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Should You Invest in Bitcoin in 2021? Understanding Cryptocurrencies

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It wasn’t a long time ago when cryptocurrencies were considered disruptive forces to the investment world. In the last few years, cryptocurrencies have become serious investment instruments with some big names investing heavily in digital currencies.

Cryptocurrencies remain highly volatile investment options even after reaching a significantly higher price mark. For investors, the volatile nature of cryptocurrencies like bitcoin and Ethereum remains the biggest opportunity as well as risk.

You may have heard the Elon Musk news on betting his money on Bitcoins. You’ll wonder it’s worth investing in an instrument in which the world’s one of the richest persons wants to invest. You surely should give it a thought. But remember, the golden rule of investments is to know the instrument well before you bet your money.

Let’s take you through our guide on understanding Bitcoin.

What is Bitcoin?

Bitcoin is a digital currency that was introduced in 2008 by an autonomous inventor Satoshi Nakamoto. It uses blockchain technology to operate the Bitcoin platform. Cryptocurrencies are built on blockchain technology.

Bitcoin uses peer-to-peer trading technology with no central banks or financial regulators to control it. It uses fully decentralized processing technology. The prime objective of launching a digital currency was to facilitate the public with daily transactions. It was aimed to provide an alternative option to the traditional fiat currencies like the Dollar, Euro, or Pound.

Since its inception, Bitcoin has evolved a lot. It has become a trading instrument rather an alternative digital currency. However, in many countries Bitcoin is being used as an alternative currency as well.

Cryptocurrencies like Bitcoin have the advantage of seamless cross-border integration. It means Bitcoin can be traded from anywhere and at the same price. It embeds the hybrid characteristics of a currency and investment instrument simultaneously.

The Price History of Bitcoin

The Bitcoin is currently trading at $ 57, 051 as of the time of this writing. When it was launched in 2008 it was worth $ 0.0008. A few days later it was trading at a meager $0.8 and remained well-below $1 mark for a long time.

It took Bitcoin several months to cross the $1 mark. For many years Bitcoin stayed below the $100 mark too. It was first boosted in 2014 when it crossed the psychological barrier of $1,000 mark.

Bitcoin saw many fluctuations in the price since its inception. The trend of high volatility continues till day as well. Bitcoin touched the first significant price mark of $ 19,000 in 2017.

It had to be the pandemic year of 2020 that gave Bitcoin the historic price boost and it touched the $ 50,000 mark. Investors forecasted dipping prices of the Dollar due to economic recession and pandemic hardships. Bitcoin and cryptocurrencies soon became popular alternative choices of investors globally.

Why Bitcoin has been so Volatile? The Risk Factor

If you consider trading an instrument, it will always carry the risk factor. No investment is risk-free in the world. However, Bitcoin has had a particularly volatile pricing history as we discussed earlier.

There are no second thoughts on Bitcoin being one of the riskiest and volatile trading instruments in the world. The volatile nature of Bitcoin has several contributors to the phenomenon.

Here are a few key points that affect the highly volatile price value of Bitcoin.

The Perceived Value of Bitcoin

It can be a digital currency, a popular alternative to fiat currencies. Yet it is perceived more of a commodity, like gold. It’s the advantage of Bitcoin, but it turns into a disadvantage when it comes to price volatility.

Legislative Barriers

It may surprise you, but Bitcoin trading hasn’t been legalized in several jurisdictions yet. In fact, many online brokers are reluctant to offer Cryptocurrencies as a trading option.

Tax treatment

The IRS says the tax treatment of proceeds from trading Bitcoins and Cryptos is like an asset. It soars up the tax burden of investors in such jurisdiction that causes big risks for Bitcoins.

Liquidity

If you are trading one bitcoin at around the $57,000 mark and big investors hold something around $ 1 million it becomes extremely difficult to liquidate the investment quickly. There are currently no ETFs for Bitcoins too.

Cybersecurity Issues

Bitcoin users can sometimes express their concerns on cybersecurity lapses for improvements. The digital perception of the currency makes it highly suspicious for cybercrimes.

