In this episode of PodMD, the Managing Director and Principal Adviser at Oxlade Financial, Mark O’Flynn, is here to discuss the topic of medicine and beyond; crafting your ideal retirement.
Oxlade Financial is an Independent Financial Planning practice that specialises in helping medical clients. They help Doctors use their income to build real wealth and reach the lifestyle they aspire to.
Oxlade Financial provides tailored, proactive and unbiased advice across all aspects of their clients’ wealth. They take a holistic, goals-based approach, ensuring that the strategies put in place for each client are specifically tailored to most efficiently achieve their specific financial objectives.
- Transcript
Please note this is a machine generated transcription and may contain some errors.
*As always, all in this PODMD podcast is intended for health professionals and the comments are of a general nature. Information given is not intended as specific medical advice pertaining to any given patient. If you have a clinical issue with one of your patients please seek appropriate advice from a colleague with expertise in the area.
Oxlade Financial is an Independent Financial Planning practice that specialises in helping medical clients. They help Doctors use their income to build real wealth & reach the lifestyle they aspire to.
Oxlade Financial provides tailored, proactive and unbiased advice across all aspects of their clients’ wealth. They take a holistic, goals-based approach, ensuring that the strategies put in place for each client are specifically tailored to most efficiently achieve their specific financial objectives.
Today I’d like to welcome to the PodMd studio, the Managing Director and Principal Adviser at Oxlade Financial, Mark O’Flynn, talking with Peter Chaplin, finance from Rooms with Style (RWS).
Today, we’ll be discussing the topic of Medicine and beyond; crafting your ideal retirement.
*We do hope you enjoy this podcast but please remember that the information discussed here is of a general nature and is not intended to serve as advice. The views and opinions expressed in this podcast are those of Oxlade Financial, not PodMD.
Oxlade Financial reminds you that any information or opinion in this podcast is general in nature, and does not consider your personal objectives, situation or needs. Nothing in this podcast is a recommendation, and you should seek personal advice from a registered financial adviser before making any decisions.Peter: Mark, thanks for talking with us on PodMD today.
Mark: Thank you for having me.
Question 1
So the topic of today’s discussion is medicine and beyond: crafting your ideal retirement. Mark, can you describe for our listeners why it’s so important to be thinking about retirement as part of your financial planning, even if it is a long way off?Mark: I sure can. I think it’s important to define retirement first, so it’s not about stopping work or sailing off into the sunset. Most people we speak to and and most clients it’s more about having the flexibility, and the choice and options. So, rather than having to go to work solely to earn money and to save being financially free or retire, you know, having the option to retire, it’s just giving people the options that they might be able to do other things or, they don’t have to see as many patients as they can, pursue other career opportunities that aren’t defined by money. I guess we know in investing, time is a massive factor. So why it’s important for doctors is you know, saving and investing the longer you do it, the much easier it is because investment returns often do all the hard work. And I guess when you compare that to a typical doctor’s career, you know, we know that doctors spend a lot more time studying and then you get into the hospitals, then you get on a specialty programme, do all your exams. So you don’t really hit your peak earnings to much later in life, and that means you typically have a shorter window where you can save and invest and really that’s why we find for doctors, you really gotta hit the ground running in terms of having that retirement plan, even if it feels too early.
Question 2
Sure, so you’ve talked about why it’s so important. How can doctors actually start and and what do they need to consider?Mark: The first thing we find is not actually starting to invest. It’s actually sitting down and nutting out really what’s important to you and what do you wanna do in life. How much does that cost and when you wanna do it. You really should sit down and do that with your partner and write it down because once you write it down it becomes more real. Then from there you just gotta get started and we feel the key considerations to look at are your cash flow. So doctors typically they have higher incomes than most people, so it’s about channelling that income into the right spots, so debt reduction other investments, super. Another key consideration is look how much do you spend on personal use assets. So that’s cars and toys homes, how many renovations do you do? How many can you afford? Debt levels as well so banks have favourable lending policies to doctors. It doesn’t necessarily mean you should use it. Over a typical career, like at some point you’ve got to move from borrowing more and more to actually paying it down. Risk management’s importance, obviously debt having cash reserves and obviously personal insurances. So we all know about personal insurance like income protection, but you also want to strike the right balance between how much cover you’ve got versus the premiums as well, which continue to go up. Superannuation, you know, that’s pretty much still the best investment vehicle to invest with. Obviously, as doctors, you pay a lot of tax as well, so having strategies to minimise tax, but also don’t go down the you know investments that are purely to minimise tax at some point you’ve got to make money from the investments. Having an investment plan finally, so what assets do you own? How much of each and how are they gonna produce the income you need to be financially free? And then also, what decisions you actually want to control, what’s important and then what do you want to outsource and also how do you automate that? Obviously life is busy, work is busy, families are busy and you can’t do everything all the time. So, we need to outsource things and we also need to automate things so we continually don’t need to make decisions all the time.
