A Guide to Retirement Planning for Doctors

Working in medicine may be challenging, especially with the strain placed on health care professionals throughout the COVID-19 pandemic. Working towards a comfortable early retirement may be a financial goal for some physicians. Here are some suggestions that doctors may use to manage financial independence.

Investigate Qualified Retirement Plans

Physicians are often subject to complex employment and contractual arrangements that may broaden their retirement options. Some physicians are not limited to the same 401(k) and individual retirement account (IRA) options available to other W-2 employees.

Some income limits and thresholds for traditional retirement plans may limit a physician’s ability to contribute to tax-deferred accounts. Talking to a financial professional about the plans and income sources available to you for retirement planning, such as profit-sharing, productivity bonuses and comparing a 401(a) plan to a 401(k) plan may give you the information you need to make an informed decision.1

Nonqualified Plans May Be an Option

For physicians who do not qualify for a qualified plan like a 401(k) or a 457 plan, nonqualified plans, which are not subject to the same rules and regulations, may be a viable option. These nonqualified plans may not offer tax-deductible contributions for those who are income-ineligible to make deductible contributions. Moving to a nonqualified plan may allow greater flexibility in the choices for retirement investments.

Keep Expenditures Under Control

After spending a long time as either a medical student or an overworked resident, it may be tempting to begin spending a new larger paycheck as a full physician as soon as it hits your bank account. Physicians are one of the professions that may suffer from financial struggles. Keeping your expenses well managed may help you avoid fiscal challenges if you suffer from an interruption in income.2

It is also important to keep your retirement contributions on a steady upward trajectory along with your income. By committing to set aside a certain amount of increased disposable income, this strategy may help your retirement savings keep pace with your lifestyle.

Make Sure You are Adequately Insured

Life and disability insurance may help manage assets and prepare for income-earning ability if something unexpected happens. Life and disability insurance are especially important if you still have unpaid student loans. Losing the ability to work as a physician may compromise your ability to repay your student loans. This job loss might put a financial strain on your family. By seeing that you are adequately insured, you may avoid financial stress when going through a life-altering event.

 

 

Important Disclosures:

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

Variable Annuities are suitable for long-term investing, such as retirement investing. Withdrawals prior to age 59 ½ may be subject to tax penalties and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

Content in this material is for general information only and is not a solicitation to sell any insurance product or security, nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

This article was prepared by WriterAccess

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1 https://www.natlawreview.com/article/physician-group-practices-should-prepare-now-changes-to-productivity-bonuses-and

2 https://www.abi.org/feed-item/two-career-paths-with-surprisingly-high-bankruptcy-rates