Life Insurance

What “Tax-Free Retirement” by Patrick Kelly Says for Doctors

by Michael Goodman

Tax-Free Retirement by Patrick Kelly

Way back in 2011, I reviewed the book, “Tax-Free Retirement” by Patrick Kelly and gave it a strong recommendation. That review is one of the most popular pages on my site. Now that my practice is focused on doctors, I thought this would be a good time to look at what Mr. Kelly’s book recommends for doctors.

Chapter 20

In chapter 20 of Patrick Kelly’s 10th Anniversary version of “Tax-Free Retirement” (2017), Patrick writes, “Doctors have many unique attributes. And in my opinion, their unique attributes are what makes this group one of the most significant to benefit from the strategies in this book.”

He then lists four reasons why doctors are a great fit for using an indexed universal life policy (IUL) for retirement planning.

“Reason #1

Most doctors make more than $196,000 per year, which is the phase-out limit for being able to contribute to a Roth IRA. Therefore, they have no truly viable tax-free retirement option available to them other than life insurance.” (NOTE: in 2021, a married couple making over $208,000 cannot contribute to a Roth IRA, while the maximum deposit is only $6,000 unless you’re over 50 years old)

“Reason #2

Doctors are specialists. They have given their lives to be the best at what they do – and they are. However, this level of specialty often leaves little time for less urgent activities such as retirement planning”

“Reason #3

Doctors are often taken advantage of by snake-oil salesmen in the financial realm hocking half-baked, poorly-formed investment strategies promising wonderful returns.

“Reason #4

Doctors generally need a lot of life insurance for three reasons. One, they need to protect a large income for their families. Two, they usually carry high debt. Often this is due to starting out in debt from large medical school bills and low wages during their residency and internship years. Three, doctors as a group have one of the lowest life expectancies of any profession.”

Bottom Line

Most doctors that work at a hospital have a contract that provides a life insurance policy (usually a term policy) and a retirement plan of some sort (usually a 401k plan these days). But the life insurance policy often leaves them under-insured and the qualified retirement plan is likely to create an income tax problem later. Doctors in private practice usually have to pay for everything themselves, or through the organization that owns the practice.

When comparing the various options available to doctors that want to supplement the benefits in their contracts, or create a retirement plan by themselves, Patrick Kelly says on page 147 of his book there is “one superior option – life insurance!” Explaining why, he summarizes that life insurance offers an “unlimited contribution potential,” “grows without annual taxation,” “takes no time to manage,” “provides a huge sum of money to the physicians family in the case of an untimely death,” and “best of all, if structured properly, the policy can allow access to future money tax-free.”

What’s not to like?

What Important Fact Links Kobe Bryant, Pete Maravich, and Lyman Bostock?

by Michael Goodman

Kobe Bryant and daughter

This week brought the first anniversary of the helicopter crash that killed Kobe Bryant, his daughter, and others. The media was full of tributes to his spectacular career and the tragedy of lives lost too soon. Kobe had retired from the Lakers but his business career was blossoming, he seemed to love being an active Dad to his four daughters, and he was winning major awards for his work in other fields (including an Academy Award for a short film). He was only 41 when he died.

His sudden death stands as a reminder that no amount of fame or fortune can protect us when the Reaper comes to collect us. Unfortunately, the sudden death of Kobe was not the first involving a major American sports star. Quite a few come to mind, but I thought this was a good time to review two pro athletes that mostly seem to have been forgotten, Pete Maravich and Lyman Bostock.

Pete Maravich

Pete Maravich
“Pistol” Pete

Pete Maravich was raised to be a basketball star by his father, who coached him at LSU. He averaged more than 44 points per game over three seasons in the 1970s, before the 3-point shot, and when freshmen were not allowed to play varsity sports. Almost as remarkable were his dribbling and passing skills, which became the precursor to players like Magic Johnson.

Drafted by the Atlanta Hawks but without much of a team to support him, he still became a star before being traded to the New Orleans Jazz, an expansion team. In his best single game, he scored 68 points against the NY Knicks without the 3-point shot. In his final season in 1979, he played as a reserve with the Boston Celtics with rookie Larry Bird in the first season the NBA allowed the 3-pointer. He only attempted 15 3-point shots that season as a reserve, but he made 10 of them! Sadly, he died just a few years later of an undetected heart defect at age 40. He’d been out playing a pickup game in Pasadena when he collapsed.

Lyman Bostock

Lyman Bostock
Lyman Bostock

The death of Lyman Bostock was possibly even more shocking as he was in the prime of his career when he was suddenly killed. Bostock was a baseball player who became a star outfielder playing for the Minnesota Twins. In his third season (1977), he hit .336 for the Twins and finished second for the batting title. After that season, he signed with the California Angels as a free agent for one of the largest contracts in sports at that time.

Possibly feeling the pressure of his new contract, he started the season with a 2 for 39 slump. Feeling guilty, he offered to give back his first month’s salary to the owner, who refused it. He vowed that if he wasn’t hitting at least his weight by the end of the first month, he would donate his salary to charity! He finished that first month hitting just .150 and did later donate that salary to charity. But his hitting recovered and he was batting .296 when the Angels visited Chicago late in the season.

After a game at Comiskey Park, he went to visit his uncle in Gary, Indiana. He was driven to visit a couple of other old friends when he was shot while sitting in the backseat with a woman he’d just met. The woman’s crazy husband had seen her there and assumed she was having an affair with the guy next to her and tried to shoot her from another car with a shotgun! Bostock was hit in the right temple and died two hours after arriving at the hospital. How senselessly tragic!

Lyman Bostock hit .311 over his four seasons in the majors and seemed destined for the Hall of Fame. He was just 27 years old when he died! But, as I wrote above, his sudden death stands as a reminder that no amount of fame or fortune can protect us when the Reaper comes to collect us.

Cash to Cover the Expenses of a Lifetime Without Market Risk

by Michael Goodman

From birth to death, there are times for all of us when we can use some extra cash. It might be for college expenses, unexpected medical bills, a wedding, buying a home, a great vacation, the cost of raising a child (or children!), and having enough money for a great retirement.

This video discusses a place to save money for those expenses without market risks.