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The FinancialMD Show - Ep 027 - Tax Tips for Young Docs From A CPA


· What Does Cory Do? [0:02:08]

· The Moment Cory Decided To Become An Accountant [0:04:04]

· Critical Key Components: Psychology of Money and Behavioral Finance [0:06:13]

· Tip: Take Advantage Of That Lower Interest Rate – Invest! [0:10:59]

· All The Things You Need To Know About Being A CPA [0:11:42]

· The Start Of The Financial MD "Dinners" [0:14:52]

· Most Often Asked Question: What Is The Best Tax Deduction? [0:19:04]

· You Can Do A 401(k) And An IRA At The Same Time [0:24:36]

· Find Yourself The Right Financial Advisor [0:32:54]

· Cory’s Piece Of Advice To Residents [0:35:50]

· Do What You Do Best And Delegate The Rest [0:37:56]

Welcome to the Financial MD Show. This is the only podcast designed specifically for residents and young physicians to help you become educated on financial planning for physicians and avoid many of the common financial mistakes doctors make. Your hosts, Jon and Trevor, explore a different topic with each episode. Jon Solitro is a financial planner and certified financial education instructor. He’s been working with young physicians for the better part of the decade and lectures to graduate medical programs around the country. Dr. Trevor Smith is a board-certified ophthalmologist with a full-time practice and he has learned the ins and outs first-hand what it takes to make smart financial decisions as a young physician. And now here are your hosts, Jon and Trevor.

Jon: Welcome everybody to today's episode of the Financial MD Show. We're so excited to be back. Dr. Trevor Smith is off, starting his own practice, and I'm sure he'll jump back on and fill us in there. But, today, we've got a special guest/co-host. My good buddy, Cory Lee, a well-established CPA tax expert in the area, is joining us today and I'm super excited. We've got a long history going back that I'm sure we'll dig into a little bit and do some nostalgia recall but, Cory, it's so good to have you today.

Cory: Yeah, I'm happy to be here. Thanks for having me.

Jon: Yeah, so, guys, I'll tell you a little bit about Cory from my perspective. I think Cory, you, and I, were introduced by – I can't believe I'm remembering this now – I bet it was 2015 or 16 and I think – I remember who it is, for confidentiality's sake, but it was an ER physician and his wife. He was just getting out of residency, pretty sure, and Cory was a friendly guy who was really great at helping this couple and we met through just in the financial planning world. At least, at Financial MD, we try to get to know our clients' other professionals and establish a good working relationship to try to coordinate the whole comprehensive picture. And so, along that way, I met Cory and I was just two or three years in the profession and learning a lot, and Cory and I have done a ton of stuff together in the last six, seven years. Cory has been probably the CPA to whom I've sent the majority of my clients by far, and even before then, Cory was working a lot with physicians and probably now a little bit more – thanks to us – over the last six, or seven years. But, as you guys know, there's a unique financial situation that young physicians are in, and residents and those just starting out and attending that you want to work with somebody that you know and you like and you trust and they know your situation. So that's where Cory comes in here and we'll talk about some of the things we've done together and what Cory's been up to. But, yeah, Cory, tell us about where you came from and what brought you to what you're doing today.

What Does Cory Do? [0:02:08]

Cory: It's like you said, I work a lot with physicians; probably, 70 percent of my business is with physicians. I do a lot of tax planning, tax consulting; you know, set up practice-type help; exit strategy planning type of help. I also do business valuation; you know, people who are looking to merge to sell or buy a practice – I help with that. I've just really been CPA for, you know, about 25 years now and just have really enjoyed just helping people out. And to touch on your point, I think we have a good collaboration because we have similar philosophies in that we want to do…we want to help the client…and sometimes that's referring them to other professionals, you know. You have to know your limitations. You have to know what you can do and where you need to be able to refer to somebody else who can help that person out as well.

Jon: Yeah, absolutely. Okay, cool. So, Cory, where did you grow up and go to school and how did you learn how to do what you're doing today?

Cory: So, the short answer is I grew up all over the place. My dad worked as a computer programmer so we moved around a lot as a kid but I ended up, you know, functionally growing up in Troy, Michigan. I went to high school there. I went to college at Michigan State, you know; got my Bachelor's in Accounting there, and then went to Walsh; got a Master's in Finance and MBA there, and just started working in the Metro Detroit area. I've been working here as a CPA ever since.

Jon: And an MBA…okay.

Cory: Yeah.

Jon: See, I didn't know that. It's good. I'm learning stuff about you, too.

Cory: I've got the MBA and the Masters in Finance just to diversify the accounting background just to help people out.

Jon: So two Masters.

Cory: Two Masters.

Jon: Brilliant.

Cory: And then I've got my CPA as well as my CVA just to make sure that I could help business owners, you know, make decisions and just got to be a resource for the clients that I was working with.

Jon: So CVA is certified valuation…?

