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Join us for an insightful discussion on managing finances in dual high-income earner households, featuring Shane Tenny, a financial planner. In this episode, we delve into the unique challenges faced by couples in professions like medicine and dentistry, where both partners bring substantial incomes to the table. From optimizing tax withholdings to maximizing retirement benefits, we explore practical strategies for achieving long-term financial goals while juggling busy careers and family life.

Shane Tenny is managing partner, Spaugh Dameron Tenny, LLC, and host of The Prosperous Doc podcast.

He discusses the KevinMD article, “Financial considerations for dual-doctor households.”

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast, get CME for this episode by clicking on the CME link in the show notes. Today we welcome back Shane Tenny. He is a financial adviser. Today’s KevinMD article is “Financial considerations for dual-doctor households.” Shane, welcome back to the show.

Shane Tenny: Thanks, glad to be here, Kevin.

Kevin Pho: So Shane’s been on multiple times in the past, talking about all things financial about physician households. Go to KevinMD.com/podcast to hear his prior episodes and story. But today let’s jump right into the most recent article, “Financial considerations for dual-doctor households.” So tell us what this one is about.

Shane Tenny: Yeah, Kevin, it’s a really important topic. I guess, just to give everybody a little bit of background on our firm, I’m the managing partner of a firm that specializes in working with physicians and dentists all around the country. We’ve got clients in about 35 states, and for a couple of decades this has been the pond that we swim in, helping docs, helping dentists make smart decisions with their money.

And obviously we know, kind of intuitively, all of us and everybody listening knows, oh yeah, we have some unique considerations, whether it’s student loans, whether it’s production based pay, whether it’s malpractice issues. But one of the nuances is not just being in medicine, but what about all those couples that are married to someone in medicine?

So now we’re both physicians, and so we both have years and years of training, which of course includes lots of clinical information, very little financial information. We share a common passion, a mission driven purpose about what we do. But that combined household, with combined financial personas so to speak, does create some really unique considerations that sometimes aren’t understood and don’t become recognized until it’s either too late, or you’ve already tripped into a pothole or stumbled into an issue. So that’s what we wanted to highlight in the blog article we put on your website.

Kevin Pho: Perfect. So tell us some of the key issues that dual physician households typically face in that financial field.

Shane Tenny: Sure. Why don’t I summarize the broad themes, and then if you want we can unpack these. I would say they kind of fall into three key themes.

So there’s a theme around what we’ll just call benefits and savings. What I mean by this is, you’ve got spouses who are employed by two different institutions generally. It could be the same institution, could be the same hospital system, but they’ve got two key employers. They’re entitled to two sets of benefits, whether that’s health insurance, whether that’s life insurance, 401(k)s, cash balance plans. And because you have these dual options, there are some real ways to either trip up when you’re making these elections, or opportunities that you can miss. So that’s the overall theme of benefits and savings.

One of the other themes has to do with something I mentioned a minute ago, and that is around student loan repayment strategies and tax filing. Those two things go together in terms of strategy. Filing taxes when you have two high income earners can be a unique area of planning and consideration. Of course a good CPA helps tremendously in this regard, but often CPAs don’t have that cross knowledge with student loan repayment strategies, and student loan repayment strategies are often driven based on the numbers on your tax return. So there’s that intersection.

And then the third category that we see, I just call it quality of life and time. Unlike other households, physician households, in our experience, just fall under a heavier blanket of time commitments, of call, and often a lack of financial acumen. And I don’t mean that in any derogatory way. They were called into the field of medicine because of a love for science or a love for people. And so you often have spouses with a lot of opportunity financially, but a deficiency of ability, both in terms of temperament and time. And so that creates stress, it can create blame, it can create marital tension. And so that becomes a unique attribute of dual physician households in many cases.

Kevin Pho: All right, so let’s talk about each of those sections in a little more detail. So the first point that you mentioned was the fact that each physician may have a different set of benefits. Tell us about the issues and some of the problems that may arise, or opportunities for that matter, that can come from that situation.

Shane Tenny: Sure, I’ll call out a few that I think everybody will resonate with.

So one would be just selecting health insurance. Super important benefit that we all need, to protect our families, ourselves. And when you go in, either for a new job, or you have that open enrollment period in October, you get a big maze of confusing decisions. And if you each just sit down, because you have no time, you’re like, OK, yeah, I’ll check this one, this looks like it’ll give me the best coverage, and I’ll take this one. Are you putting the kids on your insurance or mine?