Finite Number of Bitcoins

The Bitcoin maximum number is set at a finite figure of 21 million only. Currently, there are around 18 million bitcoins in circulation. Its biggest advantage becomes the disadvantage when it comes to controlling the price volatility.

There are several other factors that cause the price volatility in Bitcoin as well.

Let us move on to some of the recent news that has caught the eye of many with bitcoin investment.

What Did Elon Musk say about Bitcoin?

Elon Musk has been vocal on Bitcoin and its prospects in recent months. He stated several encouraging remarks on bitcoin becoming the mainstream trading instrument. For example, Musk Said; “bitcoin is on the Verge of getting broad acceptance”.

Recently Elon Musk owned Tesla gave a big boost to Bitcoin by announcing that it could soon be accepting Tesla car payment through Bitcoins.

Elon Musk stated a few things conservatively about Bitcoins in the past as well. For example, once Elon Musk called Bitcoin “a good thing” only. He said, “I should have invested in Bitcoins eight years ago” in the same statement.

There is no denying that Elon Musk has stated several good things about Bitcoins. Such high-profile figures talking openly about the Future of Bitcoin and Digital Currencies certainly give a big boost to a growing trend.

Will the Elon Musk Influence Reshape the Future of Bitcoin?

So did all the hype created by Elon Musk and Tesla on Bitcoin work well for them? It certainly did in the beginning. The news had sparked a 12% rise in bitcoin price and a 3% price increase on Tesla Stocks on the next morning of the news. Tesla had invested $ 1.5 billion in Bitcoins recently.

Everything does not work smoothly in the trading world. Not so for such highly volatile trading instruments like Bitcoin. Elon Musk’s Tesla Lost $ 15.2 billion in a single day over a comment made by himself.

There is no denying the fact that high-profile figures like Elon Musk can move the stocks in a jiffy. There have been some other high-profile investors in Bitcoin like Square and Salesforce as well.

As much as the high-profile investors bolster the Bitcoin trading confidence, it can extremely become riskier as well. In short, the influencers weighing in on Bitcoin haven’t succeeded in reducing its notoriously volatile nature.

Should You Invest in Bitcoin?

There is no straightforward answer to it. If you are a risk-averse trader and do not like to take much risks, it isn’t your go-to option. Conversely, if you’re good at taking trading risks and have the knowledge to trade it rightly, you should consider investing in Bitcoin.

Bitcoin remains highly volatile and speculative in nature as it is evident throughout history. Bitcoin remains one of the riskiest investment options ever. It can turn your fortunes in a few days, but you can go bust in a jiffy as well.

Still, the cybercrimes and scams around bitcoin trading haven’t abated as well. In all, it remains a highly risky venture. At the same, if you have a risk appetite, you should give it a go.

How to Invest in Bitcoin?

The easiest way to invest in Bitcoins is through Bitcoin Exchanges. You can directly buy bitcoins through these dedicated cryptocurrency exchanges safely. You can also invest in bitcoins through online brokers. Most online brokers offer Bitcoins through CFDs only.

Another way of trading bitcoin is through peer-to-peer trading. You can directly buy from private investors at market prices, it can save you the broker commission and processing costs. However, it is a risky option as online scammers can hit you badly.

You can also purchase bitcoin through dedicated ATMs in selective regions. You’ll need to make the first purchase through the traditional fiat currencies. You can pay through any traditional method of debit/credit cards or bank transfers.

What are the Prospects of Bitcoin?

For many years Bitcoin traded well below the $100 mark. Currently, it has crossed the $ 50,000. Investors didn’t mention Bitcoin as one of the tradable opportunities for many years. Today. People like Elon Musk have been vocal on it.

Given the price swings, scams, and cybersecurity issues, bitcoin is far from a stable investment option. It faces legislative challenges in many jurisdictions as well. It lacked the attention of institutional investors for many years as well.