Cory: Analyst…right.

Jon: Analyst…okay, interesting. Very good. So, at what point does someone like you know they want to be an accountant?

The Moment Cory Decided To Become An Accountant [0:04:04]

Cory: You know, it was high school; in freshman year high school, they did a career counseling, you know, the personality profile testing like career choice kind of testing, and the two top ones for me were mortician or accountant.

Jon: Excellent!

Cory: Those were like the two top career choices, and I’m like, oh no, not too fond of dead people, so I'll try this accounting thing. And there was an Intro to Accounting class that I took sophomore year; got 104 percent the first semester; 106 percent this semester; got every question – every test – right, plus all the extra credit that, you know, anytime the teacher asked me a question in class, I knew the answer. It was just…it was just something that I knew. It's something that clicked. I could read it. I could read it once and just know it, you know. So I took more accounting classes sophomore, or you know, junior and senior year and said, hey, I really like this; let's…you know. Michigan State had a really good accounting school so I went there and did really well there so I just got into public accounting and haven't looked back.

Jon: Yeah.

Cory: I just really enjoyed it, you know. It's just one of those things where, you know, when you struggle with science and you struggle with all these different topics and something just clicks and you'd be really good at it, you stick to it.

Jon: Yeah.

Cory: Yeah.

Jon: That's beautiful. So few people are like that where it's like, huh, I like it; I'm really good at it; this makes sense.

Cory: Yeah, I just kind of found what I was good at early on and just have stuck with it and just still enjoy it and, you know what? I get to work with numbers which I prefer – you know, numbers over words – and I get to help people, so those are two things that I really enjoy doing.

Jon: Yeah, very cool, and I think the unique thing that I'll brag about you a little bit is that you are not the typical accountant in the sense that you have people skills and you know how to talk well and…

Cory: Those have taken some development…yeah. I've definitely done some Toastmasters. I've done some other things to bring myself out of my shell.

Jon: Okay, nice.

Cory: I'm an introvert by nature, of course; you know, to being typical of accounting. You know, there's an accounting stereotype for a reason, but I try and break that mold. I definitely tried and be out of my shell and, you know, talk to people. Because, you know, if you have the information but you're not sharing it, what good is the information?

Critical Key Components: Psychology of Money and Behavioral Finance [0:06:13]

Jon: Yeah, totally, and that's…yeah, if you have the information, right, but it's not getting to people or you can't communicate it well or whatever the case might be, that's so critical. I mean in our field, when I took the CFP a year and a half ago, they had just started introducing the topic of psychology of money and behavioral finance and all that stuff but that's such a critical key component especially because so many good financial planners are good at numbers and data and planning and figuring out but just not that great at the people side of things.

Cory: You have to know the psychology of people to understand what they like, what they don't like, what their risk tolerance is. I mean, there's a lot of different factors to kind of take into consideration.

Jon: Yeah, and what they're saying…I've got a client that is an older client. We've been working for many, many years and she's very frustrated because she didn't get the kind of growth this year that she wanted to in her accounts. And I said, well, because we had you fairly conservative. Last year, you were really upset because you had lost so much in these stock investments that you had, so we switched everything to a little more conservative while still, you know, getting some growth. She had 12 percent in the last nine months, she got, but she wasn't happy because the S&P had done whatever. I was like, well, I didn't think you wanted to be in all stocks pretty sure based on our conversations. Well, I don't think that's what we said we wanted what…you know. And so it just became this whole like -- here's what I've been doing this a long time. I understand - you may not have directly said it - here's what I thought was the best portfolio based on how you felt when the account dropped, so my first thought is we can't let your account go down this much again, you know. So those are the kind of things where it comes into play of like, okay, maybe she couldn't even articulate what she wanted, or now looking back, she feels anyway. That's a whole…

Cory: And it also goes to some people don't know what they want until they realize they didn't get it and then they complain about it, right? So you can't always get what you want if you can't express what you need or what you're looking for.

Jon: Yes. And that was what she brought to me was, well, my friends all said they got this much this year.

Cory: Oh my God.

Jon: Their accounts grew this much, and I said, you know, I don't know what to say to that.

Cory: I have that same problem. Every year, I get people who say, oh, my friend got a refund; why do I owe? Well, it's a different situation.

Jon: Oh my gosh, yeah. And that's where I definitely make that a priority just unconsciously because of my background. I've got a bachelor's in Psychology and I've got a master's in Counseling and I really try to push. You know, I've talked to MSU and their program about making sure they've got a good emphasis on behavioral coaching and finance and just, yeah, financial coaching, because that's a lot of it as well. I've used so much of my counseling training in financial planning just unconsciously and, you know, marriage counseling. As couples come in, money is one of the most contentious things to talk about…one of the most emotionally driven things.

Cory: Absolutely.

Jon: And you and I both see that in our conversations.

