On the fast track

Sam, a young professional, had clear goals but lacked a clear vision for achieving them — until we stepped in. Following the road map we developed, Sam should be financially independent by age 58.

Situation

At 33 years old, Sam had just completed his fellowship as a cardiologist and accepted a position with a private practice. His starting compensation was $550,000 per year, consisting of a $450,000 salary and $100,000 bonus. Sam had been earning $55,000 annually as a resident and fellow. Along the way, he had amassed $225,000 in student debt and $25,000 in auto and credit card debt. Sam is married to Christine, and they have one young child.

Recommendations

  • Lengthen the term of the student loan and save the difference in a 401k plan, an overfunded life insurance policy or both
  • Negotiate to have his employer pay some portion of the student loan
  • Purchase a home but only make the minimum down payment required
  • Roll the auto debt into the mortgage and use the savings to pay off the credit card debt
  • Maximize savings in tax-deferred accounts for retirement first, and then save for the child’s education
  • Purchase life and disability insurance to fund the gap in wealth to protect loved ones from an unexpected death or disability
  • Create a will to reduce probate and protect loved ones

Results

Sam lengthened the term of his student loan to 25 years, and his employer agreed to pay down $15,000 of his student debt annually. The resulting increase in cash flow allows Sam and Christine to invest in excess of $50,000 per year (with tax savings) in a 401k plan. Over 25 years, this could grow to approximately $3.4 million, and the loan will be paid off.

Sam and Christine put 10% down on a new home and saved $12,000 per year by consolidating their auto debt into their mortgage. They initially purchased a term life insurance policy, which they later exchanged into a permanent, overfunded life insurance policy, paying the premiums with Sam’s annual bonus. After 10 years, this strategy should produce more than $50,000 in annual, tax-free income over Sam’s lifetime.

Disclosure

This case study has been designed to provide an example of the comprehensive wealth planning services provided by Traust Sollus Wealth Management, LLC (“Traust Sollus”). This case study should not be viewed as any indication that these clients approve or disapprove of Traust Sollus or the services it provided. Client names have been changed to protect each client’s identity.

This information is being provided for illustrative purposes only and should not be construed as the rendering of personalized investment advice or as the depiction of the historical investment and wealth planning performance of Traust Sollus. All information contained herein, including but not limited to, monetary figures, performance figures, net worth figures, asset values, account values, returns, statements of income, tax rates, insurance policies and information, estate plan examples, and general family circumstances, are for illustrative purposes only. Although we believe that the information presents an accurate depiction of the experience of certain of our clients, there is no guarantee that this information will represent any other client’s actual experience, which may be materially different than presented herein. Any difference in a client’s financial conditions, objectives or investment strategies could materially alter the results portrayed. Because each client has different financial circumstances and corresponding financial planning objectives, each client’s account will be managed in a fashion unique to and appropriate for that client.

It should not be assumed that recommendations made by Traust Sollus in the future will be profitable or will equal the performance figures or results discussed herein. Past performance is not necessarily indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy, wealth plan or wealth planning technique, or product made reference to directly or indirectly in this document, will be profitable or equal to corresponding indicated performance levels. Performance results indicated herein do not reflect the deduction of transaction and/or custodial charges or the deduction of investment management fees, the incurrence of which would have the effect of decreasing historical performance results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Traust Sollus does not use performance-based data to determine which case studies to include on its website. Additional information is available upon request.