Are you worried that you started saving for your child’s college too late?
Many physicians don’t begin serious college savings until later in their careers, but by then, retirement savings, debt payoff, and buying a home can compete for attention.
That’s why understanding 529 plans is so important.
In this episode, Daniel Wrenne is joined by Ryan Inman, co-author of Financial Residency and host of the Financial Fellowship podcast, to discuss 529 plans, college savings strategies, and financial planning for physicians.
Listen in to learn how 529 plans work, why starting today still matters, and how to balance college savings with retirement planning.
You’ll hear practical advice for doctors who want to save for college while still achieving other financial goals.
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Links
- Financial Residency: Create Your Financial Plan Without the Long Hours or Sleepless Nights by Ryan & Taylor Inman
- Connect with Ryan Inman
- Connect with me on my LinkedIn
- Contact Finance for Physicians
- Finance for Physicians
- To schedule a call with one of our awesome planners, book HERE.
Full Episode Transcript:
Ryan Inman: I think the most important thing that I’ll just kind of push out a little bit is where is that in their goal planning, right? What’s the most important thing to them? You don’t just ignore all your other goals to then fund the 529 unless you say, “This is absolutely the most important thing for us.”
Welcome to Finance for Physicians, the show where we help physicians like you use money as a tool to live a great life. I’m your host, Daniel Wrenne, and I’ve spent the last decade advising physicians on their personal finances with the mission to help them understand that taking control of their finances now means creating a future where they can practice medicine where, when, and how long they want to.
Daniel Wrenne: What’s up, everybody? I am super excited because I got my longtime buddy, Ryan Inman, joining me. And so welcome, Ryan. Thanks for coming on with me, buddy.
Ryan Inman: Yeah, I’m excited to be here, man.
Daniel Wrenne: Yeah, so, we’re gonna have a little bit of a different game plan for today’s show. So first of all, I have a pretty big update I’m excited to share.
So we’re making a little bit of a pivot, you could say, with the show. So first of all, I really enjoy the conversations like this. These podcasts are fun for me. I mean, this is the kind of thing I love talking about in case you don’t realize. And so it’s been really fun to have these conversations with all of you guys listening.
So first of all, I’m planning to continue that. I enjoy doing that. It’s one of the things… It’s one of my favorite parts of my day, so that’s gonna continue. But what’s changing is we’re gonna be living in a different home, you could say, much bigger home. So, today that’s why Ryan’s joining me.
He’s joining me for the show. He’s been, like I said, he’s a buddy of mine. We’ve known each other—I don’t know, how long has it been? Like, seven years or… It’s longer than I can remember.
Ryan Inman: It’s over 10 years.
Daniel Wrenne: Oh, 10 years maybe. I don’t know.
Ryan Inman: Yeah.
Daniel Wrenne: A long time. And he’s a fellow physician finance guru, and he’s gonna be the host of a new podcast called Financial Fellowship. And so we’re gonna be joining Ryan for his Wednesday show. And so I’m excited to kind of throw that out to you guys. I wanted to also make sure and give a little bit of an intro to Ryan.
So we’re gonna kind of go through a couple discussion points with Ryan first, and then we’re gonna jump into the main topic we were planning to cover, which was talking about 529 plans in particular for those of you guys that are maybe in the late start. So Ryan, thanks again for joining me.
It’s a pleasure.
Ryan Inman: Yeah, I’m excited.
Daniel Wrenne: Yeah. So anyway, I’ve known you for a while. I guess it’s been 10 years. But for those who haven’t met you or don’t know you give us a little rundown about you and really why did you decide to focus on the physician space with your work?
Ryan Inman: Yeah. So we met, I remember, at XYPN conference when I was first literally launching my financial planning practice, and I was going, “You work with doctors? All my friends are doctors. I’m married to a doctor.” Yeah. Like, “How are you doing this? What’s this?” And so I would credit some of the launch success to you on that.
But like I said, I’m married to a doctor, and my wife’s a pediatric pulmonologist with the Navy. She’s a civilian but works here in San Diego at Balboa. We’ve been together since we were 18, so we went and met freshman year of college. We both went to University of San Diego and all through college we dated, then she went back to KU for med school, so of course I traveled every single month to go visit her ’cause she was a little busy.
And I was doing grad school, so it was a little lighter load than med school, as you can imagine. And then I convinced her, I had to twist her arm to move from Kansas to Southern California. It was real hard. She wanted to get out of there and go to nice weather again.
Daniel Wrenne: To the perfect weather all year.
Ryan Inman: Yeah. We complain when it’s 65. That’s how bad it is here, so, as it’s snowing for you.