Cory: Yeah…very much so.

Jon: So getting a client to success is more than just getting in the information.

Cory: Absolutely.

Jon: How do we get them to take action on this stuff, for sure, and a lot of that is building a relationship with folks like you and collaborating with that so.

Cory: Even if you get the most perfect results in your mind, it may not be what they wanted so it doesn't…then they're not happy.

Jon: Yeah, that's true as well, and you may think, you know, I have an idea what I think this client needs based on their goals and their values and plans. You know, I had a couple that had just gone into practice and I had suggested they not pay off their house for a while because it was low-interest rate days and they had a surplus. I said, do it here, get on track for retirement, 401(k), or build all the stuff – the usual things – and I say, this will get you on track for your goals. Yeah, but we'd like to pay off our house early. Okay, we can talk about that. I don't think it's a good idea, here's why, and eventually, I got…

Cory: If you have a 3 percent interest rate, you should never pay that off.

Jon: Oh, yeah, it was that.

Cory: But if they have a desire to pay it off, they're going to want to pay it off, so it's always good.

Jon: And that's good. Yeah, they ended up moving on because they just didn't feel like I supported their goal of being debt-free which…you're right, my fault, and that was a learning experience for me. I communicate that to clients now – I think this is going to get you to your goals in the best way possible, but if you want to do this instead or pay off your house early, I can get on board with that and figure out how to help you do that.

Cory: Yeah.

Jon: I just think it's going to throw away a lot of money or whatever.

Tip: Take Advantage Of That Lower Interest Rate – Invest! [0:10:59]

Cory: Right, yeah, you're going to be shortchanging yourself in the long run because you're not investing and using that advantage of that lower interest rate but, you know. If you have a high-interest rate, then you want to pay off that debt as soon as possible. It all depends on the circumstances.

Jon: And I get good practice with my wife because she wants to pay off our house and I think my interest rate is 2.875 and I'm like, babe, no, you know.

Cory: Never paying that up…never, never, ever.

Jon: No. No.

Cory: That's a second rag.

Jon: Yeah. So, after the schooling, there's a test to become a CPA.

Cory: Right.

Jon: Is there a prerequisite in terms you have to have a certain type of degree? Like, obviously, you're an accounting bachelor. Is that enough?

All The Things You Need To Know About Being A CPA [0:11:42]

Cory: Yeah. So currently, for the CPA exam, you have to have 150 credit hours. So you have to have a bachelor's plus another 30 hours, so a lot of programs have done like 150-hour combo master's degree.

Jon: Got you.

Cory: Where you can get the 150 hours you need to sit for the CPA exam in a fifth year. So, you know, you use the four years plus an additional fifth, you get a master's and 150 hours, so then you can sit for the CPA exam.

Jon: I see.

Cory: Then the CPA exam is a four-part test currently and it's really a lot of work…a lot of studying.

Jon: How long does it take as far as the actual test itself?

Cory: It's different now. I think it's broken out into about four-hour increments right now, so it's four parts, four hours each.

Jon: Two days.

Cory: Yeah, basically, two days of testing.

Jon: Okay. Back-to-back or are they separate?

Cory: No. It's all separate now so you take one part and then wait, you know, six to eight weeks and then take another part. So you can study for each part in between.

Jon: Four separate parts, though.

Cory: Right, four separate parts.

Jon: That's not bad.

Cory: All different topics.

Jon: Okay. Yeah, our CFP was eight hours one day, I think, all told, the break in the middle.

Cory: Right.

Jon: Okay, and so work-wise, you got the CPA and then what was work like after that for you?

Cory: So, when I started off working, it was just a lot of learning; you know, learning how to do tax returns, learning how to do audits, learning how to do financial statements, learning how to do all the things that, you know, CPA does. You know, most CPA firms do everything from payroll to like, you know, bookkeeping, financial statement preparation, audits, tax returns. There's just a lot to learn, and then as you progress, you know, and as you get into it, you kind of learn what you like and what you don't like. You know, I really stayed more in the tax realm so I don't do any audits anymore that we have other people in the firm that do that. We have people that do the bookkeeping and the payroll taxes so I don't have to do that anymore, fortunately. You know, I stick with doing the tax returns and working with clients on how to get their taxes done and maximize their tax efficiency.

Jon: Awesome. Yeah, that's good. So, now, you're working…your office is based out of Ann Arbor.

Cory: Correct, yeah.

Jon: Okay.

Cory: I'm currently working at a firm, Andrews Hooper Pavlik that has nine offices all in Michigan. I'm in the Ann Arbor office. It's nice to have resources, you know. There's a lot of small firms out there, you know, single, maybe two or three partner firms that just don't have the resources because, you know, they're limited to what they have. We're also nice because we're not a big national firm. You're not going to get lost in the shuffle. We try and have nine offices all in Michigan so we can have that, you know, personal contact for people that are nearby; you know, have small local offices to serve the communities that we're in.