Despite all the risk factors, once Bitcoins becomes acceptable for mainstream investors, it will achieve the stability it lacks for now. It will also need to improve on technology, cybersecurity, and legislative measures as well.

The information provided is for educational purposes only and is not intended as investment advice for anyone. All information discussed is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The views presented today are those of WealthCare Financial and do not necessarily represent the views of AlphaStar Capital Management, LLC. The opinions expressed are subject to change without notice and do not constitute financial, legal or tax advice. Please consult your financial professional before executing any financial strategy.  Investment Advisory and financial planning services are offered through AlphaStar Capital Management, LLC, an SEC registered investment adviser. AlphaStar and WealthCare Financial are independent entities

 

 

Budgeting Tips for Low-Income Doctors in a High Cost of Living Areas

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Doctors and Physicians heal the wounds of their patients. If there is any way they need treatment, it can be in financial literacy. Finance and medical professions are poles apart. A key area of financial planning is budgeting.

Since the disastrous events of coronavirus last year, many practices are struggling to find their way back into the routine. Medical practices are at the farthest point to return to a point of pre-pandemic. Physicians and Doctors with low income in high cost of living areas are exposed to great financial risks.  Financial planning and budgeting can help you survive the difficult times of economic recession.

Let’s briefly take a glance at the budgeting process before we jump into the details of budgeting.

Define the Scope of Budget

Defining the scope of a budget means aligning your financial goals with budgeting. If you want to improve the medical practice equipment, it will need investment. You may also be planning to save for personal expenses such as a house renovation. Keep your financial goals in mind before preparing the budgets.

For clarity, keep the business financial goals separate from your personal financial ones. It will help you smoothly run the practice without compromising on your lifestyle. Remember, your financial success at practice will eventually affect you and your family’s financial well-being.

Choose the Right Budgeting Method

Perhaps you are a detailed-oriented person naturally, a line-by-line budgeting technique evaluating expenses in detail would suit you. Perhaps you don’t like to go into that much detail and keep your interest in summarized form only.

Choosing the right budgeting method can help you achieve effective results. For example, zero-based budgeting calls for wise and calculated spending for each penny earned. It means every expense at your medical practice should make sense. A formal 50-30-20 budgeting method would want you to categorize your spending into necessities, savings, and wants.

Learn to Analyze the Budgeting

Who knows the importance of follow-ups better than a physician? Analyzing budgets is a similar process to that as well.

Variance analysis is comparing actual performance against the standards or targets. Ideally, you’ll aim to achieve a positive variance in budgets. A negative variance will disclose the shortcomings and let you evaluate the causes of inefficiencies.

Control and Review of Budgeting

Once you identify the variances in budgets, it’s time to take corrective measures. Reviewing the budgets means identifying areas of improvement. Variances will inevitably identify inefficiencies in operations.

Budgeting reviews will also help you to understand the expense categories. You’ll learn to differentiate between variable, fixed, and overhead expenses.

You can take control of every budget in a similar method. It will increase your medical practice efficiency and eventually lead to increased revenues.

Align Budgeting Process with your Medical Practice Goals

It means harnessing the benefits of financial planning and budgeting. For example, compare your quarterly variable expenses such as utility bills for the same period of the previous year. Identify the differences and take corrective measures.

Let’s say, you identified a 1% variance in a particular revenue stream. 1% can be $100 or $500 monthly depending on the total revenue. Convert it to annual variance, and factor it for the next 10 years. You’ll know how much you would’ve missed without a budgeting method.

Now that you have grasped the idea of budgeting and its fundamentals, let’s discuss some practical ways of improving your medical practice with budgeting.

Here is a 5-step road-map for low-income doctors and medical practices in a high-cost area of living to practically harness the benefits of Budgeting.

Learn to Differentiate between Wants and Needs

It is often the case in our lives that we fail to distinguish between wants and needs. Honestly, our professional lives are no exceptions to this ignorance as well.