Daniel Wrenne: Tough life. Tough life.
Ryan Inman: Yeah. And she did her residency there, and then fellowship at UCSD, and we have two amazing kids. I worked with, as Daniel said, a large amount of physicians specifically.
I had a financial planning practice for over a decade called Physician Wealth Services. I’ve completely transitioned a few years ago—the practice actually—over to Daniel, and we’ll probably talk a little bit about that. I also at the time had a podcast called Financial Residency and a blog, and then my wife and I actually co-authored a book Financial Residency that helps people…
Daniel Wrenne: Check it out on Amazon.
Ryan Inman: Yeah. That helps people, physicians, put together a pretty basic financial plan, in a no-jargon, real-simple way that you can follow along and as you go through the book you can actually create a plan, which is pretty neat. So, took some time off once we transitioned the practice.
As physicians probably understand this, I was very burnt out working 100-hour work weeks, and then had a death in the family, had my daughter get diagnosed with Type 1 diabetes. My wife is also Type 1 diabetic, so that was a big shock to us, as she was pretty small at the time. And now launching Financial Fellowship, coming back.
Like Daniel talked about, I love this stuff. This is pretty much what I live for: helping physicians with their financial literacy. I thought I was done with it, and it brings you right back. So it’s been a lot of fun putting all the pieces together, and I’m really excited to have Daniel and the team join me for a Wednesday show.
So it’ll be a very similar thing that you guys are all used to here with Daniel. So you’ll hear a lot more of Daniel. And I’ll just help him kind of frame the conversations, and we’re gonna have some really good conversations around what physicians really need to hear as it relates to their financial literacy.
Daniel Wrenne: Yeah, I’m excited too. I know it’s something we both have a passion for, so awesome. Well, I know we got a bunch of stuff to talk about besides this, but before we get into the main topic, anything else you wanna throw out on your end?
Ryan Inman: No. I mean, we’ve kind of talked a little bit about the history, I’m sure, as hopefully everyone who is listening right now comes over and checks out the Financial Fellowship podcast. They’re gonna hear, unfortunately, probably a lot more of my story as I go ’cause as you and I both have the same no filter things just start going, and we’re just start educating, and we’re gonna bring a lot of real-life examples into that. So be prepared.
Daniel Wrenne: Yeah. Ryan does not have a filter as well, yes. That is one of the things I appreciate about him, so.
Ryan Inman: Not at all.
Daniel Wrenne: But anyway.
Ryan Inman: Sometimes it gets me in trouble.
Daniel Wrenne: Every once in a while. So Ryan’s gonna be taking the lead today. Ryan gets to be the host, so kick it over to you.
Ryan Inman: Yeah, I’m excited.
So we’re gonna be talking about 529s today, and I kind of want to just set the picture real quick. It’s conversations, I mean, we’ve had hundreds of times to get, individually obviously with our clients at some point, is they’re sitting there going, “I have a kid. They’re 8, 9, 10 years old, right? I’m a physician or married a physician.”
Couples are sitting there, and they’re going, “We are at finally a point that we need to start thinking about their college. We don’t want them to take on a ton of debt maybe like we did. How do we start? Are we behind? What does this look like?” And so we’re just start the framing there, and then we’ll, like we probably are gonna do a million times going forward, just kind of unravel and unpack, and hopefully they get some good information from it.
Daniel Wrenne: Yeah, so it’s like anything with finances. I would say it’s never too late to start, and ideally, today, the sooner the better you get started on something like this. The way things work, it’s ideal if you go ahead and start that compounding. And so, when you have someone—I mean, that’s still, well, I guess that’s still 10 years of savings, and that’s 10 years of compounding potential and tax benefits to be able to get ahead on saving for something like education funding.
And with a physician’s salary higher compensation, a lot of times you can make up ground on these kind of things pretty quickly. But it will be a pretty substantial commitment to fully fund it, especially if we’re talking about “My goal is to have my kid go to Harvard,” or something along those lines.
But I guess where I would start the conversation first is around, like, how important it is. What’s the priority order? So, like, how important is funding your child’s education in the grand scheme of all the things that are out there, whether it’s spending money now versus saving for retirement versus education?
And then what type of school goal might you be thinking of, whether it’s private or public, and that’s gonna dictate kind of how much emphasis. But just to kind of put it into perspective, if we’re talking about—I looked at some numbers before this. If we’re talking about—I used Transylvania University, because it’s a private school near us.
My wife went there as well in Kentucky.
Ryan Inman: My cousin went there, actually.
Daniel Wrenne: Are you kidding?
Ryan Inman: Dead serious.
Daniel Wrenne: Transy in Kentucky?
