How smart doctors save for retirement

For most people, owning a home is a big investment. While housing is a precondition for survival and homeownership can be part of any sound investment strategy, it shouldn’t be the only pillar of your retirement plans.


Index funds are a great investment vehicle for physicians because they require minimal management.

“While homes are not purely an investment, due to the taxes and ongoing maintenance costs associated with them, they present an opportunity for physicians,” said Anthony Watson, CFA, CFP, of Prosperous retirement specialists. “In addition to needing a place to live, a home always rises in value, and mortgage interest is still deductible up to $ 750,000 in mortgage debt if purchased after December 15, 2017. One Home with equity is also a great reserve asset when planning. for retirement.

In addition to homeownership, we’ve gathered other advice from Certified Financial Planners (CFPs) on the best investments physicians can make.

Municipal bonds

Doctors generally have higher annual salaries than the general population. As such, many of the best investments available to physicians reduce taxable income, according to Watson. Municipal bonds are one example.

“In taxable accounts, most physicians would benefit from holding municipal bonds rather than traditional taxable bonds. Municipal bonds pay lower interest rates than taxable bonds, but their interest is not taxable. To make a comparison, you can determine what is called your taxable equivalent return, ”he said.

“If a doctor were in the marginal 32% income tax bracket, they would do better with a tax-free municipal bond paying 3% than a taxable bond paying 4%. Calculation of the equivalent taxable return [3.00%/(1-0.32)] shows that this person would be better served by holding the municipal tax-free bond, as the equivalent taxable return is 4.41%. The taxable equivalent yield is what allows you to compare municipal bonds with taxable bonds on an apple-to-apple basis, ”he added.

Health savings accounts

According to Watson, a health savings account (HSA) can be another great way to reduce taxable income and invest wisely.

“HSAs are funded by pre-tax contributions, like a 401 (k). The funds can be invested and the funds grow tax-free until they are ultimately used to fund qualifying medical expenses tax-free, ”he said. “Doctors would be wise to pay deductibles out of pocket, let HSA funds continue to grow tax-free, and treat those funds like another vehicle for retirement savings.”


Roth IRA

Most doctors find that a 401 (k) (or 403 (b), if you work for a nonprofit) is one of the best investments they can make, in light of the provisions. employer matching contribution and pre-tax contributions. In addition to maximizing 401 (k) investments, Watson also recommends getting the most out of the Roth IRA.

“Roth IRAs are fantastic investment accounts to take advantage of because of their unique tax treatment,” he said. “High-growth assets like stocks in a Roth IRA early in life can put people in a great position later in life by giving them a significant source of tax-free income to fund retirement. Doctors don’t contribute to Roth IRAs any more quickly given the adjusted gross income limits of $ 125,000 for singles and $ 198,000 for couples. Fortunately, doctors can often still profit soon after retirement with a properly structured Roth IRA conversion strategy. “

Index funds

The doctors are busy. Caring for patients and keeping up to date with the latest in evidence-based medicine takes a lot of dedication. Given their professional obligations, it may be difficult for some physicians to manage their investment portfolio as closely as possible. Fortunately, index funds allow physicians to invest wisely.

“Low-cost index funds present great investments for physicians because they provide low-cost, tax-advantaged, diversified, diversified exposure to an asset class while helping to impose better discipline on investors,” said Watson. “From a behavioral standpoint, it’s much easier to buy and hold an index fund than an individual stock for the most part. “

Private real estate

In addition to home ownership, it may make sense to invest in other types of real estate, according to Lewis J. Altfest, PhD, CFP, CFA, CPA, PFS, at Altfest personal wealth management.


“Think about private real estate,” he said. “It moves independently of stocks (a plus) when stocks are hit, as it did a year ago. In addition, it is usually the best hedge against inflation, which has already started in our country. Public real estate, such as REITs, is not as good.

Certain types of actions

Investing in individual stocks can be risky. After all, if a business runs into trouble, its inventory can collapse. Altfest advises you to think carefully before investing in specific types of stocks.

“Allocate a substantial portion of your dollars to value style stocks. They are not as expensive as technologies and are more likely to benefit from the economic recovery, ”he said.

He added: “Put a decent stake in health care stocks, which are not as cyclical as others. In addition, you may have some experience in identifying those who are making forays, but avoid “one wing and one prayer” speculation for substantial sums. “

Global investments

Who Said Investing In American Companies Is Enough? The smart investor has a global mindset.

“Add more international investment. They can be careful not to put all the eggs in the American basket, ”said Altfest. “Using international investments can surprisingly reduce portfolio risk. “

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