Let’s say, you want to increase the revenue stream of your medical practice, who wouldn’t? For that, you need an extra MRI machine to purchase. It seems you have been outsourcing the MRI scans to a nearby lab, and someone just came with an idea to install a new MRI machine.

Budgeting implies an important aspect of financial forecasts. A buy v lease projection will reveal whether you actually NEED that MRI machine or not. One step ahead, it may reveal whether the return on investment will match or exceed your business’s total ROI or not.

A Proportional budget or a 50 (needs) – 30 (wants) – 20 (savings) budget is a great tool to identify and control the after-tax income. The practice will help you achieve future financial goals through savings. Once you identify the wants and needs clearly, it will be your guilt-free spending.

Think of Relocating to a Cheaper Place

Relocating is not a simple process, neither it is an easy decision. If your medical practice is in a high cost of living area, and your average income is categorized low, it suits you. Before you make the final decision on relocating to a cheaper place, consider the following key questions.

  • Will you be able to retain your current patients?
  • What is the competition in the new point of relocation?
  • What are the total costs if you decide to relocate to a new point?
  • How long will it take to cover the investment for relocation?
  • Will your staff willingly accept the decision? How will it affect your staffing needs in a new workplace?

The best option for you will be to consult an advisor. It will reduce the costs of relocation to a new point. The advisors will help you understand the demographic and competition analysis as well. Your goal should be to reduce the real estate costs without a compromise on the revenue.

Diversify your Income Sources

Low-income doctors with medical practices in high cost of living areas will inevitably struggle to increase revenue streams. They carry the burden of heavy student loans, taxes, and higher business costs. An effective way of reducing costs and increasing the after-tax profits is to increase the income streams.

Doctors and Physicians can increase their income by expanding services or figuring out alternative non-medical revenue streams.

Here are a few quick ideas for you to increase your total income.

Medical Practices – Alternative Sources of Income

  • Introduce new ancillary services at your medical practice: Physical Therapy, Allergy Therapy, Medical Spa, Weight Loss Services.
  • Increasing Lab practices and facilities.
  • Consider in-house dispensing services.
  • Partnering with another medical practice for sessions or emergencies.
  • Expanding counseling services.

Non- Clinical: Alternative Sources of Income

  • Counseling and Coaching – Sports teams, Youngsters.
  • Teaching and Lecturing.
  • Investments in real estate, stocks, or side business.

You can consider any other side hustle that can increase your clinical and non-clinical revenue. Diversification of income will help you reduce the burden of debts. It will also help you create emergency funds to reduce over-reliance on loans.

Paying off your Student Loan

Paying off medical student loans can take years of hard work. It depends on your career stage, income, and loan scheme. You can plan to pay off your student loan early, it will not incur you any penalty. It will also help you increase your net income.

Here are a few quick tips for you to pay off your medical student loan faster.

Start Making Repayments Early

This advice is for young doctors. You may find it hard but try starting repayments of your medical student loan as early as possible. Some doctors leave it until they become attending physicians, but it wouldn’t help the cause at all.

Refinance Your Student Loan

Consider refinancing your student loan. Particularly, if you have other high-interest debts as well. Refinancing can save your total interest costs with debt consolidation.

Switch to Income-Driven Repayment Plan

Low-income doctors living in high-cost areas of the business should consider this option. Consider opting for a federal income-driven repayment plan for your student loans. The drawback with this option is it will prolong your repayment tenure.

Live within the means – for a few more years

It simply means to continue living a disciplined life as you already are. Spend less and save more. Contribute more towards your student loan repayment, there is no penalty on early repayments on it.

Tax Planning – Reducing the Tax Bill

Tax planning can be stressful for many business owners. It’s not just the year-end settlement but an ongoing practice to manage your tax bill. The IRS allows you to reduce the tax liability in several legitimate ways. Low-income doctors should plan ahead of time to create an effective strategy for tax management.

Here are a few quick tips for you to reduce your medical practice’s tax bill.