Ryan Inman: Yeah. And I had no idea that was a real place, just being sheltered on the West Coast until she said, “Hey, that’s where I’m going.” I was like, “Wait, what?” Yeah.
Daniel Wrenne: I mean, that’s the first person I’ve probably ever talked to that said, “I know somebody that went to Transy,” so.
Ryan Inman: Yeah, my cousin.
Daniel Wrenne: It’s a small private school in Kentucky, and my wife lives in Lexington, which is the city Transy is in, so a lot of Lexington people go to it.
But I mean, it’s a great school, but it’s more expensive, as most private schools are. And so with that type of school cost, I was running the numbers, like if I’m funding for a nine-year-old kid, and I got $2,000 to $2,500 a month to fully fund the whole shebang.
So I mean, it’s a pretty big commitment, but the other thing is you don’t have to go all in all at once. You can kind of take baby steps.
Ryan Inman: Yeah, yeah. I just always kind of check out University of San Diego. It’s where both my wife and I went, and full tuition, room and board is like $85,000 a year right now.
Yeah, it was not that expensive when we went there, and she had a lot of credits that she pulled in. And she’s significantly smarter, and she was taking college classes way before and did it the right way, whereas I did not do that. But yeah. So I mean, fully funding something like a $90,000 a year. That is a massive commitment and almost impossible to do just through a 529 if you’re starting 10 years late.
But like you said, physicians have higher ability to earn, savings rate. But I think the most important thing that I’ll just kind of, kind of push out a little bit is where is that in their goal planning, right? What’s the most important thing to them? You don’t just ignore all your other goals to then fund the 529 unless you say, “This is absolutely the most important thing for us.”
Sometimes I use the airplane analogy, right? Put on your mask and then put on your kid’s, right? You gotta save for your retirement, you need to pay down your debts, you need to do those type of things, and then take care of your kids. But maybe that’s more important than a vacation, right? Taking a big Hawaiian vacation or something every year.
You’d rather forgo that and pay for college, right?
Daniel Wrenne: Or maybe you’re comfortable delaying your retirement for five years and accounting for that.
Ryan Inman: 100%. That makes it way easier, ’cause it’s five years more of savings, more of income, right? And all that. Yeah.
Daniel Wrenne: Yeah, I mean, sometimes that’s the direction you go.
Ryan Inman: Yeah.
Daniel Wrenne: And it’s all good. It’s just about priorities.
Ryan Inman: Exactly.
AD BREAK
Daniel Wrenne: Let’s take a quick break to talk about our firm, Wrenne Financial Planning.
The goal of our podcast is to empower you to make better financial decisions, but sometimes the best financial decision you can make is to work with someone who understands your financial goals and has the expertise to keep you on track to reach them. That’s where Wrenne Financial Planning comes in. We are a full-service financial planning firm that works with over 400 physicians and their families across the country.
We charge a transparent monthly flat fee for our services and offer virtual meetings you can take from anywhere. Best of all, you’ll get to work with a team that specializes in working with physician families. So whether you’re starting out and wondering how you’ll balance your student loan payments and saving for a home, or you are established physician trying to figure out how to pay for your kids’ college and how much you need to save to reach financial freedom, we can help.
I’ll put a link in the show notes to schedule a no-obligation meeting with one of our certified financial planners. Wrenne Financial Planning, LLC is a registered investment advisor. For more information about our firm, please visit wrennefinancial.com. That’s W-R-E-N-N-E financial.com.
AD BREAK END
Ryan Inman: So if they’re opening this account now, and they’re going, “Okay, Daniel,” and we should disclaimer, this is not financial advice, right? But they’re looking at it and saying like, “Well, what’s the investment mix look like? Is it the same as my normal investments that I have? Is it different?” Like how would you kind of talk about the investments that they’d be doing inside of the 529?
Daniel Wrenne: Sticking with the nine-year-old example, like if you have a nine-year-old, so you got 10 years left till you’re gonna start taking out of the account.
Like typically you’d probably wanna like dial it down a little bit in terms of how much risk you’re taking. So what I’m talking about is like how much stocks you’re investing in versus bonds. And so stocks are more aggressive; bonds are a way to dial it down and flatten out the ups and downs.
So when you have less time like that, 10 years or so, typically you dial it down by, starting to add more bonds in it so that—because that’s not a long period of time in the grand scheme of things. And so you don’t wanna get caught in a situation where we have a pretty bad phase of the market, and it really starts to put a kink in your goal.
And so like I said, typically we’re gonna dial it down a fair amount to have more, introduce more bonds so that it’s not negatively putting the goal at risk in case of a downturn. But I mean, that too, is like some people are like, “I’m good with pumping the gas the whole time.”