The Start Of The Financial MD "Dinners" [0:14:52]

Jon: Okay, fantastic. So, over the years, our listeners know we like to put out a lot of education - a lot of resources as much as we can. One of the things that probably our listeners don't know is that since 2014, Financial MD, we've been doing dinners at different locations around the Midwest for residents who are on the verge of graduating in their final year – fellows who are in their final year – specifically tailored to the decisions that they're going to make as they transition into practice and it's kind of the capstone on our lecture series. We do lectures for many different residency programs around the Midwest that are focused on four topics – cash flow, protection, investing, and debt, of course, is the other one…student loans and such. So those are done for all the residents in Didactics during Grand Rounds but then we do these dinners and I don't know where the idea first came about – I'd been doing these dinners for a few years and they were successful – and we started doing them in Lansing. We did some in Detroit, Grand Rapids, Ann Arbor, Kalamazoo, Saginaw – gosh, so many different cities – Chicago; did one in Cincinnati a few years ago and then Indianapolis. So about 10 different cities that we've done them in and always been really well received, really fun for us to do, and then somewhere, Cory and I got the idea, we should do these together like give them a more well-rounded experience of hearing from a financial planner and a CPA and then we usually bring in a physician loan or a mortgage expert in there as well. It makes for a great conversation and you get to…it almost becomes like a panel discussion which is kind of cool. We've got these three experts and we're sitting there having dinner with residents from all over different hospitals in the area and they bring their questions and we've kind of got specific topics that might cover but Cory and I have been doing these dinners together for a while and it's just been something we look forward to. They're fun to do, and every time – I think, pretty much – every resident leaves, they're just so grateful for the information, for the time, and I know they walked away with stuff that they wouldn't have known otherwise and they get to ask some fairly personal questions. Obviously, there are questions we'll follow up on things afterward but, yeah, Cory, I mean...

Cory: Right. I think it's…I love the dinners. I love the way that it works out because it's just really a relaxed, casual, you know, like a friendly conversation where they get to ask questions and we get to answer questions and I love answering questions and helping educate people because, you know, a lot of this information is free on the internet but you can't make heads or tails of it. It doesn't mean, you know, you can read 20 articles on HSAs and not understand what the heck it's for and how it helps you.

Jon: Yeah.

Cory: It doesn't mean that you can understand how they function, what the benefit is, and how it's going to affect you, and just a variety of questions. I mean, people come with all kinds of questions but then at that dinner table because we have so many people there, they not only get to ask their questions and hear the answer, but they get to hear other people's questions they didn't even know to ask, then get to hear the answer too.

Jon: Totally. Yeah, and how many times did they come in with the question because – hey, I heard this on the Internet or I heard this on Instagram or I had an attending tell me this or another resident or whatever and that's their opportunity for them to help clarify and stuff; so, not that we're super promoting it but if you hear about one of these dinners near you, definitely, try to attend or reach out to us and we'll…

Cory: Definitely beneficial, yeah.

Jon: Yeah. So, what have you found? If we can kind of fast-track our listeners here today to try to get inside scoop like what are some of the questions that we're seeing, Cory, that maybe would be good to point out to some of our listeners that we find or topics that come up that, hey, we'll give you a sneak peek at the dinners and some of the questions that we tend to find happening most often.

Most Often Asked Question: What Is The Best Tax Deduction? [0:19:04]

Cory: I think the question I get most often is, what is the best tax deduction out there, right? So how do I, you know…what is the way I can lower my taxes the best, the easiest, the fastest, whatever you may want to call it, right? So, everybody has to pay taxes but nobody wants to pay more than their fair share and, in my mind, the best way, the best tax deduction out there, is the HSA.

Jon: Nice.

Cory: Health Savings Accounts are, you know, if you have an opportunity through your employer or, you know, if you're self-employed to start an HSA if you have a high deductible plan, you can put in, you know, $3,850 if you're single or $7,750 if you're married in 2023 and just let it grow. It's an investment vehicle which you get a tax deduction for if you don't spend it on medical. It's a savings account so you can just let it grow. You can start investing that generally in mutual funds like the 401(k) and get market rate returns and just let it grow until you need it and everybody's going to need medical expenses at some point.

Jon: Yes.

Cory: And, you know, with an aging population and, you know, all these different factors of life in general, at some point, you're going to need medical expenses. So this is like a way to build a medical slush fund is what I call it for, at some point when you need it, you get a tax deduction when you put the money in, you get tax-free growth, and then as long as you spend it on medical, it comes out tax-free. So, it's the best tax benefit out there. But, unfortunately, it's limited, so it's something you want to do every year for a long time to be able to build that up.

Jon: Yeah, agreed. No, that's totally true, and we're on the same page with that. We call it Triple-Tax-Free in a sense it's the only thing like that, right, that goes in tax-free.