  • Take qualified business income deductions.
  • Apply for tax credits when and wherever applicable.
  • Contribute more towards the employee contribution plans and adjust the employee remunerations against it.
  • Adjust the depreciation methods for newly purchased equipment and machinery.
  • Adjust your medical practice’s income and expense timings to fit-in the right tax slab.
  • Write-off bad debts of your business to reduce taxable income.

Budgeting is a great financial tool for any business. It’s a must-have planning tool for low-income doctors. It can increase your operational efficiency as well as lower your expenses when used effectively.

Contact an expert advisor today for more information on retirement planning for physicians. Sometimes a fresh perspective from a trusted source is all you need. Feel free to call us at 561-705-2005 or email us at Michael@AskWealthCare.com

 

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Please share this market update with family, friends, or colleagues.

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By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims-paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entities. 

                     

Financially Fit: 7 Financial Risks Medical Professionals Face (and how to fix them)

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Medical professionals face several financial risks in their line of work. For some, it may seem like there is no solution to their problems. Such risks include risks from real estate investments, disability, death, inadequate insurance, and much more.

Physicians face high risks whether employed by a hospital or practicing privately on their own.

 In the list below, we will look at some of those risks and how you as a physician can fix them.

  1. Risk of Running out of Money due to Poor Investments Returns

A physician has very little time to know where and how he or she should invest. Considering the amount of work they are involved in makes it rather hard for them. As a professional, you need to find ample time to review your financial situation.

If you are interested in investing in your private practice, it would be wise to seek financial advice before moving forward.

Where can a physician find relevant financial information? Only through financial media adverts such as websites, radio shows, magazines, or TV adverts. Information found through advertising is not enough to properly help on how to invest.

Unfortunately, for some physicians, they take the fast way without consultation. Doing so only leads to poor investments, and some have ended up losing their retirement savings.

The best solution would be for a medical professional to seek the advice of a financial specialist.

These specialists will help you to develop an excellent financial plan helping you to reach your financial goals.

As a physician, you might be having general information about how to manage your finances. The specialists will now help you by advice further on the right direction and how your investments will be fruitful. They can help draw up a financial plan steering you in the right direction.

  • Disability Insurance

It is paramount for a physician to have an insurance policy that covers disability. Depending on their gross income, most physicians can spend between 2% and 5% on insurance premiums.

Some factors that will determine your disability plan include age, health, and medical specialty, how disability is defined in your policy, location, waiting period, and how much of the disability cover you will need.

Physicians who pay more premiums are Surgeons, Obstetricians, Anesthesiologists, Registered nurses, and Podiatrists. Physicians in dentistry, internists, Gastroenterologists, and primary care physicians usually pay the lowest premium rates.

The primary disability insurance policies will pay out 60% of your gross income. For example, if your annual income is about $336,000, you will receive $17,000 per month from your disability insurance.

Your premiums tend to increase as you age. Expect to pay higher premiums as you grow old.

To save on your insurance premiums, inquire if your insurance provider offers discounts. Some insurance companies give out discounts on premiums paid annually rather than those paid in monthly installments.

  • Inflation

With inflation rising, the economy usually suffers high costs. All sectors suffer, and one of the most affected ones in the healthcare sector. Healthcare costs will rise, yielding devastating consequences.

Public payers reimburse most doctors and hospitals. With the rate of inflation speculated to increase, physicians will receive 90% of what is fully allocated Medicare costs for their patient’s care costs.

Medical providers each year negotiate reimbursement rates with their commercial insurers. Some rates are as high as 200% of the amount Medicare pays. It can later lead to the closure of hospitals and loss of employment.

The best solution would be for the health care system to embrace changes. First, the health care system can begin by reducing the cost of high-quality care. They can then minimize medical errors and maximize prevention and remove treatments that have no clinical efficacy.

  • Alternative Payment Method

Physician’s payment models tend to be complex, and the change keeps on increasing. With alternative payment methods on the rise, the way of compensating physicians is changing. Such methods include bonuses and penalties for meeting their goals.

Research has indicated that medical practitioners are at a high risk of financial risks brought about by alternative payment methods. These include penalties for the cost of overruns.

