Retirement planning often feels far off when you’re busy with a medical career. Doctors face unique financial challenges that can make retirement planning seem complicated. High student loans, delayed earnings, and complex pay structures are just a few hurdles. But like diagnosing a patient, carefully examining your finances can pave the way for a secure retirement.
Let’s go through financial planning for doctors at every stage. You’ll find tips on managing wealth, choosing the right advisor, and more. Whether you’re a new doctor or have years of experience, you can start building a strong financial plan.
Financial Planning for New Doctors
Starting a medical career is exciting but comes with unique financial pressures. High student loans, adjusting to a new income, and learning to manage expenses can feel overwhelming.
Seeking advice from a professional who understands doctors’ needs can help. They can guide you through budgeting, debt management, and investing. An advisor knows the intricacies of financial planning for new doctors.
Set a Simple Budget
Unlike many careers, doctors often start earning later in life. This delayed income can make saving feel like a rush. It’s easy to get tempted into lifestyle upgrades, but keeping expenses in check early helps build a solid financial base. Set a simple budget to track where your money is going.
Debt Repayment
Medical school isn’t cheap. New doctors often start their careers with significant debt, and it can feel like a heavy weight on your shoulders. Managing student loans should be a top priority. Explore your debt repayment options.
Income-driven repayment plans or refinancing can lower your monthly payments and free up cash for other things.
Build an Emergency Fund
An emergency fund is your financial safety net. It’s solid advice to save three to six months of expenses. It doesn’t have to be a considerable amount immediately—start small and build up. This fund will cover unexpected costs without derailing your budget.
Start Saving for Retirement Early
Retirement might seem far off, but the earlier you start, the better. Even small contributions to a Roth IRA or 401k plan can grow over time. Take advantage of compounding interest by saving consistently, even if it’s just a little bit each month. This early start can help you catch up on the years you earned less.
Why You Need Financial Planning for Physicians
These are some common challenges you face with financial planning as a doctor:
High Risk for Liability and Litigation
Doctors earn high incomes and face personal and professional risks. You may have a target on your back for lawsuits and financial requests from friends and family. Physician wealth management should include protection strategies like insurance and asset shielding.
Malpractice lawsuits are also another factor to consider the sensitive nature of your work. Proper asset protection, like liability insurance and trusts, helps protect finances from claims.
Delayed Investing
Many doctors start investing later than others because of student loans and high expenses. Ongoing education, compliance, and changes in healthcare will strain your finances. Early financial planning for physicians can help avoid this catch-up game.
It sometimes feels like you must invest aggressively later in life to make up for it. Proper physician wealth management would balance your risk tolerance and create a solid foundation.
Tax-Deferred Wealth
Doctors rely heavily on tax-deferred accounts like 401k plans. While suitable for retirement, these accounts can limit your flexibility and expose you to future tax hikes. A balanced approach in physician wealth management can alleviate this problem.
High Taxes and Income
Doctors pay high taxes on earned income with few deductions. Financial planning for physicians should include tax-efficient investment strategies to help minimize this burden.
You probably also have complex pay structures, including:
- base salary
- bonuses
- income from partnerships
- private practice
This can make budgeting tricky when preparing a doctor’s financial plan for retirement.
Private Practice Constraints
Financial planning for doctors is even more challenging when you have your own private practice. If you have your own practice, then you also need to consider succession planning and an exit strategy for your business. Do you plan on passing it down or selling it?
You don’t have to worry about your retirement plans, but also the retirement of all your employees. When managing cash flow in your business, you have to understand how to navigate labor shortages, wages, benefits, and retirement-matching contributions.
How to Find the Right Financial Advisor for Physicians
Not all advisors are familiar with physicians' needs. Look for those with experience working with doctors or specializing in physician wealth management.
These are steps you can take to find a financial advisor for physicians:
- Ask about their experience, typical clients, and how they have helped other doctors achieve their financial goals.
- Look for credentials like Certified Financial Planner (CFP) or Chartered Financial Analyst (CFA). These qualifications show a high level of expertise and ethical standards.
- Pay attention to their fee structure and whether they are fiduciaries. Fee-only advisors charge a flat rate, or a percentage of assets managed, while others may work on commissions. Knowing this helps you avoid conflicts of interest.
- Every financial advisor for a physician has a different approach to financial planning. Some focus heavily on investments, while others provide a more comprehensive service. You want their approach to work with your needs and comfort level.
Get the Financial Care You Deserve
Student loan debt, legal liability, and taxes should step in the way of your retirement. With the experts at Asset Preservation Wealth and Tax, you should build a financial life with investment options that help you reach your retirement goals. We understand the specific challenges doctors face and can help you with a custom plan based on your condition. Our holistic approach factors in your taxes, debt, lifestyle goals, estate planning needs, and more.
As fiduciaries, we have the legal obligation to act in your best interests with objective advice—the same way you take an oath to help your patients to the best of your abilities.
Plan your future with Asset Preservation!
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
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