Important financial planning issues for physicians

Have you recently considered/looked at these important financial planning issues?

Investment Strategies. Since the passage of the American Taxpayer Relief Act and the enactment of the net investment income tax last year, physicians are faced with a significantly higher income tax rate on investment income. It is causing many to step back, look at their investment strategies and analyze the tax implications.

Asset Placement. Asset placement issues are a critical piece of your overall planning picture. I think it’s particularly important to do two things: 1) decide whether fixed income that generates a lot of taxable income should be in retirement accounts, Roth IRAs or regular accounts; and 2) determine whether higher growth equities that are taxed at a lower rate belong outside of the retirement account.

Harvesting Gains. Harvesting gains can be part of a physician's overall strategy – even in this environment with higher tax rates on capital gains. Trying to plan that around your income year by year, over a multi-year period, is the best way to identify where to incorporate capital gains. I believe that harvesting gains can make sense in the right scenarios – especially for physicians with low incomes due to business losses in a particular year.

Planning for retirement. To me this is the big one. Are you doing any retirement planning? Will you even be able to retire when you WANT TO. To be effective, look at an asset’s efficiency and do projections on an asset basis. Determine whether it will last through your lifetime and then look at where that income stream is going to come from (such as an IRA, a pension or from a regular account) when you retire.

Have questions? I’m here to help.