Physicians are more welcoming to alternative payment methods that help to improve patient care. Clinical improvements were noticeable and commended by physicians despite them not benefiting from financial bonuses.

To have a solution to the alternative payment method, practicing physicians need to help design the alternative payment method. It will help improve their engagement and see more productivity in inpatient care.

  • Entrepreneurism in Health Care

Having physicians may reduce the effects of private firms taking ownership and control of health care institutions. The decision of patient care will remain with the physicians. From the beginning, physicians are the ones who have been relatively independent of health care institutions. They are bound ethnically to put the interests of the patients ahead of their interests.

Entrepreneurs now seek to invest in a health care business that happens to be outside of their practice.

Physicians must fulfill a role often known as ‘fiduciary,’ where the physician acts on behalf of his patients’ interests.

Some entrepreneurial developments in the health care sector may affect the probability of a physician’s behavior towards the patient’s ethical interest. The investments brought forth in the health care organization and bonus incentives may negatively influence the physician’s decisions. It could lead to the medical professional being biased when making decisions that will not serve the patients’ interests first.

Another challenge is that physicians would offer various services from their establishments with their separate source of income. They receive extra payments from having tests done at their laboratories.

However, such provisions have been dropped, and physicians can no longer generate personal income from services they do not provide.

Though, physicians are allowed to own their establishments such as hospitals, nursing homes, laboratories, and pharmacies. They tend to invest in freestanding and non-institutional health centers that many people are welcoming.

  • Interest Rate Risk from Real Estate Investments

Is it recommended for physicians to invest in real estate? By investing in the right assets, you can be sure that you will generate good returns.

Most physicians already fall into the higher part of federal and state tax brackets. As an investor, you can deduct the expected depreciation from your annual tax return with commercial property depreciation.

There are two ways of getting involved in real estate: active and passive real estate investing.

Active real estate investing is a risk mainly for those whose time is limited. As a physician, you would want to weigh out your options first. Investing would require you to outsource the properties, research the local market, secure financing, and manage the property yourself.

As for passive real estate investing, it can suit well with your schedule as a medical professional. It is not very involving. The benefits of passive investments are saving on time, benefiting from a more significant capital pool, deduction of property depreciation from your annual tax bill, entrust the help of professional management, and no dealing with lenders.

At times, you cannot predict how the investment will end up. Some risks that you can consider are:

  • Purchasing a bad property
  • If the investment has a lawsuit
  • Getting bad tenants
  • Poor location
  • Leverage
  • Value Decrease in the market

By doing proper diligence, you can reduce the risk involved in real estate. All investments carry possible risks, and the real estate is not exempted. Do your investigations and, if need be, seek the help of a professional.

  • Having a Malpractice Insurance to avoid Inadequate Insurance

Insurance is one of the recommended long-term financial plans. The medical profession is one of the highest paying careers and has a high income; many physicians have many assets. Before taking up an insurance cover, be it a disability, business overhead, or life; seek a skilled professional’s advice.

Without an adequate insurance policy, some physicians face the risk of losing their license to practice.

 Medical malpractice insurance is designed as specialized professional liability insurance. It covers the physician’s liability against any arising disputed services resulting from a patient’s death or injury.

Medical malpractice is required by anyone who intends to practice medicine. Hospitals must have this insurance for their physicians to defend any malpractice claims that might bring any dispute.

Because the amount of insurance required to meet your malpractice insurance varies, it is crucial to confirm with a professional medical insurance consultant. The professional will guide you on the type and amount of coverage you need.

There are two types of malpractice insurance: claims-made and occurrence. A claims-made policy will cover when an incident took place and after a filed lawsuit. The occurrence policy covers any claim that happened during the period of the coverage, even after the claim has been filed after the policy lapses.

As a physician who is going into private practice, ensure you have malpractice insurance. It will cover claims associated with medically associated risks such as regulatory requirements and cyber liability.

