Practicing medicine can be exceptionally rewarding, holistically fulfilling, and…utterly exhausting. When you're ready to hang up your stethoscope and venture into your next phase of life, it's critical that you have taken the right steps today to walk into the retirement future you've always envisioned. Whether you want to travel the world, spend time with family, or embark on extreme fly fishing, it all hinges on your ability to proactively plan for retirement.
Your plan for retirement should include much more than simply saving. To help you confidently do just that, the team at the MB Group have outlined a few tips physicians can use to plan for retirement. Continue reading to learn more and don't hesitate to reach out to the MB Group for tailored retirement planning solutions.
Start Retirement Planning by Maximizing Tax-Advantage Accounts
The majority of employers offer some type of 401(k) or 403(b) plan that allows you to contribute to the account tax-free up to $19,500 annually. Fidelity Investments reported that 60% of physicians under the age of 50 and 30% of those over 50 fail to save up to the limit, which is an epic miss. These tax-advantaged accounts are among the most effective ways for doctors to save and plan for retirement.
However, saving for retirement isn't the only benefit of maximizing your contributions to these accounts. Because all contributions are tax-free, maximizing your participation means you may be able to effectively lower your taxable income. Make sure to work closely with your CPA or financial advisor to maximize every benefit offered by the Internal Revenue Service.
Consider Adding a Cash Balance Plan to Your 401(k)
Implementing a "cash-balance plan" to your retirement account can help you save on taxes and make substantially larger contributions to your 401(k). Think of a cash balance plan like a 401(k) on steroids. When you work with a tax planning professional at the MB Group, you may be able to squeeze a stunning 20 years of retirement savings into 10.
What Is a Cash Balance Plan?
A cash balance plan is designed to empower you to add extra tax-deferred dollars to your 401(k) once you've maxed it out. If you're a profitable owner of a practice, the cash balance plan can help you pay less in taxes and accelerate your savings. These contributions will lower your taxable income dollar by dollar, which means any funds you contribute to the plan will not be taxed in that year. However, it's important to know that the cash balance plan is significantly less flexible than the 401(k), and it's only an effective strategy if you are able to commit to making significant contributions every year.
Maximize a Contributions to Your HSA
As a doctor, you are on the front lines and know all too well about the phenomenon of rising health care costs. Unfortunately, most people—including doctors—tend to overlook these rising costs when planning for retirement. Did you know that Fidelity estimates an average retired couple aged 65 in 2020 may need a sobering $295,000 saved to cover healthcare costs? Not to mention this number is projected to increase.
One way doctors can solve this emerging problem is to earmark funds for these costs with a health savings account (HSA). Although most people assume the HSA is for today's health care costs, one strategy is to contribute tax-free dollars to the HSA, invest them in a suitable vehicle, allow them to grow tax free, and use the funds tax-free in retirement for eligible healthcare expenses. As a triple-tax advantage account, HSAs can help you accomplish two critical goals:
- Have funds specifically designed for one of your largest retirement expenses, and
- Lower your taxable income today.
Work with an Experienced Planning Professional
Undoubtedly, one of the most important steps you can take to plan for retirement is to partner with the experienced professionals at the MB Group. In addition to changing tax laws, there are a number of factors that should all be monitored and considered. Most physicians simply do not have enough time to perform their life's work and plan for the future they have always envisioned. Fortunately, you're not alone.
At the MB Group, we are a team of experienced CPAs, financial advisors, and retirement planning specialists. We offer decades of experience helping doctors, physicians, and medical professionals achieve their goals. We will work closely with you to take a holistic view of your future and ensure you understand the steps you need to take today to walk into the retirement you deserve.
Contact MB Group to Create or Revise Your Plan for Retirement
Contact the MB Group today to take the first step in your retirement planning journey. Or if you already have a plan, the team at MB Group can offer you a second opinion and pressure test your strategy for your goals.