How To Work Less

Posted by & filed under Business Owners, Doctors, Education.

How to Work Less

Work Less and Enjoy LifeThere is no doubt that hard work is a key to success. However, this character trait is not one we can teach. Some people become harder workers as they mature, but seldom does a zebra change its stripes. There are generally hard workers and not-so-hard workers. The goal of this section on Leverage is to help you get the most out of any level of effort. Whether you fancy yourself hard working or laid-back, Leverage can help you get more out of your desired amount of effort. In this chapter, we will discuss the capacity problems of Leverage, how education can increase your ability to Leverage your effort and then suggest ways physicians can overcome the barriers of capacity.

You Can Leverage Hard Work…But Effort Is A Capacity Problem
The basic and inherent problem with effort is that you only have two hands and two feet, and there are only 24 hours in a day. If we consider the case of two landscapers (Lazy Larry and Manic Mike) with very different work ethics, we can illustrate these physical constraints we all have.
Let’s assume that Lazy Larry and Manic Mike earn $50 per house per week. If Lazy Larry works five days per week and landscapes 8 houses per day, he will earn $2,000 per week before paying overhead, staff, equipment, taxes, etc. Manic Mike can work seven days per week and landscape 10 houses per day. This would give him precious little time off for family or personal time, but he would earn $3,500 per week before all of his expenses.
Both of these landscapers might consider themselves successful (depending on their goals and values). But if hard working Manic Mike wants to make more money, there aren’t enough hours in the day or days in the week unless he does something that earns him more money per house or he finds a way to Leverage something other than his own effort. The next application of Leverage could help Mike do just that.

Leveraging Education
The idea of leveraging education to create wealth is no secret. In fact, it has become part of the American Dream. For over a century, immigrants have come to America and have taken advantage of the educational system. They have pushed their children to do well in school in hopes that they would get a good job and enjoy a higher standard of living. They have also pushed their children to find careers that pay them more money than a career like Manic Mike chose.
Leveraging education is a key element of building and protecting wealth. To prove this point, consider the following salaries of highly educated professions. When considering the earning potential of these professions, keep in mind that the median U.S. household income for the year 2007 was $48,201, which means that half of all United States households earned less than $48,201 per year. (US Census Bureau’s 8/27/07 Current Population Survey (CPS)). According to a USA Today article on 1/18/06, the first year salary plus signing bonus for an MBA (2 years of graduate school) was $106,000.
According to MD Salaries (, the first year salary of a neurosurgeon ranged between $350,000 and $417,000 in each of these cities: Houston, New York, Miami, Los Angeles and Seattle. Neurosurgery requires the completion of four years of medical school, a one-year internship, and a rigorous 5- to 7-year residency. Thus, there is no doubt that leveraging education can help you earn more money per year and increase your wealth faster than if you had a job with a lower level of education. Physicians use this type of Leverage quite well.

Education And Effort Are Not Enough
Would you be surprised to hear that the neurosurgeon mentioned above and Manic Mike have the same problem? While we are not saying that Mike is performing brain surgery, we are suggesting that they both have the same fundamental problem—albeit at a different level of income. Mike doesn’t have enough hours in the day or days in the week to increase his business. Similarly, a neurosurgeon’s income is limited by the number of surgeries he can perform as well as constrained by the number of hours in a day and days in a week. Even if you assume that there is an endless supply of patients who need brain surgery, and there is an endless supply of lawns to be mowed, the surgeon is limited just like Mike. In other words, a landscaper earning $50 per house has the same capacity problem as a neurosurgeon earning $500 per hour because:
1. They are limited in the amount of money they can earn until they figure out how to Leverage what they do
2. They only make money when they are actually working
This is a lesson that savvy business owners and investors figured out long ago. As a result, the most successful business owners:
· Always focus on the Leverage of any business.
· Never consider increasing effort as a legitimate, long term means to increasing income.
· Never enter into a business that requires them to constantly “work” to make money.
For these reasons, we prefer to focus our articles, seminars, books, and personal consulting recommendations on strategies that help Leverage assets and Leverage people.

The Diagnosis
All teenagers have parents, teachers and coaches who tell them to work harder. We prefer to tell you—and show you—how to work smarter without having to work harder (or having to clean your room or take out the trash). The Lesson applies to anyone—no matter how hard working or lazy you may be. If you want to work less and build more, you can do it. Applications of this “smarter working” lifestyle will be the focus of the next two chapters.