Cory: It's the only thing out there.

Jon: It comes out tax-free, and then worst case scenario, if you're over 60, 65, you can take the money out without a penalty; you just got to pay taxes on it, but, you know, in that case then, it's just like a 401(k).

Cory: Exactly, yup. It's effectively a secondary retirement account.

Jon: Yeah, so it's a no-lose situation and we definitely try- and I've even had conversations with many of our especially high-income clients where we talk about, hey, we try to pick their plan at the beginning of their job and pick their benefits and I'll kind of lean towards those HSA plans because that's something to note too. Not every plan, not every health insurance plan, qualifies to have an HSA. It's got to be a high-deductible health plan and that number of what makes it a high deductible changes every year but look for a plan that has an HSA that's a high deductible if you want to have that tax-advantaged account.

Cory: Right.

Jon: And you briefly mentioned this but that's the other piece is that they can be invested inside most of them. So, a lot of times, you get to pick your own provider whether it's Fidelity or Health Equity or WEX or whatever, Optum Bank. There are so many different providers that will also let you invest it and that's another one of those…you know. A lot of my clients, we've just, you know, put in some index funds the stuff that we know we're not going to use for health expenses real soon. You start to accumulate. A lot of them I've just said, hey, let's leave a couple of thousand in cash for we got to put it off for health expenses, but the other stuff, we're starting to accumulate – let's invest this – and it's really cool to see that piece grow as well.

Cory: Yeah, and this is where really talking to your client comes into play because some clients may have high medical expenses and don't want a high deductible plan because they want the insurance to cover, you know, some of it or most of it. So, if you have a lot of medical expenses right now, having an HSA may not be the best benefit for you.

Jon: Yeah.

Cory: This is, you know, something for people that are relatively healthy, have a high deductible plan and they know they're not going to hit that high deductible cap so you can start putting money away into a high deductible or a health savings account and then just let it grow. If you're going to be using it every year, it's great because you still get the tax deduction but then it doesn't have that long-term opportunity of growth and getting tax-free growth.

Jon: Yeah, it's not a bad thing if you've got high medical expenses.

Cory: No, it's still good.

Jon: As long as your deductible is low enough that it's covering whatever you put in the HSA but, that is a good point and I'd be curious about your thoughts on this. There's a lot of clients who have said, well, we plan to try to have a baby this year, and I may say, yeah, well, then maybe let's do more of a fully-covered, you know, high premium plan this year just to make sure and then once the babies are, you know, you're done having kids or whatever, we could look at an HSA plan.

Cory: Absolutely, yeah. I mean, you have to look at it year over year to see if it's still the best benefit for you.

Jon: For sure, something you're not locked into, you can change every year.

Cory: And then that money's there if you need it, you know. So, I had to have a kid that had braces this year so I used some of my HSA money for braces.

Jon: There you go.

Cory: So you don't pay for that out of pocket. So, it's there, it's available, just write the check for the braces and you're done. It's nice. It's nice to have available.

Jon: Yup. This year, I wanted to get bicep implants, so I've got my HSA.

Cory: Got it. Yeah, you could use it. You could use it for almost anything medical nowadays.

Jon: Yeah.

Cory: I mean, like Tylenol, you can buy with your HSA but I wouldn't recommend it but you can.

Jon: Yeah. I mean, yeah, you get a debit card and you can go do that. So, HSA…other topics that you feel like we're coming across that might be people surprised that they didn't know or they thought it was one way and it turns out it's another way. What are some topics you can think of?

You Can Do A 401(k) And An IRA At The Same Time [0:24:36]

Cory: I think one of the things that most people are surprised by is that you can do a 401(k) and an IRA at the same time.

Jon: Okay, interesting.

Cory: I think there's a common misconception out there that, you know, if you're covered by a 401(k) you can't do any an IRA. Well, you can, but it's limited. So there are rules around where, you know, there are two different code sections of the IRS and I hate to get technical but, you know, there are two different code sections in the IRS tax code. One is it for IRAs and one is for 401(k)s. You can do them both independently but they both have their own rules and regulations and stipulations on how much you can put in each year. So, if you're covered by a 401(k) plan and you're making, you know, more than, I think, it's some $180,000 a year, you can't directly do an IRA but you can always put into a nondeductible IRA and convert that to a Roth or put it in and leave it in as a nondeductible IRA. There's lots of different options you have there. You can always do both.

Jon: Yup. That's awesome. Yeah, that's one of those things that we get a ton of questions about backdoor Roth and that's one thing we'd love to talk about.

Cory: Right.

Jon: In my mind, it's one of those and I think, Cory, you and I have had this conversation like, hey, yeah, while it's go in about…

Cory: Many times. Many, many times.

Jon: Yeah, out there let's do it.

Cory: Yeah.

Jon: It's going to be around forever.