Question 3
So Mark, there’s certainly a lot to think about. You mentioned about superannuation being such an important investment vehicle. Perhaps we can sort of talk a bit more about super?Mark: I think the first thing you need to know about superannuation is it remains the best investment vehicle to invest via. Yes, we hear in the media the rules change and they continue to change, but they will also change for other investment vehicles outside of superannuation. So often people over complicate things, but they’re really the only three things you need to consider are number one; the contribution strategy. So how and when you get the money into super and what types of contributions. And if you’re either on the other end and retired, it’s how you get the money out to fund your lifestyle. Number two; investment strategy. So what types of investments do I own, whether it’s direct property, shares or a more diversified portfolio, a popular strategy for doctors is do I own my own practice premises? Number three; what superannuation vehicle or type of fund do I facilitate this all in? So most of us start off with industry super funds, on the very other end of the spectrum are self-managed super funds and the third type in the middle tends to be retail super funds. And what’s appropriate for everyone’s needs is really specific to the strategies and what type of assets you want to own. So often self-managed super funds are really popular, but they may not necessarily be appropriate for everyone.
Question 4
You mentioned about Super being one of the most effective investment options. Why is that? Is that the tax concessions?Mark: Correct. So the tax concessions are twofold. So when you invest money, you want to try and retain as much as possible in your own pocket without leakage. So superannuation is still the best vehicle because in a lot of cases you get a tax deduction first by putting the money in. And then when you invest the money, the tax rate is a maximum of 15% on earnings and if that was outside of super and you invested in your own name. So in a lot of cases, doctors would lose 47 cents in the dollar, which is the marginal tax rate. So the combination of those two aspects make it a really powerful investment vehicle.
Question 5
You mentioned automation. Can you expand a little bit more about that?Mark: Yeah, automation so what I mean by that is if you said a long term investment strategy and let’s talk about cash flow, let’s say you’re allocating X amount to investments, well now you can automate that. So you can set up regular transfers into a particular account, and you can then set up regular investment plans. And that means you don’t have to continually make transfers months to months to facilitate it, t’s all automated. And the main thing is then it actually happens, so you you’ve controlled the bigger picture and then you don’t have to remember to do anything because it’s already set up and doing things yourself. And we know that’s pretty much one of the most important things because we always get busy, kids get sick, we forget about things, things get busy at work. And so you can apply that to many things in your life.
Question 6
Yeah certainly understand make it automated, make it easy. Particularly our lives are busy. But having said that, how often should the doctors come back and visit organisations like yourself to review the investment strategies?Mark: We think every six months, I guess there’s no such thing as a said and forget. So, people’s lives change, the world changes. Once a year probably okay but we find not enough. Every six months we find there’s the right mix of people. I mean, we try and grab our doctor clients for an hour every six months, and we find we can take care of everything in that hour and that gives people their headspace that they can get on and enjoy their lives and do what’s a bit more interesting.
Question 7
And you mentioned earlier passive income, can you talk a bit more about this?Mark: Yeah so I guess the first thing you need to know about financial independence is you need a passive income that’s not related to working. So it obviously needs to come from your investments. So at some point in your career when you’re building up assets a shift needs to take place from actually building up assets that you’re buying to actually getting income back from the investments, and that transition needs to take place over a decent period of time. I guess the key one is everyone in Australia loves residential property, for example I own residential property, and it’s gone up a lot, particularly during COVID years. However, to produce a passive income, it’s important to have a balance. So residential property as an example is quite a liquid, so you can’t sell a door, you can’t sell some growth to fund your retirement. You’re limited to spending the net income, which can be quite low as a percentage once you net out all the costs. So having that right balance and having the right mix of investments during your career is important. So if you want to aim for a certain level of passive income, you need a lot more residential property, for example to produce that income compared to having more diversified portfolios. So what we find works well when you’re accumulating assets is obviously residential property when you don’t need any income from the investment and there’s a lot of tax benefits like negative gearing that supports the return. When you actually need some income from your investments, it becomes a bit more important to have a mix of investments as well. The other thing you need to know when we’ve spoken about debt a bit. So obviously debt is a powerful wealth creation tool, but at the end of the day, banks want their interest which is 6% and that eats into the passive income as well. So having that plan to reduce debt over time is important, and tha can come from obviously saving overtime and paying it down or asset sales as well that might need to occur. The main thing is people understand we’re not here to argue residential property or not. It’s just having a plan to know how much passive income do I need to maintain my lifestyle and where is it actually going to come from.