Keep Reading More

Making Sure You Don’t Run Out of Money in Retirement

Posted by & filed under Business, Doctors, Healthcare, Uncategorized.

Post 1The last, and one of the most important, financial disasters that we will discuss in this Lesson is the threat of running out of money during retirement. In this chapter, we will focus on the type of investments you can make to ensure that you avoid financial disaster and don’t run out of retirement savings.
This may sound odd, but the reason this chapter is so important is because we don’t know when we will die. Because you cannot predict that day you will die, you can’t possibly know how much in retirement savings you need or know how much retirement income you can afford to take out each year. Many retirees operate in such fear of running out of assets that they make the mistake of never touching their principal. This leads to a lower quality of life in retirement and to unnecessary estate taxes at death.
One of two things will certainly happen. You will be like many retirees and either die with money leftover for your heirs (and for the government via estate taxes) or live longer than expected (or spend too much) and run out of money in retirement. If you die with money left-over, we assume you would rather leave it to your heirs than to the federal government (this is where this chapter overlaps with the estate planning topics discussed in Lesson #9). We also assume that you don’t want to have to rely on your children, your children’s spouses, or your grandchildren to support you.
In this chapter, we will explain how certain Doctors get the most out of their retirement plan assets without risking running out of money in retirement. These savvy physicians get the most out of all of their assets. They also make sure that they don’t have to experience financial and emotional disasters like running out of money in retirement and having to ask children or grandchildren to support them. A very valuable tool to help avoid this financial catastrophe is the Life Annuity.

Life Annuities
Retirement is a time for you to worry less, not more. You have already worked for thirty or more years, raised children, dealt with weddings (and maybe divorces), and handled thousands of day-to-day crises with your kids, among many other troubles. The last thing you want to do in retirement is worry about how you’re going to support yourself and still leave something for your children, grandchildren, or your favorite charity. The Annuity and Insurance strategy eliminates the risk, “guarantees” you an adequate income in retirement, and leaves as much as money as possible to your heirs and/or charities, if there is anything left. In our best-case scenario, we can do all of this while reducing, if not eliminating, the income and estate taxes in the process. The first part of that strategy mentioned above includes a life annuity.
The life annuity (not to be confused with the variable annuity) is designed by actuaries to pay interest and principal back to you over your lifetime. The amount the insurance company pays you is “fixed” and will not decrease if the stock market crashes or if interest rates fall. Moreover, if you outlive your life expectancy, the insurance company continues to pay you or your spouse for as long as you are alive. This is a good way to remove the investment risk of your retirement plan assets and “lock in” a fixed income in retirement.
You may be wondering how much income one can expect from a life annuity policy. To answer this question, simply look at the table below, which shows some numbers for clients of ours (some individuals, some couples) at varying ages. Of course, these numbers are only examples and may differ based on a variety of economic and medical factors. However, once a life annuity is purchased, the monthly or annual income amount cannot change (unless a cost of living rider that increases the annual payout 1% to 3% annually is also purchased).
If you are afraid of running out of money or are just uncomfortable with investment risk and how it may impact your retirement, you may want to consider what sophisticated clients have utilized for years—Life Annuities. Your multidisciplinary planning team can help you integrate life annuities into your planning to minimize risk, maximize after-tax retirement income, and maximize your estate. How life annuities can be part of an estate plan will be discussed next.

Using A Life Annuity To Leave Money For Heirs
Life Annuities also are a valuable tool in helping you give retirement funds to your children and grandchildren, without enduring financial burdens. In most cases, the life annuity policy pays you more than you need to cover your cost of living. We recommend you gift the “excess” to an irrevocable life insurance trust (more in Lesson #9, which focuses on estate planning) and buy
life insurance to replace the value of the pension assets. Because pension assets are only worth 25 %+ to your heirs after income and estate taxes (also discussed in the estate planning Lesson), this solution almost always gives more to the heirs, reduces income taxes paid on withdrawals, AND provides a fixed income stream in retirement. If you’re not sure how this solution would work in your situation, please feel free to call us and we will run an illustration for you.

The Exclusion Ratio Can Save Taxes
Interestingly, there is a way to get tax-free income with a life annuity. If you purchase a life annuity with non-retirement plan assets, you will receive a significant tax benefit. Savvy Doctors know this and consequently implement a life annuity policy into their financial plans so that they can save even more in retirement and avoid financial disasters.
Each life annuity of this type has what is called an “exclusion ratio.” This is the amount of the monthly or annual payment that is NOT income taxable. The older you are, the greater the tax-free percentage of the life annuity payment. For More