Contact an expert advisor today for more information on retirement planning for physicians. Sometimes a fresh perspective from a trusted source is all you need. Feel free to call us at 561-705-2005 or email us at Michael@AskWealthCare.com

Share the Wealth of Knowledge!

Please share this market update with family, friends, or colleagues.

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By clicking on these links, you will leave our server, as they are located on another server. We have not independently verified the information available through this link. The link is provided to you as a matter of interest. Please click on the links below to leave and proceed to the selected site.

This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims-paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.

10 Things Every Physician Must Do To Prepare for Retirement:

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Financial planning is something that doesn’t come naturally aligned with the medical profession. It doesn’t imply physicians can’t manage a sound financial management plan. Retirement planning is vital for every profession, for medical professionals even more.

After the current pandemic caused uncertainties of life around the globe, who else can understand the importance of planning better than Physicians?

It’s a certainty that you joined the medical profession to serve humanity. That shouldn’t lead you to the complacency of ill planning about your retirement plan affecting you and your loved ones. You deserve to have a flexible and comfortable life post-retirement. For that you’ll have to plan for your retirement now for the time you think of hanging your white coat.

  1. Match Your Lifestyle With Retirement Planning:

What’s enough for you by the time you retire? Yeah, that’s what you need to think now. Everyone lives with a unique lifestyle that comes with different habits. One persona may be content to live within $5,000 a month post-retirement; another perhaps would need $20,000.

  • Where would you settle after retirement? Will you relocate to a particular place?
  • How much would it cost you to stay in that particular vicinity? How many family members will be supporting by then?
  • How much your normal retirement plan contributions will be?

At this stage, you’ll need to consider the importance of long-term financial planning. Your financial success wouldn’t come overnight.

At what age do you plan to retire? Retiring at 60 is different from retiring at 67 altogether in financial terms.

  1. Don’t Fall Into A Debt Trap:

Medical students take the heaviest toll when it comes to student loans. Once you secure a job, it becomes easier to finance your student loan installments. As you grow with your annual income, debts start growing too. Is that coincident?

Well, it’s natural to be tempted to go for more with upgrading a vehicle, house, and interior designing and exotic vacation planning. Just keep an eye on your compound interest payments you make every month.

A few simple tips can help you save a large sum in the long run.

  • Consider refinancing your expensive student loan with a cheaper option
  • Think of debt consolidation with a single personal loan that comes with a lower interest rate
  • Avoid excessive credit card usage and late payments
  • Keep an eye on your credit score, it directly affects your lending costs i.e. the interest rate charged by banks
  • Evaluate your house mortgage options now for the long run to avoid reverse mortgage costs later

  1. How Much Should You Save On Your Income?

Talk to any financial advisor, and the savings bar will be set at least 20% of your gross income. That’s the income before your taxes come into play. Your gross income will also get a boost with investments and saving accounts.

As physicians go through a tough educational and career routine, they often find it hard to manage more than one job. Realistically achieving a savings target requires a lot of planning. The most effective tool to achieve savings is to adapt the budgeting habits.

Preparing monthly budgets and analyzing the results against actual expenses will reveal a lot about your spending habits. Budgeting is the best tool to manage monthly expenses.

  1. Evaluate The Retirement Plan Contributions:

Your career may grow as a full-time hospital employee, a private practitioner, or a locum tenens. Your retirement plan contribution will differ accordingly too. As a rule of thumb, maximize your retirement planning contribution towards the tax-qualified plans.

Evaluate the different retirement plans, tax benefits, and the maximum contribution that compounds to your net wealth at retirement.

The Traditional Retirement Plans:

As a physician, if you’re a part of a not-for-profit organization 403(b) will be your retirement contribution plan. For most of the physicians, it is 401(k). Both these plans come with tax implications and a maximum limit of the contribution of $19,000. You can contribute up to $26,000 after the age of 50 to these retirement plans.

Both these plans come with pre-tax contributions. Your funds will be taxed when you retire, that’s the crux of the retirement planning.

