Term Life Insurance

e.g. "If you die within 20 years (the term), we will pay your spouse $2M.  For this coverage, you will pay us a monthly premium of $300, which will rise after ten years."

Term insurance is for a set period of time.   If you live past the term, the insurance expires.   Examples are 5 year, 20 year, “until age 90,” etc.  For a healthy mid thirties person who neither smokes, drinks, nor takes medication, you can get a $2M 20 year term policy for about $100-300/month.  However,  if you are eligible (military=USAA; medical or teachers=TIAA/CREF) you can get it for much less.  Premiums increase over time.

Permanent  Life Insurance (also known as whole life insurance)

"Whenever you die, no matter when you die, we will pay your spouse $2M, plus any interest that has accrued from a portion of each month's premium.  For this, you will pay us a monthly premium of $800, which will never change."

Whole life insurance is forever.  Additionally, after the first year, part of your premium goes into the insurance as a “cash value” on which you earn interest, all tax deferred.  Think of this like buying a mutual fund within an IRA, and contributing a little every month.  This is because when buying whole insurance, you are basically buying insurance AND shares in the insurance company.   Certain kinds of life insurance (“Mutuals”) also pay you dividends based on surplus in the whole insurance fund.

You can also use the cash value at any time to buy a home, pay for college or your retirement.  And the premiums never increase.

I favor term insurance; I need another investment that pays only 4% like I need syphilis.

529 plan: I am amazed at how many people I have to kick in the teeth over this.  Assume that your kid's 4 years of college will cost you $110k.  At a doctor's tax rate, you'll need to have earned $180k.  A 529 plan is like an IRA, but instead of being allowed to use it for retirement, you can (only) use it for "qualified education expenses:" tuition, books, travel to the college, room, food, etc, etc.  Anything at all that can be associated with education.

It doesn't have to be college.  It can be medical school, vo-tech;  You specify each account for a specific child; but any money that isn't used you get to keep (though those withdrawals are taxed.)  Or you can transfer the money to another kid, or your kid's kids.

The advantage of the 529 is that any growth of that money is never taxed, even on withdrawal (assuming it is for education.)  Following this logic, in order to save $110k for college, you only need to invest $27k at the child's birth (assume 8% growth.)  Think about this.

The beauty of the 529 plan is that it is essentially a legal tax dodge.  You can save much more than would ever be needed for the kid's education, tax free, and keep the money after they graduate.  And the money cannot be taken in a bankruptcy.  Is anyone listening to me?

Roth for Kids: Did your lazy, pot smoking, iPod wearing ("it has to be white!")  MySpacer make some money from that one summer he pulled it together enough to work?  Declare that money, pay his taxes (i.e. $0), and put it in a Roth in his name.  Maybe your kid is an industrious 9 year old who washes cars when not at Mandarin class?  Declare it, pay the taxes, and put it into a Roth.   Oh my God-- if you put $4000/yr into his Roth for ten years, he will have 11 billion dollars by the time he graduates.  You'd be crazy not to! 

7. Open a clinic and form an LLC

If you do solo private practice, you will make a comfortable living.  You will not become rich. This article is not called, "How To Rot In Your Own Self-Satisfaction."

You need a clinic: one or two psychiatrists, one or two therapists, one or two NPs (these can overlap.)  It is not necessary to share the same office, but you need to be in the same building.  I'd argue NPs are more valuable than psychiatrists (less knowledge at the beginning but more motivated), but that's for another day.

Refer to each other.  If the patient comes only for therapy, have yearly psychiatric checkups with the MD.  If one of the clinicians is an expert in something but the patient is being treated by someone else, refer for a consultation. 

As I said before, your clinic should advertise as specializing in some things: Treatment Resistant Depression; OCD; Adolescents; Borderline Personality Disorder;  Independent Medical Examinations (IMEs= disability evaluations; you are not the treating psychiatrist, and you get a flat fee per eval;) "treatment of impaired physicians" (a gold mine-- contact the local medical society chapters and let them know you exist); Clozaril/lithium/meds that need regular blood work.  (For example, have a Clozaril Clinic: all Clozaril patients come at the same time and get their blood drawn (by the RN) and clozaril (and other meds) dispensed (by the pharmacist of your local pharmacy, who will make money on the pills)-- and you can bill each patient's insurance for the service.)   And hook up with the local schools, colleges, and area internists-- get their referrals.  (The best way to do this is to go there, (unannounced or by intro through a drug rep) and meet them-- it takes 8 seconds for the deal to be solidified because why not refer to you?

