Volatile financial markets can be unsettling, but it is important to realize that volatility itself should not cause a medical professional or anyone else to abandon a well-conceived financial plan.
Volatile financial markets can be unsettling, but it is important to realize that volatility itself should not cause a medical professional or anyone else to abandon a well-conceived financial plan. The market volatility that erupted in 2015 and early this year can have a positive effect by making investors take a second-or maybe a first-detailed look at their financial plan and see if it is one for all seasons.
Of course every sound plan has an investment component, and it is important that investments be properly diversified and rebalanced periodically. Creating a successful investment strategy begins with having a discussion with a professional about life goals. Retirement is an important subject, including the lifestyle one hopes for after the working years are over. Furthermore, there can be other important interim goals, such as paying for children’s higher education, or having a vacation home.
A vital element of the goals discussion is determining the rate of return that will enable objectives to be not merely met, but met within one’s own risk tolerance. Volatility is a reminder that risk certainly exists, but a long-term plan that is well thought out and takes risk into account can help ease your mind through the ups and downs of the markets.
Many people who succumb to panic end up selling when markets are near their low points and buying back in after prices have recovered. Another important component of a good plan is keeping the proper amount of cash on hand to take advantage of buying opportunities and for a sufficient emergency fund.
A comprehensive financial plan involves much more than investments, too. Steps left undone can have a larger impact on financial security and retirement readiness than financial market performance. A solid financial plan should be flexible and expandable to mesh with the trajectory of the physician’s economic and life situation.
Below are some questions that physicians should raise with their financial planner and with other professionals such as attorneys, CPAs, and other experts:
Q) Given the structure of my practice, what steps, if any, do I need to take to protect myself against legal liability?
A) For the successful practitioner, risk management and legal expertise should be brought to bear to design a plan that protects wealth from potential lawsuits and creditors. There are numerous legal structures that a practice can implement, such as a partnership or limited liability corporation (LLC). It is important to recognize what type of insurance coverage is appropriate for the structure of the practice. For example, a practice operating in multiple locations should organize so as to limit any potential liability for each location.
Q) As I earn more and save more for retirement, should I be looking at a wider range of investments and products?
A) Generally, yes. When starting out with limited resources, portfolios should be kept fairly simple, with the proper amount of diversification. As incomes rise and tax rates increase, the old adage, “It’s not what you make but what you keep,” becomes more important. Individuals should not only consider return or yield, but also their tax-equivalent return when deciding on investment strategies. Additionally, higher earners should look for ways to save money on a pre-tax or tax-preferred basis.
Q) What kind of disability insurance coverage do I need if an illness or injury makes it necessary to give up my practice?
A) The most comprehensive disability protections will provide a stream of income if the physician is forced to leave his or her practice and move to a different career path, for example, in education or consulting. A surgeon who injures a hand should still be compensated by a policy even if he or she finds other employment in medicine or decides to switch fields entirely. Additionally, medical professionals should look for a contract that specifically includes their specialty in the language of the contract rather than more vague or general wording, which is very common.
These are just a few topics to raise in a robust financial planning discussion with a professional advisor. Remember, volatility has its ebbs and flows, and it should not deter a physician from taking steps that will help protect his or her financial future.
About Chris Kampitsis
Chris Kampitsis is a Financial Planner and Financial Services Executive at the Barnum Financial Group, an office of MetLife and a part of the MetLife Premier Client Group. He is based in the Barnum office in Elmsford, NY. Chris is also a Retirement Income Certified Professional (RIPC®). . He can be reached at email@example.com.
MetLife does not provide tax or legal advice. Please consult your tax advisor or attorney for such guidance. Metropolitan Life Insurance Company (MLIC), New York, NY 10166. Securities and investment advisory services offered through MetLife Securities Inc. (MSI)(member FINRA/SIPC) and a registered investment advisor. L0216455851[exp0217][All States][DC]