And that’s a choice, and it’s all good. But there will be more risk. So for example, my son’s around that age where he’s 10 years till school, and so we’re probably like, 30% bonds at this point, something like that. Just ’cause we’re starting to introduce that.
And as we get closer to it, it’s gonna be more and more bonds.
Ryan Inman: Yeah. And again, even just two planners talking, even though I’m not a planner anymore, I can’t turn that part of my brain off. Different risk tolerances, different planning, different income levels, different net worths, right?
Everything is different. So all of this is unique to that specific person, right? What works for Daniel does not work for me, does not work for you, that kind of thing. So, when we were talking about making this show, and talking about 529s, and then I realized that my son’s 11, and he only has eight more years in the house, and I was like, “It’s crazy.”
I got real depressed for a second. I was like, most of my time with him is gone. This stinks. But then I was thinking about… We’ve got the ability to—we’ve been saving, just again, planners, we plan. We’ve been saving for a long time, and there is an opportunity that maybe we don’t use all his money in his 529.
Yeah. And that we let it continue going, and there’s now with the SECURE 2.0 kind of deal he can use some of those as Roth conversions at some point, up to the limit and things. So we’re just full aggressive. I’m like basically no bonds. I’m letting it go, and if we do have a 2008 crash, a 2020 crash, 2000 type crash, we’re just gonna stomach through it because we do have resources to assist him outside of the 529.
Yeah. And so it’s different planning, and there might be someone that says, “I have no additional resources. We haven’t even started.” But I’ve got the ability to maybe super fund and add some more.” So maybe we could talk about ways to get a good amount of money up front and if they should look at doing that or not.
Daniel Wrenne: Yeah. So, well, by the way, that doesn’t surprise me about your 100% stocks. You’re an aggressive guy. I mean, you’re good at taking risks.
Ryan Inman: I’m good with risk.
Daniel Wrenne: Everybody’s different. Anyway, super funding is what Ryan’s referring to. So you can pile a bunch of money into a 529 if you really wanna get aggressive with it, and so this can work well if you’re super high income position, for example, or if you have a bunch of brokerage money already that you’re like, “I’d rather shelter it from tax than have it be taxed.” Obviously if it’s gonna be for education.
So, anyway, you can basically—So there’s a amount you can gift to an individual, including your child, each year and really not have any tax consequences. So the number now this year is $19,000 per year per individual, and each spouse could do that.
So the 529 rules allow you to basically take advantage of that gift limit and basically accelerate five years’ worth of it into one year. And so what that translates to is you can basically put in either $95,000 if you’re single or $190,000 if you have both spouses into the 529 in one year to hyper fund it, which, that’s fantastic if you’re able to do and you know you’re gonna use it for education ’cause you get the most tax benefit.
Ryan Inman: And not to assume everyone is in the position that they can do that, you can get family help if that is of, a thing that is possible for you, that maybe grandparents can also assist in that, right? So instead of having it outside of this, if they were to give, there might be some other tax consequences around that, but if they can put it in a 529 and help that grow, now it grows tax-free, and it can do a lot of benefit for the beneficiary.
Daniel Wrenne: Yeah, grandparents.
Ryan Inman: Your kids.
Daniel Wrenne: For sure, grandparents can fund it. Really, anybody can fund it, but that’s… A lot of times grandparents want to do those kinds of things, so doesn’t hurt to mention it to them, be like, “By the way, I got a 529.” I tell grandparents, I’m like, “Let’s not do the plastic junk gifts, whatever toys. We’re good with that. Let’s do 529.”
Ryan Inman: Yeah. And then what ends up happening is you get the plastic junk toys and the 529.
Daniel Wrenne: Right, that’s what happens. Yep.
Ryan Inman: Yeah. Yeah, that’s basically what we’ve been doing. I tell my mom every year and my dad like, “The kids don’t need anything. I know you’re gonna buy them crap anyway, but how about we help them with college so then they can get on their feet and start earning actual income and do well.
And Ruby’s—my daughter’s talking about going into dentistry. For some reason, she’s obsessed with teeth. She’s always been obsessed. She is very excited. She was excited to get braces. She’s excited to go get her teeth done. It’s a very interesting nine-year-old dynamic.
And I’m like, oof. I was factoring college. I don’t know about dental school.
Daniel Wrenne: Yeah, it’s expensive.
Ryan Inman: We might need that aggressive piece then if she continues down that road. So I mentioned the SECURE 2.0 and the Roth kind of piece. So where that kind of comes in, I think, is if someone has a 529, they maybe super funded it or they’ve had one, and now they kind of say, “Well, my kid didn’t need it. They got a scholarship,” or we saved too much, right?
