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How much should I put into a TeamHealth SERP?

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  • How much should I put into a TeamHealth SERP?

    Howdy!

    Long-time lurker, infrequent poster. I just joined TeamHealth as a W2 and am looking to maximize my retirement savings. TH offers a SERP, and I'm trying to understand how much to put into it.

    My situation:
    Early career, ~15 years remaining in practice
    ~1M retirement savings, of which, 300k tax deferred (i401k, rollover 401ks), maybe 100k roth
    Annual income 400k, 300k W2 with TH, maybe 100k as a 1099 elsewhere, savings rate ~35% of gross (~150k/year)

    Planning to maximize my teamhealth 401k at 19k and the 20% of 1099 into a i401k (20k), leaving ~100k remaining that could be put into either taxable or SERP.

    Regarding eventual SERP distributions, I'd probably elect to take them annually over a decade post-TH rather than a lump sum. I truly don't know how long I'll be with Team Health, but could be with them for the long haul if no better options appear in my geography.

    I'm considering putting ~50k annually into it (leaving 50k in taxable savings), but understand there's a risk of loss of to creditors if TH goes bankrupt.

    Is this too much?


    1
    ~50k to SERP annually (1/3 of retirement savings)
    100.00%
    1
    ~30k to SERP annually (1/5 of retirement savings)
    0%
    0
    Nada to SERP annually (too risky)
    0%
    0

  • #2
    Depends on how long you plan to stay with team health. if you leave for another job soon (likely a higher paying one) then I wouldnt put any in- it'll just add to your taxable income the years after you leave. If you are close to retirement or cutting down (so leave for a lower salary) then go ahead and plow some in.

    Comment


    • #3
      SERP’s are designed to generate lower returns compared to the optimal choices in qualified plan or unlimited choices in a taxable account. Funds are often “invested” in life insurance policies. Whether or not you should put a chunk of money into yours depends on your IPS and your financial plan. Let’s just say t’s not a benefit that would give me great joy upon finding out a client was offered the ”opportunity”. BUT, that’s mpo and certainly not that of the rest of the investing world. Obviously they have a place in the right situation or they (hopefully) wouldn’t still be around. I think this is a good example of prioritizing tax savings over accumulation of net worth but you must consider your priorities before making the decision to allocate up to $50k to this plan.

      So I would vote option 4 (not listed) on your survey.

      Welcome to the forum!
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment


      • #4
        Originally posted by jfoxcpacfp View Post
        SERP’s are designed to generate lower returns compared to the optimal choices in qualified plan or unlimited choices in a taxable account. Funds are often “invested” in life insurance policies. Whether or not you should put a chunk of money into yours depends on your IPS and your financial plan. Let’s just say t’s not a benefit that would give me great joy upon finding out a client was offered the ”opportunity”. BUT, that’s mpo and certainly not that of the rest of the investing world. Obviously they have a place in the right situation or they (hopefully) wouldn’t still be around. I think this is a good example of prioritizing tax savings over accumulation of net worth but you must consider your priorities before making the decision to allocate up to $50k to this plan.

        So I would vote option 4 (not listed) on your survey.

        Welcome to the forum!

        Thank you! Looking at plan options for the SERP, there appear to be multiple options of institutional index funds (some Vanguard, some Charles Schwab - who hosts the SERP) with expense ratios in the 0.04-0.02% range. I ought to be able to integrate these in with my overall portfolio in my taxable accounts.

        As such, it doesn't seem like the investment options are all that terrible. I'm thinking maybe a modest ~$2k/mo, $24k/year SERP investment as such?

        They further offer an up-to-10% after tax contribution to my 401k plan with an immediate roth conversion, so I'm looking to maximize that as well to continue to have some continued Roth assets.

        Comment


        • #5
          Originally posted by gottalivealittle View Post


          Thank you! Looking at plan options for the SERP, there appear to be multiple options of institutional index funds (some Vanguard, some Charles Schwab - who hosts the SERP) with expense ratios in the 0.04-0.02% range. I ought to be able to integrate these in with my overall portfolio in my taxable accounts.

          As such, it doesn't seem like the investment options are all that terrible. I'm thinking maybe a modest ~$2k/mo, $24k/year SERP investment as such?

          They further offer an up-to-10% after tax contribution to my 401k plan with an immediate roth conversion, so I'm looking to maximize that as well to continue to have some continued Roth assets.
          You’re welcome. Since you’re a new poster, I should mention that I define “risk” not as the fund fees or even custodian, but on the choices the individual makes regarding his/her retirement savings, income choices and spending in relation to their goals. Iow, you set the risk level by your behavior, over which you have far more control (hopefully) than the market. Since you list the fund choices and not the custodian, I’ll give an example -
          • if you are early in your career and have no need for the SERP funds in the next 5+ years, I would consider it risky to purposely choose lower returns for perceived “safety” (whatever that means) over long-term growth in an appropriately diversified fund portfolio.
          • If you are nearing retirement, the decision is more nuanced. If your plan dictates you will require investment distributions in the early years of your retirement, your financial and tax plan calls for you to take funds from your SERP for living expenses and other goals, using the SERP as an investment vehicle could be a great choice.
          • Of course, if you are FI, you can invest for as little or as much net worth creation as you want - it will matter only to your future heirs, as you’ll be gone.
          Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

          Comment

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