Portfolio CHECK-UP

Name:Brent Berkey, MD

Residence:South Florida

Age:35

Family:Single; no children

Specialty:General surgery

Annual income:$130,000

Savings:None

Financial concern:Dr. Berkey has recently taken a staff position in theDepartment of Surgery at a local university hospital in South Florida. He hasnot yet begun saving for retirement, as he has just finished paying off all hismedical school debts. At the hospital he will make a salary of $130,000annually. He is eligible to immediately begin participating in the university's403(b) tax sheltered annuity program; the hospital will annually contribute10% of his salary to the plan. Dr. Berkey wishes to begin participating in the403(b) program right away. Thus, he wants to know how much he may contributeannually through monthly payroll deductions and how much he willhave at retirement, which he anticipates will be around age 60.

The Finance Professor's Solution

Expense

assumptions:

Under the current program at the hospital, Dr. Berkey may contribute upto $13,000 annually on a pre-tax basis. In addition, the university will alsomake a yearly contribution of $13,000 (ie, 10% of his annual salary). It is assumed that contributions are made monthly and thatthe rate of return on investments is 7%—net of fees and expenses—whichis moderately conservative over the long term. It is also assumed that Dr.Berkey's salary, as well as his future contributions, will keep pace with inflation.Under these assumptions, the good doctor will have approximately$3.8 million in savings when he retires from medicine.

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 Gr oup 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.