The Popular Press Hurts Doctors

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Most people believe that there is more financial information available on television, in newspapers and magazines, and on websites than one person could possibly review in a lifetime. They may be right!
Our Google search for “Financial Advice” on August 11, 2007 yielded 112 million results. A search for “investing” yielded 104 million results. We then narrowed our search for sites that had all of the following tags: “investing,” “high income,” and “financial planning.” This narrowed the results down to 133,000. Obviously, we agree with the sentiment that there are an almost infinite number of places one can look for financial advice. However, who is this advice for? Consider this statement:
Most financial information available in newspapers or magazines, on television, or within websites is inappropriate and often detrimental to a Doctor’s planning. How can there be so many places to find financial information and so few reliable sources for Doctors? To answer this question, let’s start by looking at a list of television stations, newspapers, magazines, and websites. Which of these outlets would you consider to be for Doctors and which would you consider to be directed at Average Americans?
Television: Fox News, MSNBC
Newspapers: New York Times, USA Today, Wall Street Journal
Websites: FoxNews, CNN, CNNMoney, USAToday,
WSJ (Wall St. Journal.), Forbes
Magazines: Smart Money, Money, Business Week, Fortune, Fortune Small Business
If you are like all of the colleagues and clients we asked informally, you would say that almost all of the aforementioned media would deliver information which would target wealthier Americans, such as Doctors.

The important point we are trying to illustrate with this data is that almost all of the high-end magazines and websites in the first list have an average audience household income of less than $100,000. Every single one mentioned on that list, except The Wall Street Journal (TWSJ), has an audience with an average household income of less than $150,000.
For the purpose of our next statement, we would like to exclude TWSJ. Though TWSJ focuses on business and financial markets, its primary goal is to report the news. It does not take a position of encouraging or promoting any particular products, strategies or financial philosophies. Given this caveat, our conclusion from the aforementioned data is:
Even the highest level media outlets in the United States are not targeting and delivering appropriate content to an audience with an average income above $150,000. Why is this information important to our discussion of financial planning for Doctors? Let us explain what we learned from the publishing of our last book, Wealth Protection: Build & Pre-serve Your Financial Fortress for John Wiley & Sons.

The Media Business: “Get The Eyeballs”
If you are in the media business, it doesn’t matter if you are publishing magazines or websites, or producing television or radio programs. The goal is always the same if there is advertising involved—provide content that will attract a large enough audience to generate ad revenue. You generate ad revenue by proving that you can deliver a significant audience and that you can accurately track the demographics of the audience. All of the sites, magazines and newspapers mentioned earlier are in business to make money. If they don’t generate content that maintains
an audience large enough to support the necessary ad revenue, the company will go out of business. They must “get the eyeballs.” Their business model is really that simple.
To attract a large audience, these outlets have to deliver content that appeals to a large audience. After writing our last book for John Wiley, we appeared on over 120 radio and television programs. Though the book Wealth Protection had interesting philosophical lessons and over 62 practical lessons on advanced financial, legal, and tax-saving techniques, almost every producer and interviewer wanted us to discuss topics in the book we thought were the most basic. What we were told by one host was that his goal was to keep as many people as possible interested in the interview. He didn’t care if the information was fresh and exciting. He wanted to make sure that “Joe Lunch-Bucket” (his words) wouldn’t be put off by the topic. He told us that talking about ways to save $100,000 in taxes or ways to efficiently buy rental properties would alienate most listeners—which, in turn, would cause the show to lose “eyeballs” (or “ears,” as is the case in radio). He was not going to allow that to happen.
Until John Wiley asked us to write a book about Affluent Americans (Wealth Secrets of the Affluent—publishing date April, 2008), we had received very little interest from the popular press in regard to the education we have regularly offered to high-income clients for the last twelve years.

Consider the following:
· Every information/publishing company is in business to make money.
· The money almost always comes from advertisers.
· Advertisers pay more if the audience is larger.
· A publisher must continuously offer appropriate content to the masses to maintain and grow an audience and attract advertisers.
· Even the high-end distribution channels don’t target consumers earning over $100,000.
If you consider these five statements you can clearly conclude that:
It is almost IMPOSSIBLE for Doctors to find useful and appropriate financial information from popular newspapers, magazines, websites, or television programs. This is why most of the information contained in this book may seem foreign to many readers. The tips, tools, and strategies offered here are not the kinds of things that most information outlets would ever deliver because, quite frankly, there is no business reason for doing so. Fewer than 10% of Americans would find much of the information in this book applicable or beneficial. If it is important to “fit in” and do what everyone else does—even if it is not the best course of action—this book is not for you.

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

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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