personal finance
Simple Steps I Take to Protect My Credit and Identity
My personal information has been stolen at least twice. As a result, I think it is important for everyone to consider taking basic steps to protect their information. Here are the simple steps that I recommend you use to try and protect your identity and credit:
- Open all mail. If someone opened a fraudulent account in your name, you might start to get mail that makes absolutely no sense to you. Don’t just chuck stuff that looks like junk mail.
- Use two factor authentication for all financial account logins. This is now required by the TSP, and it is for good reason.
- Use a password manager. I use Dashlane, although there are others. This ensures that your passwords are cryptic but that you don’t have to remember them.
- Consider establishing active duty credit alerts on all of your credit reports with all of the credit agencies.
- Check your credit report every four months, checking one from each of the three credit agencies. Some people check all of them at the same time once a year, but I think that by staggering them and doing one every four months it is more likely you’ll pick up something fishy sooner rather than later. Check for mistakes and accounts you don’t recognize. Both could be a sign of identity theft. Just go to AnnualCreditReports.com to get your free credit reports.
- Set up alerts so that you get notified whenever a transaction occurs without a credit card being present. Contact your credit card companies to get this set up. You can usually set dollar thresholds above which you want to be notified, or you can get notified about all transactions. When our credit cards have been hacked it has often been for modest amounts and things like gas purchases, so worrying only about high dollar purchases is probably not the way to go.
- Based on the Equifax hack and others, we have reported to the IRS that we are potential victims of identity theft. This means that we cannot file our taxes without a special pin that is mailed to us each year. This prevents others from fraudulently filing taxes in our name and stealing a fraudulent tax refund. Consider doing the same if this is applicable to you.
There are other steps you could consider taking that I have not personally adopted. For example, instead of an active duty alert you could place a freeze on your credit accounts. This prevents anyone (including you) from getting a credit card or loan in your name. It will also prevent you from doing things that require a credit check, like switching cell phone carriers or renting a house/apartment. Since I am still in the Navy, I decided to go with the active duty alert instead of the freeze due to the lower amount of hassle when we have to PCS in the future. Here’s a good post that explains the difference between the two options.
Websites like CreditKarma offer free, real-time credit monitoring. In the past I used their services, but don’t anymore. I honestly don’t remember why I turned it off, but I may consider signing up again now that I think of it.
Cyber incidents and identity theft are just par for the course nowadays and the price you pay for on-line convenience. Make sure you set up your own plan to limit the chances you’ll be personally affected by identity theft or cyber crime.
What is an Active Duty Credit Alert?
One option that military personnel have to protect their credit is to use an active duty alert. What exactly is an active duty alert?
A 12 month active duty alert is available if you are active duty in the US military. In addition to the normal fraud alert that civilians can use, your name is removed from prescreened credit or insurance offers you get in the mail for 2 years. It is designed to protect your credit while you are deployed, but you don’t have to be deployed to use it. We have this placed on our credit on a continuous basis to prevent fraud.
It forces businesses to take reasonable steps to verify your identity before issuing credit in your name. If you provide a telephone number when you place the alert, a business must either contact you at the telephone number you provided or take other reasonable steps to verify your identity. This helps them confirm that the credit application is really from you and not from someone who has stolen your identity. If you actually are deployed and are difficult to reach, you can assign a personal representative to answer for you, place, or remove the alert.
You can end the alert before 12 months, or request another one when the initial one expires.
You can place a fraud alert or active duty alert by visiting any one of the three nationwide credit reporting agencies – Equifax , Experian , or TransUnion. The one that you contact must notify the other two. You also can find links to their websites at IdentityTheft.gov/CreditBureauContacts.
Finance Friday Articles
Here are my favorites:
3 Reasons Why You Should Invest in Bonds
Can You Handle 100% of Your Money in Stocks During a Correction?
Four Opportunities Due to Coronavirus
Here are the rest of the articles:
3 tips for trading in volatile markets
20 Things You Need to Know About Asset Protection
All-Equity ETF Portfolio Doesn’t Add Up
Asset Allocation (Part 3): What’s in My Dream Bucket?