What kind of happens in that scenario, right? If there’s more money left over in the 529 after that child has finished school.
Daniel Wrenne: Yeah, so you can now, with the new rules Ryan’s hitting on, you can transfer up to the annual limits up to $35,000 to Roth IRA in the name of the beneficiary, which is a great kind of like backup option for 529s.
There’s a few other backup options, but that’s one of the really best ones. The one there’s a few caveats for that or qualifications you have to meet. The one that I was gonna mention in particular for this scenario we’re kind of talking about is like the 10-year-old example is like you have to have the account in place for 15 years. If you’re listening to this and you’re young, like you have young kids, like below nine, and you aren’t gonna fund a 529, just open a 529.
Get the account in place, the sooner the better, because that starts that window. The account has to be open and in place for 15 years for that part of it. So if you have a nine-year-old, that’s I guess 19, 20. They’re in their 20s before they can even start to do the Roth thing.
So there’s a couple other caveats besides that, but.
Ryan Inman: Yeah. You can’t fund it within the last five years.
Daniel Wrenne: Yeah.
Ryan Inman: Right? It prevents someone from opening an account, leaving it dormant, funding it with a bunch of money, and then moving it over, right? It has that limit as well. I think it’s $30,000 or $35,000 that has it been. So it’s not like you’re gonna funnel hundreds of thousands of dollars this way. But it is an option.
Daniel Wrenne: No, but it is a great… I kinda look at it like one of the first things they introduced, it was a really good backup option, was the ability to use it for K through 12 private tuition, and then they increased that number.
I think it’s 20 a year. You ought to double-check me on that one, but it’s gotten an increase recently. And then also they added the Roth option as well. And now they have this professional. You can use it for some professional education-type things. And so, the more things they add to that list the better I view the higher I view the 529 because it allows that flexibility, and I think the more confident you can be to fund it for college ’cause you now have a lot more backup options.
Ryan Inman: Yeah. When I was reading kind of all the rules and everything they’ve been adding, I immediately went to this becomes a backdoor Roth mechanism for a couple years for your child, right? So once they finish school, and you’ve got some extra in the 529, they’re earning. It’s been seasoned for 15 years.
And let’s say that they earn more than the $100— and I think it’s like $170,000, you phase out for a Roth. Let’s say they make, I don’t know, $250,000. You could still now take this. It has no income issues at all, and I think this year it’s $7,000. So indexed, it might be $9,000 or $10,000. But you’ll be able to do essentially backdoor Roths for them with this money, right? So I mean, that’s a pretty unique, interesting thing. You can delay. You don’t have to do it. You can change beneficiaries. Of course, if you have got multiple kids, you can do that. I don’t know how that would actually work, and I don’t think it’s been tested then can still do this Roth piece or anything, or does it reset the time or anything? Right. So a lot of that’s probably gonna get worked out.
Daniel Wrenne: And then if your child, for example, is gonna go to medical school and residency, how many of you listening maxed out your Roth every single year of residency?
Like that’s hard. And so this can become their mechanism for making sure they’re able to max out their Roth while they’re in those low-income years.
Ryan Inman: I mean, just as long as they have earned income, they can put it in. They can’t put it in and then you also put money in, right?
It still hits the cap. But yeah, this becomes a really interesting tool that—there’s no reason to say that you can’t just keep it open and assign it to their kids when that happens, right? It kind of becomes a weird dynasty-planning tool over time. So there’s a lot of cool reasons to have a 529, to open it, to start funding it. It doesn’t mean you have to super fund it, right? It’s a pretty cool account as we are nerding out on an account. But it’s a pretty neat account that you can get a lot of benefit from, and really, your kids would benefit from.
Daniel Wrenne: Yeah. Yeah, no. I could talk about the 529 for days, so we probably hit a good chunk of it for now. And so, Ryan, I just wanna thank you for joining me today. I know we’re gonna do one more of these, and so we’re gonna be coming back for our, I guess, final show, which is crazy.
Ryan Inman: Immediately in my head, it’s playing the “It’s the final countdown~“
Daniel Wrenne: Yeah. So yeah, for you guys listening, make sure to subscribe to Financial Fellowship, and we’re gonna be rocking that out Wednesdays, right? We’re gonna do Wednesday shows. So yeah. Y’all can catch us over there as well. So anyway, thanks for coming on, Ryan. We’ll catch all you guys on the next show.
No guests or clients appearing on the podcast received any form of compensation for their appearance and obtained no other benefit from us. It should not be assumed that every client has had the same experience.