Cory: It's one of those things that the backdoor Roth, you know. It utilizes two loopholes in the tax code where, you know, the first one being that there's no income limit on a nondeductible IRA contribution. You can make 10 million dollars a year and still put in $6500 this year into a traditional IRA or $7500 if you're over 50. No matter how much money you can make, you can put it into a nondeductible traditional IRA. Then the second loophole is there's no income limit on converting from traditional IRAs to a Roth. You can make 10 million dollars a year and convert any IRA money you have from a traditional to a Roth. It's a backdoor Roth. It's simple, it's easy. You can put it in, you know, $6500 a year and, if you keep doing that every year, you know, for a long time, it built up.

Jon: Yup. One of the things that I have found as people ask, well, what makes a nondeductible IRA? I'm like, well, it's not the IRA. It's the way…

Cory: Function of deducting it or not, right?

Jon: Yeah, you're right. So how do I make a nondeductible contribution? You just don't deduct it.

Cory: Right, exactly.

Jon: Because people assume just because I put money in an IRA and now it's deductible. No. Now it can be deducted, but you determine that when tax time comes.

Cory: Exactly. So, it's just a traditional IRA, right? So there are really two types of IRAs – traditional and Roth. So if you put money into a traditional IRA and don't deduct it, it's a nondeductible traditional IRA. If you deducted it, then it's a deductible traditional IRA, but you have to keep track of that on a separate form in your tax return. So, Form 8606 that you keep track of whether it's, you know, whether you took…if you didn't take the deduction and you keep track of it there as per nondeductible traditional IRA contribution. Once you've converted it to a Roth, then you keep track of it as a Roth contribution.

Jon: Okay. So you can have an IRA with some deductible contributions and some none inside the same IRA?

Cory: Yes.

Jon: Okay.

Cory: It gets messy and I don't recommend it because, you know, you're going to drive your tax person nuts doing that.

Jon: Yeah.

Cory: I like to try and keep it clean where if you're going to do a nondeductible traditional, either keep it nondeductible or convert it to a Roth.

Jon: Got you.

Cory: There is one, you know, major stipulation out there that, you know, a lot of people don't know about is if you have other traditional IRAs so, say, you take a 401(k) and you convert that to an IRA from your old job, now you have an IRA sitting out there, if you put in a nondeductible traditional IRA contribution, you have to pro- they call it aggregation rules, so you have to prorate the traditional nondeductible and the deducted nondeductible or to deduct deducted IRA in a conversion to the Roth, so try saying that fast.

Jon: Yeah.

Cory: It's really the aggregation rules that if you have any other IRAs out there, it makes the backdoor Roth more complicated.

Jon: So what's going to happen? What's the negative if you don't do it right?

Cory: You end up having a mix of deductible and nondeductible that you're not taking credit for. So if you don't keep track of the basis – the deductible basis – then you end up… you could end up paying tax when you take the money out on stuff that's nondeductible.

Jon: That you've already paid taxes on.

Cory: Right, that you already paid tax on.

Jon: Okay, so it's not a bad idea to do a backdoor Roth if you've got another IRA out there. You just got to be…

Cory: Careful about it.

Jon: Either convert or be very meticulous about tracking the numbers.

Cory: Yes.

Jon: Okay.

Cory: Track it really well, or you can convert all of the other traditional IRAs out there.

Jon: You know, and that's great. That's a good point. That's a lot of recommendations I make. I find that – and this is probably true for you too – there are certain recommendations that are just general like, hey, at least think about this in your last year of residency; one of which being when you go into practice, you got a half-year of a resident salary and then a half-year at an attending salary, give or take, and probably if you talked to us anytime you're in residency, you probably put some money in your 401(k) or 403(b) in your residency even if it was just a 5 percent.

Cory: Right.

Jon: And I often – again, this is not necessarily financial advice, everybody's situation is different – but I often tell my graduating residents – let's go ahead and convert that. It's $5000 in your 401(k). Let's just- this is going to be the lowest tax bracket you're going to be in for the rest of your life this year. Let's convert that to a Roth and then we can start the backdoor Roth free and clear…no other pre-tax money.

Cory: That's kind of the best reason to do it, you know, and I always say, look, it's only $5000 or whatever it is…even if it's $50,000. You can do it for $5000 or $10,000 a year for five years. You can do any amount in any year you want. There's always the ability to convert from a traditional to a Roth.

Jon: Yes.

Cory: So, if you have $50,000 and you only want to do $10,000 a year, we'll do it for five years in a row and then you're done.

Jon: Yeah.

Cory: But converting it to a Roth makes more sense tax-wise over your lifetime because, again, a traditional IRA, if you put money in now, you get a tax deduction now. Great, you know. You put in $6000, you get $1000 off in your taxes – great, you saved $1000. But when that $6000 grows to $100,000 when you retire, now, in a traditional IRA, when you take that money out, you have to pay tax on every single penny of that $100,000.

