Planning for Your Future as a Physician… “ The Basics Every Resident Should Know” Presented by: David L. Bailin, ChFC, CLU, CLTC Personal Wealth Strategies for Physicians 2620 Whitehorse Hamilton Square Road Hamilton, NJ Phone (609) Securities and Investment Advisory Services offered through Securian Financial Services, Inc., Member FINRA/SIPC, A Registered Investment Advisor. Personal Wealth Strategies for Physicians is independently owned and operated. David Bailin is a Registered Representative and Investment Advisor Representative of Securian Financial Services, Inc. David Bailin nor Securian Financial Services, Inc. provides specific tax advice. Please consult a tax professional for specific tax information DOFU 4/1/06

The Need for Responsible Planning What If You Were to Die Today? Many individuals recognize the benefits of financial planning. A financial plan often uncovers problems, and frequently provides the motivation to make needed changes. For the most part, the issues involved in planning are positive and enjoyable (e.g., retirement, well-educated children). However, planning for the unexpected – known as risk management – can be less pleasant. A key part of risk management is answering the question, “What if I were to die today?” Preparing for an untimely death is often referred to as “survivor benefit planning.” A subset of estate planning, it addresses the need to keep one’s family in their current world, financially. Understandably, no one likes to contemplate his or her own demise. For some, death seems a distant, future event. Others are simply too “busy.” Whatever the reason, delaying this part of planning can result in expensive, unintended, even tragic consequences.

The Need for Responsible Planning What If You Were to Die Today? Survivor Benefit Needs The ultimate purpose of survivor benefits planning is twofold: (1) to ensure that the ongoing income needs of the survivor(s) are met, and (2) To provide for immediate lump-sum cash needs. ▪ Income needs: How much income will the survivors need, now and In the future, to cover the following: ▫ Household living expenses: Will the family stay in the same house? Can they afford to? Do they want to? Will they have the option? ▫ Additional childcare: Will there be a need for more help with young children? ▫ Educational expenses: Will there be enough money for the children to go to college?

The Need for Responsible Planning What If You Were to Die Today? ▪ Lump-sum needs: How much will the survivors need immediately and in cash? Consider the following: ▫ Final Expenses: More than the funeral, this includes unpaid medical bills which, after a long illness, can be substantial. ▫ Estate settlement costs: Probate expenses, attorney’s fees, death taxes, etc. ▫ Mortgage payoff and debt reduction: Will it be important to provide a paid-off house? Are there debts that should be retired?

One Final Question If you died today, would your plan be ready?

Types of Life Insurance Policies In choosing the type of life insurance policy you purchase, consideration must be given to the need which is being filled e.g., funding retirement needs, creation of an estate, payment of estate settlement costs, (federal and state death taxes, last illness and burial costs, probate fees, etc.), business buy-out, key-man coverage, etc.

Types of Life Insurance Policies Decreasing Term Level premium, decreasing coverage, no cash value: Suitable for financial obligations which reduce with time; e.g., mortgages, or other amortized loans. Annual Renewable Term Increasing premium, level coverage, no cash value: Suitable for financial obligations which remain constant for a short or intermediate period; e.g., income during a minor’s dependency. Long-Term Level Premium Term Level premium, level coverage, no cash value: The annual premiums are fixed for a period of time, typically 5, 10, 15 or 20 years. Suitable for financial obligations which remain constant for a short or intermediate period; e.g., income during a minor’s dependency.

Types of Life Insurance Policies (con’t) Whole Life Level Premium, level coverage, cash values: Cash value typically increases based on insurance company’s general asset account portfolio performance. Suitable for long- term obligations; e.g., surviving spouse lifetime income needs, estate liquidity, death taxes, funding retirement needs, etc. Universal Life Level or adjustable premium and coverage, cash values: Cash values may increase, based on the performance of certain assets held in the company’s general account. Suitable for long-term obligations or sinking-funds needs: estate growth, estate liquidity, death taxes, funding retirement needs, etc.

Calculating Your Crisis Factor Monthly Budget _____________________ Savings _____________________ Factor _____________________ Other Sources Available _____________________

Individual Disability Income Insurance One approach to the problem of a providing income during an extended period of disability is to purchase individual disability income insurance. What to Look for in a Disability Insurance Policy ▪ Definition of disability: Are education, experience, and past earnings taken into account in determining whether the insured is qualified to resume work? Many policies provide for an initial own occupation definition of disability, for a specified period of time, after which a different definition of disability applies. ▪ Partial or residual benefits: Partial or residual disability benefits may be paid in some policies when the impairment allows the insured to perform only a portion of his or her duties. This provision may also pay benefits in the event the disability reduces the insured’s income by a certain amount ( for example, 20% or more) for pre-disability levels. ▪ Cost of living adjustment: Is there a cost of living adjustment (COLA) which would increase benefit payments after a disability occurs?

Individual Disability Income Insurance (con’t) ▪ Cancelability and renewability of policy: Except for nonpayment of premiums, is the policy noncancelable or guaranteed renewable? Noncancelable generally means that the insurance company cannot cancel the policy, change the policy provisions or increase policy premiums after issue, as long as premiums are paid on a timely basis. Guaranteed renewable is similar, but allows the insurance company to increase the premium. ▪Waiting and elimination period: Is the waiting or elimination period proper for the insured circumstances? Commonly available periods may include 30, 60, 90, 180 and 360 days. Naturally, the longer the elimination period one selects, the lower his or her premium payments will be. However, a person’s needs, cash reserves and income sources should be the deciding factors in selecting a proper elimination/waiting period. ▪Benefit period: What benefit period should be selected? Since long-term medical disability can be financially devastating, one should elect a long-term benefit where possible. Some companies offer lifetime benefit periods, but periods as short as 24 months to 60 months are also available.