Again, you may end up having good coverage, everybody has a plan if you go to the doctor, but you’ve missed the ability to reconcile the two. Wait, who’s where, could we save more money, would it be better for you to take the whole family on your plan because you’re employed by a major hospital and I’m in private practice or with a small group of partners, or is it better for us to do some different combination? So in that regard, with health insurance, I would say most often what we see is not necessarily a mistake or a deficiency, we see a lost opportunity for better efficiency, an opportunity to save money.

One of the others, that would be more an area where there may be a problem, I’ll just continue with the health insurance example. As we know, over the last decade many major employers, hospital systems and the like, have had to control their own health insurance and benefit costs by offering high deductible plans. High deductible health insurance plans often come with the ability to elect a health savings account. This is a great opportunity for most physician families.

And so again, in my example here, what we have seen is folks coming out of fellowship, they’re going to their first job, they’re signing up for benefits, they both look down, they’ve been programmed by somebody, their parent, their friend, whoever, you want to save, you want to max out your health savings plans. And so both spouses will elect high deductible coverage. They look at the different HSA savings options, one is single and one is family. They think, well, I’m married, I’m a family, and so they check the box for family coverage.

In that regard, both spouses end up contributing perhaps $7,000 to the HSA, and while each employer thinks that’s tolerable, when they go to file their tax return the IRS says, no, no, no, that was a cap for the family and the household, you’ve now over contributed. And so now you have to go through these annoying steps for corrective overcontributions.

So that would be another example. Obviously coordinating life insurance and disability insurance benefits, cash balance plan contributions. This is the maze that we’re in here when we talk about this category.

Kevin Pho: So is it just a matter of time, where both physicians in that household would have to sit down and go over their individual benefit plans and see whether there’s overlap, see whether there’s opportunity? Is there someone that can guide them through that process? Because what you mentioned is that a lot of them simply don’t have the time and just check off whatever box is most convenient. Is it just a matter of time, and just sitting through and envisioning different scenarios?

Shane Tenny: I think time is definitely an important attribute. It’s also just a level of interest and awareness. And so you might be aware, like, oh, I know we’re not doing this right, but who wants to do this on a Friday night, or that magical day in the month when we’re both not on call and at home? Who wants to sit around and look over your benefits package?

But your point is right, which is, number one, I have to be aware there may be some efficiencies here. Number two, I have to be willing to set aside the time. And then, even if you have the time, I don’t understand these things. What’s the difference between dependent care FSA and dependent care credit and the health savings account? Those sorts of things.

And so, having somebody to help, I’ll take the opportunity to catch the softball you threw me, this is what financial planners do. This is what we do that is unique from capable accountants. That’s unique from the benefits people in your employer’s department in the hospital. It’s unique from the attorneys. We kind of navigate this field of confusing decisions.

Kevin Pho: So give us a success story where you have two physicians in a household get their benefit plans more synergistically aligned with the help of a consultant like yourself. Give us a success story of what that would look like, and some of the opportunities they gain by doing that.

Shane Tenny: Yeah, so on the benefit side, since we’re in that category, the success story is the inverse of the problem. So the success story is when clients, either on their own or with the help of us, when they say, hey, can you take a look at our benefits with us? And we look it over, and we see this opportunity, and we say, OK, look, if you both enroll separately here, your total insurance costs over the year are going to be about $20,000. Instead, if we put all the kids on your benefits and you choose single only, your combined benefits cost will be $14,000.

So just making that good decision, this was from last fall, I was working with some clients, they saved about $6,000 in health insurance costs, and they still end up having good coverage.

Kevin Pho: All right, so let’s talk about the next piece you mentioned, which was student loans. And as you know, physicians graduate with sometimes hundreds of thousands of dollars each of student loans. Tell us some of the pitfalls and opportunities when it comes to addressing this issue once you have those attending salaries.

Shane Tenny: Yep, absolutely. So under this category of taxes and student loans and optimizing that, I would say there are three primary things that we see. This one maybe is a little bit more pointed than the prior category.

Student loans, you bring up, is certainly a huge pain point for physicians. Physicians who are employed, as many are aware, with a nonprofit hospital system or health care system may be eligible for Public Service Loan Forgiveness. This has been pretty well publicized over the last decade, and certainly over the last couple of years with the forbearance from the federal government.