Jon: Yes.

Cory: You've just created $20,000, $30,000 of taxable income or tax on that income that you've created.

Jon: Yup.

Cory: When you put it…when you convert it to a Roth, you pay the tax now – okay, great. You pay tax on $6000 – fine. When it grows to $100,000, you can take it out with no taxes at all. You've just saved tax on $94,000 of income.

Jon: That's great, yeah.

Cory: It's an amazing…

Jon: Way to put it.

Cory: The Roth IRA and Roth, even 401(k) is just an amazing tool for long-term growth and avoiding taxes; basically getting tax-free growth rather than tax-deferred growth.

Jon: Yup.

Cory: And a lot of people – and the other misconception out there that I, you know, I don't even know how it happens is, you know, you get these physicians that are making 250, 300, 400, 500,000 a year and for some reason, they've been told along the way – oh, I make too money to be able to put into my Roth so I'm only putting into my traditional 401(k).

Jon: Yup.

Cory: If your company has a Roth 401(k) plan, it doesn't matter how much money you can make. You can put money into the Roth 401(k) plan.

Jon: Yup.

Cory: And I get that – oh, I can? Yeah, put money into your Roth, you know, to save the…you're going to pay tax now. Yes, but that, you know; this year, it's 22,500 that you can put into a Roth 401(k). Put that in the Roth, and let it grow tax-free. That way, you never have to pay tax on it again.

Find Yourself The Right Financial Advisor [0:32:54]

Jon: Yeah. There are so many things like that that we find that it just brings us back to that point of finding an expert that you like and you trust and you know has your best interest in mind because you guys as doctors, you know so many things about so few areas and that's true of anybody. We've got specializations; each one of you has a specialty even if that specialty is primary care, you're really good at that, you know a lot about that, and trying to become an expert in something else like personal finance or real estate or any of those things like, can you do it? Yeah, I'm not going to argue with The White Coat Investor and say you can't be your own financial advisor – for sure – but it takes a lot of work and a lot of knowledge that a lot of people just don't have the time or the desire to do or you've got families or you've got just other hobbies or things you want to do that to come in and say, well, I thought 20 years into your career is your fault, like getting misinformation is so much more likely when you're doing your own financial planning on the internet versus finding somebody that knows what they're talking about, that has the experience, that knows your situation, and obviously, I'm preaching here. You guys are listening here and you've heard me say this before and you know this, at least if you're listening to this, you found some good information. But, taking that time however long it takes to find the right person to give you that information and know that this is good information. This person has been doing this a while, they've got the certifications, they've got the knowledge – that thing can save you so much money. Like Cory said, 20 years of putting in a traditional 401(k) versus a Roth like, you can't fix that. There's no way to go back and make that different.

Cory: That creates a lot of tax down the road, and you have to find somebody who can explain things simply, right? Anybody can complicate the hell out of plans. I mean, there are lots of attorneys and financial advisors and CPAs out there that will, you know, explain things in ridiculous detail just so you don't understand it. That means they don't understand it. If they can't break it down so you can understand it, that means they don't understand it.

Jon: Yeah, it's a very good point, and there's certainly a lot of investment strategies and portfolio managers that have talked to me before and then I try to convey that to a client. I was like – okay, I'm going to be honest. You've got a good track record; I don't know why. Maybe we'll stick with just some little more simple strategies.

Cory: Let's figure out something we can understand and explain well and have good returns.

Jon: And it'll probably be just as good.

Cory: And probably just as good, right, generally, yeah.

Jon: Yeah.

Cory: Save some money in the long run.

Jon: Yeah, well, good. So, if it had to be one piece of advice that you gave to a resident in their final year, what do you think would be one takeaway that you would want them to know?

Cory’s Piece Of Advice To Residents [0:35:50]

Cory: I think it kind of reiterates what you were just talking about. Focus on what you do best. You've gone through residency. You've got your education. Focus on your career and delegate the rest. Delegate the financial advising. Delegate the, you know, legal work. Delegate…you know, find an attorney that can review your contract when you're signing a contract. Work with the CPA that can help you get your taxes done. Delegate the things that you don't know about because it's not worth the time and effort of you learning. You need to be educated enough and understand enough to be able to be asking questions, but, you know, delegate the things that you don't want to know how to do. I give the example all the time that my brother showed me how to change the oil in our car when I was 16; he was 18. I did it one time. I will never do it again.

Jon: Yeah, yeah, that's an example.

Cory. Right, because it's not something that I want to know how to do. Could I figure it out? Yeah, it took me a couple of hours. I'd, you know, figure out may have to go to the store to get more parts and the supplies and I could get it done but I still want to know what to do with the oil when I was done, you know.

Jon: Yeah.

