Portfolio CHECK-UP

Name: Sandi Bennett, MD

Residence: North Florida

Age: 49 (spouse, Jim, is 50)

Family: Married, no children

Years in practice: 19

Type of practice: Family practice

Annual income: $345,000 (combined)

Savings: $445,000 in defined-contribution savings plans and$150,000 in miscellaneous securities.

Financial concern: In 2002, Dr. Bennett discontinued her practice's quali-fied retirement savings plan after it became too expensive to fund. Presently,she has no tax-favored retirement vehicles for deferring future income. Herhusband, Jim, however, is currently participating in his company's defined-contribution401(k) plan.

Despite Jim's retirement plan and their accumulated savings, both Dr.Bennett and her husband think that they are not saving nearly enough forretirement. They intend to retire in about 10 years but now fear they won'thave enough savings. What other options should the Bennetts consider so theycan retire on time?

The Finance Professor's Solution

After reviewing Dr. Bennett's qualified retirement savings plan, it wasdetermined that she was better off discontinuing the plan, using the moneyshe's saving by not participating in the plan as a personal "bonus," paying theincome taxes due on the bonus, and then investing the proceeds in financialvehicles of her choice. Of course, since she's a physician, Dr. Bennett favors aninvestment vehicle that provides sound asset protection.

Because Florida offers creditor protection for the cash values accumulatedin both annuities and life insurance vehicles, Dr. Bennett may want to considerthese vehicles. If she decides to invest in annuities or life insurance vehicles,Dr. Bennett will have to pay careful attention to the following:

• The annuity or insurance company chosen and its overall rating
• The choice of investment subaccounts that are offered in the annuity orin the insurance contract
• The subaccount's annual expenses
• Insurance/mortality expenses
• Annual policy administrative charges
• Cost of borrowing against the policy (if it's an insurance contract)
• Surrender charges and penalties incurred for early contract terminationand/or withdrawal of funds

Unlike her qualified retirement program, annuities and life insurance vehiclesdon't offer a current income tax deduction. But what she'll spend additionallyon taxes by discontinuing the plan and giving herself the money will more thanoffset the cost of having to fund the plan for her employees annually.

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 theAsset Planning Group in Miami, Fla, specializing in investment, retirement,and estate planning. Mr. Kosky teaches corporate finance in theSaturday Executive and Health Care Executive MBA Programs at theUniversity of Miami.