Bearing Up – 4 Lessons from Previous Bear Markets
Buying a $3 Million Umbrella Insurance Policy for $170 Per Year
Creating an Overreaction Plan for the Coronavirus
How the Coronavirus is Impacting Commercial Real Estate
It’s time to change the retirement planning conversation
Making the best of a market downturn
Partner, Parent, or Physician? A False Dilemma
Should We Buy Our Dream House?
The Best Cities To Buy Real Estate In America
The One Guarantee in the Stock Market
The Potential Impact of Coronavirus on Private Real Estate Investments
The Relationship Between Recessions and Market Crashes
Why Does The Stock Market Go Up Over Time?
Why Hospital Administrators Should Eat Last
Why I’m More Worried About the Bond Market Than the Stock Market
Why I Still Work (Even Though My Physician Husband Out-Earns Me)
Why One Mother Left Her GI Fellowship to Raise a Family
Finance Friday Articles
Here are my favorites this week:
Four Rules I Followed To Get Wealthy
Should I Try To Time The Market?
What to Do (With Your Portfolio) about a Likely Pandemic
Here are the rest of the articles:
3 mistakes to avoid during a market downturn
Asset Allocation (Part 1): What’s In My Security Bucket?
Asset Allocation (Part 2): What’s In My Risk/Growth Bucket?
Coronavirus Pandemic Won’t Have Long-Term Effects on the Stock Market
Freaked Out by the Stock Market? Take a Deep Breath
Lessons in Fear and Wealth from the Coronavirus
Not Breaking a Sweat from the Coronavirus
Questions Every Investor Needs To Ask Themselves Right Now
Should Capitalists Really Be Afraid Of A Bernie Sanders Presidency?
Survive a Market Crash! How We Thrived After 2 Financial Meltdowns
The 60 Day Qualified Dividend Rule
Top 5 Tax Loss Harvesting Tips
What Happens to Stocks After a Big Down Month?
Finance Friday Articles
Most importantly:
Here are my favorites this week:
Don’t Tinker With Your Portfolio
Four Critical Questions for Index Fund Investors
Stand Your Ground in the Face of Coronavirus Induced Market Volatility
Here are the rest of this week’s articles:
3 Major Myths About Financial Freedom
5 Companies Make up 18% of the S&P 500. Should Investors Care?
7 Contract Topics Every Physician Needs to Review
12 Things That Won’t Help You During a Market Correction
A Successful Real Estate Crowdfunding Investment: Key Lessons Learned
Coronavirus, uncertainty, and the markets
Lazy Workers are Bad; Lazy Portfolios Are Great
Medical Device Patent: A Quick Path to Financial Independence?
Physicians Were Targeted, Allegedly Scammed out of Tens of Millions of Dollars
Should You Pay Off Your Mortgage Early With Rates So Low?
Renovations! All at Once or Piece by Piece?
Six Ways You Can Increase Your Risk Tolerance
The Young Person’s Guide to Investing (requires a NY Times login)
What early retirement means when you’re too young to retire
What Happens When You Buy the Dip?
Why An Adjustable-Rate Mortgage Is Better Than A 30-Year Fixed-Rate Mortgage
Throwback Thursday Classic Post – My Guest Post on White Coat Investor – Disability Insurance for Military Physicians
Figured this is a good repeat due to the update we posted on Monday about disability insurance. Check out my guest post on the White Coat Investor site:
Guest Post from DI4MDs – An Update on Disability Insurance for Military Physicians and Dentists
(Note: I receive no compensation if you use DI4MDs for your insurance needs. I continue to lose $99 per year on this blog.)
Disability insurance which protects military physicians and dentist’s greatest asset continues to be a very limited market with few insurance companies and agents providing this critical protection. The available plan options depend on which stage of your medical/dental career you are in.
For military physicians and dentists at any stage of their medical career, MassMutual will provide the recommended specialty specific / own occupation disability coverage. MassMutual continues to be the only company that offers a non-cancelable and guaranteed renewable policy to age 65 and is the first policy we recommend. This policy is now available in all states.
For military physicians and dentists who have completed training, Lloyd’s is also available and can work well as a supplement to MassMutual coverage or if there is a medical issue. However, the policy does not contain the same premium and renewability guarantees as MassMutual’s policy.
If you are a resident or fellow and are at least 60 days away from graduating, in addition to MassMutual another option is a policy with Ameritas. However, you should be aware that Ameritas does not cover disabilities resulting from military service when scheduled active duty is more than 3 months. You do have the option of suspending the policy. Suspending the policy locks in your current insurability but does not provide any coverage during the suspension (though no premiums would be due either).
