Dan Deighan, CLU, CFC

I'm a young doctor, and the plan is that I take over my father's and his partner's practice in the next few years. As exciting as it may be, I have some concerns about retaining the value of their practice, preserving the assets they have worked so hard to develop, and continuing their legacy as caring and nurturing doctors. What suggestions do you have to help us through their retirement transition?

Retirement income needs of the senior sellers need to be determined in terms of dollar amounts and the flow of the dollars to them over time. Often, in a family arrangement, the sellers will finance the sale over 10 or 20 years at a reasonable interest rate, which allows the junior buyers to purchase with low or no money down and to spread the payments out over time. Doing so allows the future cash flow of the practice to pay for the purchase more comfortably while allowing the junior purchaser, through salary and profits, to afford the desired lifestyle for his family and contribute to a retirement plan. 

Dan Deighan, CLU, CFC, is founder and principal of Deighan Financial Advisers in Melbourne, Florida. He has counseled clients since the firm's inception in 1974. Learn more by visiting 

. Send your money management questions to 

Articles

IRA conversion, practice buying considerations are addressed

Considerations when buying a practice

 I've heard of physicians who earn more than $100,000 through their practices employing a Roth IRA conversion tax strategy to counter the expectation of rising income tax brackets in future years. Will this work for everyone, and is this a smart investment?

When a conversion is completed, it triggers an individual taxable distribution to the IRA owner. After the Roth conversion, the investments in the Roth account accumulate free of income tax and also are not subject to income tax at distribution. In essence, you pay the tax on the seed rather than on the harvest. 

Traditional IRA and employer retirement accounts are infected with taxes. It is often a smart, multigenerational family legacy tax plan to use the Roth conversion strategy. 

When does converting an IRA make sense?

Q: During the past 24 months, my investments have been on a roller coaster ride due to the banking challenges, recession, government bailouts, and stimulus plans. What can I do to stop the "bleeding" as it relates to my portfolio?

As a possible alternative to the stock, bond, mutual fund, and annuity markets, consider that demographic, economic-driven investment strategies have performed very well during the same time period. Demographic economics research involves analyzing the spending and migration patterns of a population to determine where it will be spending its money and what it will be spending its money on in the future. In the current, tight economic environment, consumers will be spending money on non-discretionary items such as food, shelter, medical care, prescription drugs, transportation, and energy.

Q: Much like I have asset protection strategies in my retirement portfolio, my practice needs to be protected from various scenarios that could put me out of business in a heartbeat. What do I need to know? 

 Asset protection is an important planning consideration in the litigious society in which we practice and conduct business.

The preferred asset-protection choice of business entity in which we do business varies by state. Your attorney must be knowledgeable and up to date on these choices.

Discuss with a litigation attorney how he or she would approach "piercing the veil" of protection for the personal assets you have or plan to have in place in terms of business entity (for example, a limited liability corporation or corporation). Consider professional liability and commercial liability insurance as well as commercial and personal liability umbrella policies.

Review your income and estate-tax plans and qualified retirement plan documents at least annually to update documents and strategies to avoid paying unnecessary taxes.

Shrinking physician reimbursement schedules from insurance companies and government agencies over the past 10 years, combined with increasing costs of doing business, have created a difficult business environment in which to operate profitably. A quarterly financial review process to examine effective ways to control costs and increase revenues, perhaps through cost sharing and/or technology improvements, would be a timely and prudent methodology to maintain profitability for your practice and avoid credit challenges and bankruptcy.

 Send your money management questions to 

Investors should consider obtaining a qualified second opinion when concerned about "bleeding" of portfolio values due to market losses.

Q&A: Protecting your investment portfolio and assets

Q: My stockbroker and accountant continue to tell me to "ride out this market crash" because I am a long-term investor. That may have been true 20 years ago when I was in my thirties, but as I get closer to retirement I become fearful of losing what I have accumulated-and I have lost more than 40 percent in the last 18 months. Does the same old "buy-and-hold" strategy still have a pulse for those of us in our fifties, sixties, and older?

But what about the lost opportunity during those years? What if you simply made 3 percent on a one-year certificate of deposit? That would be $30,000 per year plus compound interest, or an additional $248,321. So even if you did ride out the market, your portfolio would still be behind almost 25 percent. We must find ways to generate significantly higher returns to gain back our losses and continue to experience growth. The opportunities exist to accomplish this using creative alternative income and growth investment strategies, but not via the same old "buy-and-hold," song-and-dance financial product sales people historically advocate. 

Dan Deighan, CLU, CFC (left), is founder and principal of Deighan Financial Advisers in Melbourne, Florida. He has counseled clients since the firm's inception in 1974. Learn more by visiting 

Does the same old "buy-and-hold" strategy still have a pulse for those of us in our fifties, sixties, and older?

Author | Dan Deighan, CLU, CFC

Articles

Considerations when buying a practice

When does converting an IRA make sense?

Q&A: Protecting your investment portfolio and assets

Q&A: Tired of hearing 'buy and hold'