Winter 2017-18

Student Loans and What to Do… “ I’ve been saying ‘soon’ long enough ” is a phrase taken directly from an out of state client’s email just two days before the writing of this article. What this person was referring to is the con- stant conflict of priorities, opportuni- ties and distractions that we all face with recurring frequency, which derails or postpones our retirement planning. Interestingly, this comment was from a client that we would not consider to be sitting on the sidelines passively hop- ing for retirement. However, what they have hit on is what we often suggest as the path toward both retirement success and student loan elimination. We are often asked by our clients about one of the most consistent aspects of a physician’s reality: student loans. The question is usually asked with a mix of despair and frustration that the student loans have lingered or even exist at all. To be sure, student loans are one of the major challenges that exist in planning for retirement. As if it is not enough that physicians have a compressed career of significant earnings, often starting peak earning years a full decade after undergraduate peers, you also have this debt obstacle to overcome. The student loan payments can make it hard to save the additional amount per year neces- sary to catch up to peers and ultimately hit your personal retirement timeline goals. For example, some feel that they would like to retire early (often that’s considered before age 65), but are con- cerned that full retirement will likely not come until age 70. Student loans are an emotional and fi- nancial decision. The best approach is difficult to define in a broadly reaching article like this. It can often be a very individualized and personal decision on which two spouses don’t even agree. For people who fear that carrying stu- dent debt is a drain on their lifestyle or goals, or find stress in carrying the debt, paying the loans off as quickly as possible can seem like the best deci- sion. That is the emotional appeal. For others, the question is strictly “what’s the best financial strategy?” Unfortunately, that financial perspec- tive is only conclusively known in hindsight. The best place to allocate extra dollars at the end of the month is driven by one’s individual preference between re- tirement planning and loan elimination. Financially speaking, if we could pre- dict with certainty that investment re- turns would be greater than the interest rate on your student loans, we would always recommend investing over stu- dent loan payments. And the converse is true if we knew that investment re- turns would be less than student loan interest. According to CNBC, the average an- nualized total return of the S&P 500 index (the 500 largest publicly traded companies in the United States) over the past 90 years is 9.8%. If you were playing the averages, investing would be the obvious choice. The reality is, no one knows until after the fact what any individual year’s return will be. In to- day’s world with investment risk com- ing from local, and global events, eco- nomic outlooks and political tweets, nothing is predictable. Commonly, we recommend a blend of extra money being allocated to your own personal combination of emer- gency reserves, proper insurance pro- tection, intermediate and term invest- ments, and student loans. It’s important to realize that without prioritizing savings, another more ex- citing priority always finds it’s way into your budget. With retirement, the key to getting there is still the old advice of living within your means, controlling debt, and saving, saving, saving to af- ford the continuation of your lifestyle. Keep in mind, if we can ever be of as- sistance, our initial meeting with you is always complimentary. Travis Flandermeyer, MBA. ............. direct line (505) 717-1111.................................................. Travis@CeteraNetworks.com Phil Messuri, MS, CFP®. .................. direct line (505) 798-6941............................................ Messurip@CeteraNetworks.com 6100 Uptown Blvd NE, Ste 610B/C, Albuquerque, NM 87110....................................... www.DoctorsFinancialResource.com Investment Advisor Representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC. Cetera is under separate ownership from any other named entity. The Doctor's Financial Resource and Cetera Advisor Networks LLC are not affiliated. Disclosures: Investment Risk - All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. Index - Investors cannot invest directly in an index. This is part of a series of articles on the business side of medicine from The Doctor’s Financial Resource.