If you are in medical school and more than 180 days away from starting a military residency, in addition to MassMutual and Ameritas you will be able to apply for a policy with Standard. However, Standard will not cover disabilities resulting from military training, action, or conflict. Like Ameritas, you have the option of suspending the policy. Principal and Guardian may also be available if you are still in medical school. However, unlike the voluntary suspension option with Ameritas and Standard, Principal and Guardian require that your policy be suspended once you enter active duty. All medical students can obtain disability coverage without income qualification.
One crucial fact to be aware of when obtaining disability coverage is the medical underwriting requirement. Since military medical exams are extremely thorough and document any medical condition it is important to establish coverage early in your medical career before any conditions or ailments appear. Depending on the medical condition you may be declined coverage, issued a policy with a waiver/exclusion for the pre-existing condition(s) or issued with an increased premium. Even a combination of the latter two is possible. This can be avoided if you apply now so you can have the protection you need later. A policy with an option that will allow you to purchase additional coverage in the future regardless of health can be established to fit any budget. A graded premium structure can also be used to reduce the initial premium outlay for residents and medical students.
There is no better time than now to establish the type of policy you need to protect your medical or dental career in the event of disability. Please contact us below to begin:
DI4MDS – Andy Borgia, CLU and D.K. Unger – www.DI4MDS.com
10505 Sorrento Valley Rd., #250
San Diego, CA 92121
888-934-4637
858-523-7511 or 858-523-7529 after 5pm PT
7th Step to Financial Freedom – Saving for Future College Expenses
The 7th (and optional) step to financial freedom is to save for future college expenses.
Only a small percentage of students get enough financial aid to cover their tuition, housing, books, and fees. As a result, saving for college is a major financial goal for many people. Luckily, it is as easy as 3 numbers…5-2-9, as in using a 529 plan. 529 plans allow parents or grandparents to put money aside in a tax advantaged way that can later be used for college. In addition, those of us in the military who are willing to serve a little longer can transfer our GI Bill to our children, which can help with college costs, sometimes covering them completely. That’s my plan, as I’ve got two kids and two GI Bills.
How Expensive is College?
According to the National Center for Education Statistics, for the 2016–17 academic year, annual current dollar prices for undergraduate tuition, fees, room, and board were estimated to be $17,237 at public institutions, $44,551 at private nonprofit institutions, and $25,431 at private for-profit institutions. If that wasn’t enough, educational costs are increasing at a 6% rate annually.
How Can You Limit Costs?
Get your kids to go to a state or public school. Once you’ve got your degree and are working, no one really cares where you went to school. Work ethic, intelligence, creativity, and other characteristics make or break your success, not an Ivy League pedigree. State schools are just fine.
One other strategy is to have your kids go to a community college for the first 1-2 years of their education, later transferring to a four year college or university and getting their degree.
529 Plans
The money in 529 plans can be invested in stock and bond funds. As long as the withdrawals are used for qualified higher educational expenses, the investment gains are free from federal taxation.
As of 2020, you can contribute as much as $15,000/year to each child without incurring the federal gift tax. In addition, you can pre-fund up to 5 years of these contributions, or $75,000 in 1 year. Couples can give $150,000.
Sound too good to be true? Well, it is true, which is why 529 plans have come to dominate the college saving game.
Downsides of a 529 Plan
If you don’t use the proceeds of your 529 plan for educational expenses, your gains are subject to income tax and a 10% penalty. In addition, colleges will consider 529 assets when determining need-based financial aid. If you believe you’ll be eligible for financial aid, you might be better off keeping the assets in your name or the names of the grandparents.
That said, the amount you’ve saved for college has much less of an impact on your financial aid than your overall income does. In other words, families with high incomes will be expected to pay for at least part of college regardless of whether they saved for college.
As Usual, Taxes and Costs Matter
Not all 529 plans are perfect. Each state offers a plan, and you can use the plan from any state. You are not limited to the one you live in.
There may be some state tax benefits if you use your state’s plan, but just like with all investments you have to see if those tax benefits outweigh the other features of the plan. Some states have high fees and expenses or have less than optimal investment options. Some states give you tax benefits no matter which states’ plan you use.
