Physician 2022 financial planning checklist

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.

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.

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.