Question 8
Sure. So do you find that for most people that there needs to be a transfer out of residential property into something more liquid?Mark: Yeah, I do. So I think it doesn’t necessarily have to be a major one, what it needs to be is an understanding of how much you need and then where is it going to come from. So we find just having a balance is an important as well, so you know that’s why it comes back to the planning as well. So you know most people buy a house and then they’re familiar with that so they want to buy another property as well. I think the main thing is you spend the time looking at what else is out there. But yeah, there does need to be a shift towards not continually buying stuff, but actually consolidation and debt repayment and diversification into other assets that complement each other.
Question 9
Sure, sure. So practically how do we make this all happen? The doctors, the listeners, they’re thinking, okay well retirement planning needs to be a higher focus. So what do they need to do?Mark: What do they need to do now is super easy, so just get out a piece of paper and a pen and just nut out what’s important. What are my big picture goals? Finish paying for private school fees, how much do I need to sustain my lifestyle like baseline plus all the fun stuff like holidays and any sort of other things like cars or boats. Do it with your partner as well so everyone’s on the same page. It never ceases to surprise me when we meet with a couple they’ve not actually ever sat down and planned this out, or actually even have a conversation. And you know, I can understand why that happens when everyone’s busy with their jobs and just getting by day-to-day. We find just by putting down what’s important, it really does set the scene and the road map and really the decision making. The decision making gets implemented quite easy from there and then that really sets the scene for why we should be doing things and what type of investments, what the strategy is. The second thing people should do is like an actual health check on what they’re actually doing to achieve their goals and going back to those considerations like cash flow, super, investments and tax, all those different aspects to look at how they’re on track to meet their goals. And then the other thing I would be doing is working with professionals that actually know your bigger picture goals. So I think better conversations, instead of saying should I buy this property to reduce tax, I think a better conversation is to work with advisors that go here are my goals, does this property or share portfolio or whatever, accelerate me in achieving my goals?
Question 10
Do you find that lots of people, that their goals changed or do they sort of stick pretty much to a plan or?Mark: Yeah, it’s a good question. No, I think people’s goals remain quite steady. Obviously people are aiming continually adding to the goals which we find important. I think another part of the planning process is once people set goals, is actually doing the work to find out if they’re on track or not, cause big part of our job is measuring whether people are on track and then actually helping people add more and more things into their lives. So it’s not about saving for some future pot of money that then they will spend, you know part of the planning process is actually to go well can I guilt free go on this holiday now because we obviously we don’t all live forever. There are certain windows of time for example that we can do different things. There’s only a window of time where kids are at home and you can enjoy them. There’s only windows the time when we can do more active holidays as well. So yeah, but you know, for the most part, I think the goals remain, you know, reasonably steady, but hopefully we’re adding more and more in as more and more becomes achievable. And then what I do find does change a lot as people’s lives as well careers, family changes. So that’s why I think it’s important to continue to revisit whether we’re on track or not.
Concluding question
Yeah, terrific. Well look that’s been some fantastic insights Mark, I really appreciate your time. So, thank you for your time here today on PodMD. To sum up for us, could you please identify for our listeners the three key take home messages from today’s podcast.Mark: Well the first takeaway is to just get started. So saving and investing and particularly investing is a wonderful thing because you can be making money while you sleep and it does the hard work for you. So and you know, the longer the time period you have, the easier it is. So just getting started, write down your goals, do the health check and then get started with saving. The second thing is prioritising your goals. So like I said, writing them down, speaking to your partner, make them real. Also, don’t be too influenced by other people. So run your own race, everyone has colleagues, we all work in groups for example and practises, we have friends and family. So what’s right for one person doesn’t necessarily mean it’s right for you. What’s right for you is how you meet your goals. And the third thing is you can’t do everything but control the most important things, the big picture, things like risk, the plan and then outsource the rest to trusted professionals that take the time to get to know you.
Perfect. Mark, once again, thank you very much for your time here today on PodMD and thanks for the insights you’ve provided.
Mark: Thank you so much for having me, Peter.
