These 10 strategies can make your 2022 financially successful.
The new year is off to a busy start. While we’re almost through January, there is still plenty of time to set your financial goals for 2022. Keeping track of your financial goals and checking in throughout the year will build up your successes month by month.
We can plan all we like, and the future can still catch us by surprise. According to a statistic in AMA, 60% of physicians over the age of 50 will be involved in a lawsuit at least once. This statistic is even higher for certain specific types of physicians such as OBGYNs and surgeons. It’s important to speak to an attorney and discuss various asset protection strategies such as Nevada Asset Protection Trusts, LLCs, or Family Limited Partnerships to make sure your assets are protected from frivolous lawsuits.
Being prepared can never come too soon. Estate planning, including a properly drafted will and trusts to protect your assets, will allow for peace of mind with the knowledge that your estate will be distributed exactly as you wish it to be and that your family will be cared for. Don’t wait to prepare these documents. Wills are not set in stone; while you’re living, you can continue to make changes you deem necessary.
If you are a hospital-based physician, enroll and contribute the maximum to your employer-sponsored retirement savings plan. Depending on the options available through the particular type of retirement plan your employer offers, there may be extra advantages such as employer match contributions and automatic deductions from your paycheck to make saving even easier. Take the time to learn the details of your plan so you can be sure you’re getting the most out of it for tax benefits and retirements savings. The maximum contribution amount for a 401k in 2022 is $20,500, and for those over the age of 50 doing some catch up, you can add an extra $6500 for a total of $27,000.
If you are a self-employed physician, then personal retirement accounts are another good way to save, with the annual IRA contribution maximum amount currently at $6000. For those over 50, the catch-up amount is $7000. A Backdoor Roth IRA may also be an option, particularly for those who have maxed out their 401k plans. To get the tax-free growth and tax-free withdrawal benefits of a Roth IRA, after-tax dollars contributed to an IRA can then be converted to a Backdoor Roth IRA. Self-employed physicians should also speak to their CPA about contributing to a SEP IRA and a Cash Balance Plan for their practice.
Living expenses can get out of hand with regards to your savings if you don’t take a look at what you spend in proportion to what you bring in. Looking over recommended percentages, you will probably want to keep them to something like this:
Your unique situation will mean shifting the percentages, but a budget you stick to is the first step to keeping your financial goals in sight.
It’s never too early to begin saving; the earlier you start your retirement savings, the more you’ll take advantage of compounding. This means that the more time your money sits in savings, the more time it has to earn interest and grow, and that growing balance continues to earn more interest. This also allows for a little padding should something go awry in later years. You’ll have already established a good base, so a rocky period won’t disrupt your entire savings plan.
Using a credit card or student loans are common among physicians, particularly when they’re younger and getting established. Credit card debt adds up very quickly, and the high interest
rates can whittle away at the savings you’re trying to build up now. Pay off those debts as quickly as possible to save yourself the interest and use your budgeting tools to help you spend within your means going forward.
Contributing to your retirement accounts is one step, the next is making sure that your investments have the greatest amount of stability you can give them. By diversifying, which is spreading your investments into various sectors so that potential as well as risk is not all in one area, you’ll give some protection to your investments. Be cautious with speculative investments as well if you’re concerned about a stable foundation. It’s your retirement, and slow and steady is more likely to win the race.
Social Security is a benefit that helps most people, regardless of investment planning. However, waiting to claim those benefits will gain you delayed credits that will increase your benefits annually until you’re age 70, meaning a larger benefit to you and your family. Be ready to sign up with Medicare as soon as you’re eligible at age 65 and make sure you understand the plans you’re signed up for-- Medicare Part B is the medical insurance portion, and there are various plans that you’ll need to choose from to find the one that works best for you.
Your health is part of your financial planning. According to a recent wellness survey in Medical Economics, one out of four physicians face burnout. It’s never too late to seek professional help if you feel burnout and consider taking a break for your mental health. Also, look outside of work for other interests, including new skills and hobbies, travel, volunteer work in your community or in your faith. Career shouldn’t mean constantly exhausting yourself at work. It helps sometimes to pause and find a passion that will help you truly enjoy life.
All of this may seem like a lot, with many concerns and questions and moving parts. Because of the complicated nature of financial planning, it may benefit you to work with an experienced financial advisor. We believe in listening and taking your unique situation into consideration when helping you formulate your goals and guiding you toward them, from 2022 to your future.
Syed Nishat, BFA, is a partner at Wall Street Alliance Group. He holds a bachelor’s degree in business administration from University of Nevada Reno. Syed holds the FINRA Series 7, FINRA Series 63 and FINRA Series 66 licenses, along with licenses for life, disability and long-term care insurance. He also has been awarded the Behavioral Financial Advisor (BFA) designation.
Securities are offered through Securities America, Inc., member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Wall Street Alliance Group and Securities America are separate companies. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.
Source: AMA Policy Research Perspective, Medical Liability Claim Frequency: A 2007-2008 Snapshot of Physicians" AMA 2010.