.
Recap of Questions and Answers
Today we covered:
- How and when to save for children.
- Consolidating your 401k before medical school or residency.
- Fixing an over-contribution to your Roth IRA.
- Using student loans in job negotiations.
- Understanding disability insurance.
Closing Section
Thanks for hanging out with me on our first-ever AMA. Your engagement made this possible. I’m looking forward to our next set of questions. See you in the next video!
Looking for a more thorough all-in-one spot for your financial life? Check out our free eBook: A Doctor’s Prescription to Comprehensive Financial Wellness [Yes, it will ask for your email 😉]