Cory: The oil that came out…what do I do with it? I could spend hours doing that or I could take it and in 10 minutes at the oil change place, pay somebody to do it. Why wouldn't I do that? It's an example of, you know, it's a simple example but it's an example I use a lot because it's effective. I know what I know because I've been doing it for 25 years. I'm really good at it. I love what I do and I love helping people and answering questions and, you know, for me to go out and learn how to remove my daughter's appendix if she needs that surgery, I'm never going to do it.

Jon: Yeah, yeah. If we're in a pinch and I had to do it, like sure, I might have to go to the store and get some other parts and things but, yeah.

Cory: I'm not going to throw my daughter on the kitchen table and Google how to, you know, take out her appendix. That's just…yeah.

Jon: Oh, that's excellent.

Do What You Do Best And Delegate The Rest [0:37:56]

Cory: We have people who are educated in this country for a reason, you know. Do what you do best and delegate the rest.

Jon: Yeah, no, and certainly, you know, people have been screwed over by insurance agents posing as advisors.

Cory: Right.

Jon: Or, you know, getting bad advice anywhere but, you know, that's why we always ask the question, you know, a. get a referral, find some testimonials – those are fine – and find out how this person is getting compensated; you know, that can get a piece of it as well, and understand conflicts of interest and all that kind of stuff.

Cory: Right.

Jon: Be a savvy researcher as you're looking into this but, yeah, and just be smart, you know; understand the recommendations as best you can. Ask questions.

Cory: Ask questions, right?

Jon: Yeah. Work with someone who makes it a collaborative process; that has no problem educating you and helping you understand as much as possible.

Cory: Right, and if somebody, you know, any advisor ever says – oh, it's fine, we'll just do it and don't worry about it – no, that's…they need to be able to explain it.

Jon: Yeah, exactly; that means there's something they're not telling you probably.

Cory: Right, you got it.

Jon: Cool. Well, I think we're at the end of our time today, but this has been great, Cory. I think this is a ton of great information that we've never had in a previous episode and just getting people to get to know you and understanding; seeing behind the curtain of a CPA and how that whole process works. If people want to reach out to you for anything, what's the best way to get a hold of you?

Cory: The best way to get a hold of me is my email: I'm not sure if you can post that somewhere.

Jon: Yeah, we'll put in the show notes for sure.

Cory: Yeah, it's easy enough to get a hold of me by email. I'm always happy to help, answer questions, be a resource, and I always enjoy the time and appreciate you having me on. It's been great.

Jon: Yeah.

Cory: I always love chatting with you whether it's the dinners or just in person over lunch or, you know, just phone calls catching up but I think it's always enjoyable to share information.

Jon: Yup, and for the record, full disclosure: Cory does my taxes – there you go. Like that tells you anything. All good. Well, guys, thanks so much for joining us for the Financial MD Show. This has been another great conversation with some good tips. Hope you're taking notes. We've got links to everything we've talked about in the show notes. Be sure to leave a review because that is key for getting this information into the hands of other young physicians who don't necessarily know what they're doing in their personal finances but would like to get better. So, leave a review, share this with somebody, subscribe, and then join the conversation on our social media – on Instagram; we've got TikTok blowing up, Facebook, and Twitter. So, join us on all those. We'd love to see those get to the point where it's a well-known resource for young physicians to get good solid financial education. And, of course, check out for links to all of this, and if you're in the Detroit area, on September 27th, come join us for dinner and love to see you. So, we'll talk to you guys soon. This is John from Financial MD, we'll see you next time.

Thanks for joining us for another Financial MD Show. Be sure to head over to to get more in-depth resources on financial tips for physicians and don’t forget to join the Financial MD community group on Facebook, where physicians at all stages of their career gather to share tips and get ideas on achieving true financial success. We’ll see you next time.

The Financial MD Show is for informational purposes only and is not an offer to invest. It is not financial, tax, or legal advice. Be sure to seek financial, legal, or tax professionals when making any financial decisions. Before investing, you should make sure that any investment strategy or investment meets your individual investment needs, goals, and objectives. Financial MD makes no claims or guarantees to individual investment performance. All investing involves the risk of loss as well as the potential for gain.

Resources and Links:

· What is Business Valuation? –

· Certified Valuation Analyst (CVA) –

· CFP: Certified Financial Planner Definition –

· What is Risk Tolerance? –

· Health Savings Account (HSA) –

· Triple-Tax-Free: What it is, How it works –

· Fidelity Investments –

· HealthEquity –

· WEX Inc. –

· Optum Bank –

· Backdoor Roth IRA: Advantages and Tax Implications Explained –

· What is Aggregation? –

· (403) Tax-sheltered annuity plans –

· The White Coat Investor –

· Cory Lee’s Email Address –

· Financial MD Website –

· Financial MD YouTube page –

· Financial MD Facebook community –

· Financial MD TikTok –

· Financial MD Instagram –

· Financial MD Twitter –

· Financial MD LinkedIn –

· Financial MD Apple Podcast –

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