This will work precisely because you are a clinic and not a solo psychiatrist .  Somehow, being part of a group  conveys the impression of expertise, professionalism.  It's like a mini-medical society.  And people refer to them.

The NPs can prescribe, and there is no reason why they cannot be as skilled (or unskilled) as any psychaitrist)-- but they can also do nursing maneuvers:  EKGs (bill for them,) labs (bill for them,) and preventative screenings/counselings (diabetes, smoking, etc (bill for them-- yes, you can get money for it.))

Limited Liability Company: In the past, the only way to shield yourself from liability was to incorporate your practice, "Joe's Medical Practice, Inc." (Usually an S corporation or PC.)  The corporation is a separate legal entity (that has assets, like furniture and computers; and liabilities, like you).  Any lawsuits would be against the corporation, and thus your personal assets can't be taken in the settlement.  If the corporation gets bankrupted, your IRAs are still safe.  (But if your car is a business asset, it can be taken.)  On the flip side, however, you have to pay corporate taxes on the revenue and then personal income taxes on what you take home, i.e. 30% corporate  + 35% personal= death.  Also, you have to have recorded meetings, bylaws, paperwork, etc.

An LLC is a company, not a corporation; no corporate taxes, no double taxation, no meetings.  But, it is a seaprate legal entity, so you have liability protection. 

Be careful to keep the assets separate.  If you use your car for work and soccer games, it is up for grabs.  If you buy groceries on the business credit card, you are destroying the distinction between you and the company.  

There may be some instances where an S corporation is better for your clinic.  For example, LLC members (i.e. you) have to pay Medicare and Social Security taxes on all of the business' profits. S corporation members are actually shareholders-- and get paid partly through a salary (so you have to pay Medicare and SS taxes) but partly through dividends (no Medicare/SS taxes.)

Consult your local attorney for more info, I'm just a psychiatrist. 

8.  Save money.

I know, this one sounds stupid because it is "easy."  But no one does it.   Listen to me, fools, listen to a story my Dad used to tell me, which I paraphrase here:  Pretend you are a resident, and you "only" make $39k/year.  Would you have taken the job if they only paid $35k/yr?  Of course you would.  Then you can put away $4000 per year-- in a Roth.  Don't laugh-- do it.  Maybe you make more than $100k? Open a Roth for your kid.  Now.  A Roth AND a 529.

Consolidate your loans: doing this lowers your monthly payments but extends the life of the loan (so you'd end up paying more.)  However, take the money that you now save from this and fund your Roth because after you make >$100k, you can't do this.  After you start making big money, you can pay off your consolidated loans as fast as you want.  The point is to get extra money now that you can save in a Roth.  Because the max interest rate on federal loans is 8.25%-- you can make more than this in a Roth.

Credit cards should be paid off immediately, then burned-- even GOOG can't compete with 18% interest.   And if you tell me you need credit cards to survive I am going to subpoena the bills and If I see anything from Nordstrom's, I'm going to burn your shoes.

Private Mortgage Insurance:   If you did not put down at least 20% of the appraised value of your house, you are paying an extra 0.5%-1%. For a $400k house that's an extra $150/month.   If you bought your house in the past year or two, more than likely it appraised less than you paid-- check this.   If you cannot afford to put down 20% (I should ask why you are buying such a house), pay extra principal in the early months, and get the loan down to 80%-- and then call your lender to cancel the PMI, because they won't do it automatically until 78% (snakes.)

Sell stuff: More than likely you have old technology, clothes, furniture, etc that you could sell on Ebay.  But who needs that headache?   i-soldit.com is a national chain of stores that sells your stuff on ebay (and charges 30%).  But who cares?  The sooner you sell that old cell phone, the more you'll get for it.  Put this money into a Roth.