Which 529 plan do I use? Regular readers would guess that I use whichever state’s plan is run by Vanguard, and they’d be correct! Vanguard administers the Nevada plan, which is what I use. They also provide management and services in the Colorado, Iowa, Missouri, and New York plans. Many states, though, offer Vanguard and other low cost investment options.
You find a lot of good information on 529 plans at:
http://www.savingforcollege.com/
Other Types of Accounts
Here is a great table from the Vanguard website that compares benefits offered by 529 plans against various other types of accounts people use to save for college:
| 529 Plan | Uniform Gifts/Transfers to Minors Act (UGMA/UTMA) | General Investment Account | Education Savings Account (ESA) | |
| State tax breaks | X | |||
| Federal tax breaks | X | X | ||
| Low financial aid impact | X | X | X | |
| High contribution limits | X | X | X | |
| Earning potential | X | X | X | X |
| Access to your money | X | X | X | |
| Age-based options | X | |||
| Total flexibility | X | X | ||
| Account control | X | X | X |
(Source: https://investor.vanguard.com/college-savings-plans/which-account)
As you can see, while there are other options, the 529 offers the most benefits. Some people advocate using Roth IRAs, whole life insurance, or ultra-conservative investments like certificates of deposit (CDs) or savings accounts, but this is generally a bad idea.
You need your IRAs to save for retirement, not college. Saving for retirement is your top priority, even over funding the college education of your children. You can borrow money to pay for college, but you can’t borrow money to retire.
Life insurance is expensive and generally offers very low investment returns. CDs and savings accounts aren’t expensive, but their investment returns are just as anemic. With educational inflation at 6% annually, it will be hard enough for stocks and bonds to keep up let alone life insurance or CDs/savings accounts.
The GI Bill
If you have served in the military after September 11, 2001, you are eligible for the Post-911 GI Bill. It covers four academic years, including tuition and fees, housing, and books up to 100% of the cost of the most expensive public school in your state. For private schools in 2019-2020, it will cover up to $24,476.79 of costs. Some more expensive schools participate in the Yellow Ribbon Program to bring their tuition down closer to what the government will pay. In some situations, you can transfer the GI Bill to your spouse or children.
You can find a ton of information on the GI Bill at this website:
http://www.military.com/education/gi-bill
Specific information about transferring your GI Bill is here:
http://www.military.com/education/gi-bill/post-911-gi-bill-transferability-fact-sheet.html
What’s the Bottom Line?
529 plans have become the go-to account for most people saving for college. Go to SavingForCollege.com to find out which state’s plan is right for you. If you have a GI Bill and are willing to transfer it to your children for their future college expenses, check out the link above for all the details
Finance Friday Articles
This one from Forbes is certainly interesting:
Valentine’s Day Massacre: U.S. Navy Eliminating $40 Billion In 6 Weeks
Here are my favorites this week:
Fiology: The Study of Financial Independence (FI)
High Earner Not Rich Yet – How to Avoid Becoming a HENRY
The Benefits of a Fixed Asset Allocation Portfolio
Here are the rest of the articles:
8 Perks of Being a Side Hustle Business Owner
Adding Up the Costs of Your Investments
Dealing With the Guilt of Early Retirement
Disability Insurance: Your Plan B to Passive Income
FarmTogether Review: A New Investment Platform
How to prepare your portfolio for the coronavirus outbreak
Inflation-Adjusted Annuities No Longer Available: Now What?
Losing My Balance – Should You Still Invest in Bonds?
ONE PORTFOLIO RISK TO RULE THEM ALL
Some Lessons From 92 Years of Market Return Data
Student Loan Refinance Ladder: A Case Study
The Biggest Problem in Finance?
The Biggest Risk in Crypto Today
The Courage To Be Disliked: Change Your Life Because You Can
The Importance of a Legacy Binder: The “ICE” Binder
Top 5 Ways to Spot (and Avoid) Investment Scams
When You Were Born > Everything Else
Personal Finance for the Military Physician – A 2020 Update
Here are the slides I used for this podcast, in both PDF and PPT format:
Personal Finance for the Military Physician – A 2020 Update – PPT
Personal Finance for the Military Physician – A 2020 Update – PDF
Joel Schofer's Career Planning Blog 