The best strategy that is often available for student loan forgiveness is to elect an income driven repayment plan. Now, we don’t have the time, and I’m sure your listeners don’t have the interest, in trying to unpack all of student loan repayment options here on this episode. But suffice it to say, if we’re going for Public Service Loan Forgiveness and we want to best utilize the income driven repayment options, we have to be aware of what income we are reporting to the Department of Education. The Department of Education is getting your income from your tax return.

Therefore, while it is almost never the best option for married households to file separate tax returns, this is one of the cases where it may be. The challenge that we see is that CPAs, who are trained and capable at filing taxes, don’t often have knowledge of Public Service Loan Forgiveness rules. So they’re only looking at, will you pay more taxes filing separately or together? And in almost every case filing taxes separately results in a higher tax bill. That is just the way the tax code is written, it is written to favor joint filing. However, there are cases when filing separately and paying more taxes is better, because you will pay less in student loans. So as a financial planner, when we’re looking at a household and the total money, not just the tax money, we can see that as being an opportunity.

The second thing, I’ll keep clipping along here, is often married physicians, because they’re both working, they end up having help in the house, they have a nanny. And so when you have a nanny, particularly one that’s full-time, there are tax burdens there, there are ways that you need to pay them and handle that tax filing. And so that’s a unique consideration we see.

And then the third one, which cropped up about, oh, maybe 13, 14 years ago following the passage of Obamacare, is the Medicare excise tax. This one’s pretty easy to understand. The Medicare excise tax from the Affordable Care Act requires that any household with more than $250,000 of income, you have an extra 0.9 percent tax you have to pay.

Hypothetically, using easily manageable figures here on a podcast, if you had two physicians each making 200 grand, neither of them individually will have an employer who withholds this extra tax, because neither of them is making more than 250. But combined, when they file that tax return, the IRS is going to want an extra 0.9 percent tax on everybody. So again, having that awareness can help you plan ahead and avoid annoying tax surprises.

Kevin Pho: So it sounds like, when choosing a financial planner, physicians should definitely choose one that is certainly familiar with the health care field and high income earners in general, to take advantage of these specific opportunities that may be available to them.

Shane Tenny: Well, I’m biased, but I would say I think they’re well served. And if nothing else, perhaps, again, there are a lot of great financial advisers out there, many are my friends at conferences and things, but I think anytime you’re in a subspecialty field, whether you’re a public company executive, whether you’re an attorney, whether you’re a physician, finding somebody that really knows the world you live in can give you even more nuanced advice.

Kevin Pho: So let me ask that question from another angle. What kind of questions should physicians ask themselves to see whether they can go it alone and do without the services of a financial planner?

Shane Tenny: That’s a great question, because there are a lot of physicians who are capable. I think there are a couple of key questions to ask.

Number one, do you have an interest in doing this yourself? If you don’t, if money feels overwhelming for whatever reason, then you need help. Candidly, the same question would be true with lawn care, or taking care of your car, or anything. If you don’t have an interest in doing it, then you need to hire somebody, that’s something to outsource.

If you do have an interest in it, then the question is, do you have the time? And one of the things I’ve learned personally is, the older I get, the more my kids grow, the more life seems to get busier, not slower. And so there often is a stage in life when we have more time than money. That may come when you’re in undergrad or something like that, you’ve got a lot more free time than money. Generally, as life progresses, you end up having more money than time. When you have more money than time, that’s when it’s usually a good use of that money to just outsource the advice.

And so you can ask yourself, do I have an interest, do I have the time, and then the third would be, do I feel like I have the acumen to navigate this? Do I have enough baseline knowledge and willingness to do the research?

Kevin Pho: All right, we’re talking to Shane Tenny. He’s a financial planner, and today’s KevinMD article is “Financial considerations for dual-doctor households.” Shane, you’ve given so much sound financial advice in this podcast. Let’s end off with, say, the top two that you want to hammer home to my audience, and then we can end off with some of your take-home messages.

Shane Tenny: I think the main thing is really the third category that I highlighted maybe 10 minutes ago, and that is just the quality of life and time, and sort of the questions you were just asking about.

The thing that we see that is often present within physician households is, not only are the decisions more complex than for their peers from undergrad or training or whatever, the decisions are more complex, the opportunity is more significant. Physicians are among the top income earners in our country. The opportunity to do really awesome things for their families and their communities is huge.

And so, looking and determining, what is the impact of these decisions, do we have the time to do it, and is it causing us stress? Because it doesn’t have to. There are people out there who are capable and able and willing to help.

Kevin Pho: Shane, thank you so much for sharing your perspective and insight, and thanks again for coming back on the show.

Shane Tenny: Thanks.