Portfolio CHECK-UP

Name: Michael Hertz, MD

Residence:Southwest Florida

Age:61; spouse, 54

Family:Two children

Years in practice: 28

Specialty: Cardiology

Annual income: $240,000

Savings: Pension and profit sharing plan

Financial concern:Dr. Hertz would like to be in the position to retire inthe next 3 to 5 years. At present, he owns his home with no mortgage, fullyfunds his pension and profit sharing plan to the tune of $44,000 annually,and has done a good job of funding for his retirement.

Since his kids have long since finished school, he has no liabilities, and heand his wife live a rather modest lifestyle, he is in a position to save a fewthousand dollars more every month earmarked for retirement. However,one of his big concerns is if he did save additional money every month, howcould he save money in such a way that it cannot be attached by creditorsin the event he is sued for malpractice?

The Finance Professor's Solution

First of all, under Florida law, their home is protected from creditorsunder homestead exemption, as are his qualified retirement plan and hisIRAs. Additionally, the cash values of life insurance and annuities are exemptfrom creditors. At present he has neither.

Because of Dr. Hertz's age and the fact that he is uninsurable, life insuranceis not even a consideration under the circumstances, which leaves himone other choice: annuities. Dr. Hertz is aware of annuities, but is concernedwith the excessive costs of owning annuities.

What Dr. Hertz should consider is a true no-load annuity or one that doesnot impose any contract surrender charges and minimizes the mortality andexpense costs. In this way, his monies are totally liquid and he would haveaccess to his monies any time he wishes, without any penalties from theannuity or insurance company, or from the IRS for early withdrawal since heis older than 591/2. The typical insurance and mortality expenses for annuitiesrange from 1.25% to 1.75% annually and usually have a 5- to 9-yearsurrender penalty, depending upon the company. However, no-load annuitieshave annual insurance and mortality expenses of less than 1% and nosurrender period.

For more information, call Mr. Kosky at 800-953-5508or visit www.assetplanning.net. 

Thomas R. Kosky and his partner, Harris L. Kerker, are principals of the Asset

Planning Group in Miami, Fla, specializing in investment, retirement, and estate

planning. Mr. Kosky teaches corporate finance in the Saturday Executive and

Health Care Executive MBA Programs at the University of Miami.