Consider An IRA Or Roth:

If your total retirement plan contribution is going to be taxed at 30%, you’ll be left with only 70% of whatever you saved over the years. That can change your net wealth drastically. One way of contributing more towards your retirement plans is to opt for an IRA or a Roth plan.

With an individual retirement account (IRA) and a Roth, you can contribute a maximum of $6,000 annually. These private contributions investment plans are taxed annually at 6% by the IRS. The tax advantage with these plans is that these investments are taxed when you make the contribution, and are tax-free at the time of retirement.

  1. Consider Alternative Retirement Plans:

Diversification remains a key point in financial planning and successful implementation. As physicians, your contribution towards IRAs and 403(b) plans may fall short of your expectations. Consider a few alternative options for long-term financial benefits of retirement contributions.

Employer Contributed Plans:

Your employer can make contributions to your retirement plans with traditional 401(k)s or a 457 one. These matching contribution plans increase your total annual contribution. For example, the joint contribution limit with a 401(k) plan is $56,000 annually.

Do remember the forfeit risk that comes with matching plans though. If you leave the job or your employer goes broke, you’ll have to forfeit a substantial amount of contribution.

Spousal IRA Plans:

This plan will best match your plans if your spouse is non-working or you both apply as joint file taxes. Your spousal IRA plan comes with an additional annual contribution of $6000 before the age of 50 and %7,000 after 50 years of age.

Another way of maximizing the retirement benefits is to privately invest as an individual. You can make an investment plan for regular monthly income to cover some extra expenses. The best way to match and enhance your retirement contribution is to invest in a long-term financial investment plan.

  1. Investment for the Long Run Success:

As a practicing physician, it’s highly unlikely that you’ll need some passive income to meet the monthly expenses. If that happens the likely cause of it may be the excessive debt payments. Consider investments paying regular monthly interest with a low risk profile such as a certificate of deposits and special saving accounts with the bank.

Likely you can afford to plan for the long-term investments with capital gains. Consider evaluating your risk profile first. The amount you can risk and how much loss can you bear at this stage of your life.

Some investments that can yield capital gains in long run for you may include:

  • Make an investment in the Bonds market with stable fixed coupons or long term capital gains
  • Consider investing in blue-chip stocks or stock index funds such as an S&P 500 
  • Make a long term investment with real estate yielding capital appreciation

Your investment choice between individual stocks and index funds may vary. It depends on your risk appetite and your financial goals. However, your savings plans and private investments should complement your retirement plans.

  1. Manage Life Risk:

Well, we should be the ones asking for this expert advice from you. Purely based on financial prospects, it’s called hedging the risk.

You may already have an auto insurance plan as it’s a compulsory one. Consider some extra insurance plans that can save you and your loved ones on contingencies.

  • Seek a comprehensive family insurance plan covering all the individual family members
  • Protect your properties and house with Property insurance and estate planning
  • Secure health and life insurance plans
  • Consider other insurance plans like Disability insurance, Vision insurance, malpractice insurance, intellectual property insurance, and so on

You may already know the key differences between the term life insurance and whole life insurance. Plan the most suited one for you and your loved ones.

  1. Do Estate Planning right Now:

Consider formulating a formidable estate plan right now. It will involve nominating your beneficiaries and writing a formal will. You may opt to appoint an estate agent or an attorney to look for your estate planning.

Remember to include a few important points that may affect your long-term financial plans:

  • Write a formal will or form a trust
  • Consider burial and funeral insurance plans
  • Nominate your beneficiaries through a will or by establishing a trust
  • Consider the tax implications on your wealth distribution
  • Evaluate the debt consolidation in case of your demise

  1. Do Tax Planning Properly:

Your tax implications will differ with your income streams and the nature of income. Some of your income will be taxed at source such as your salary, and some wealth will be taxed on capital gains such as a retirement contribution fund.

Taxes are subject to change, there are numerous ways tax policies affect your net wealth. A simple choice between a traditional IRA and Roth can make tax implications different. 

  1. Revise and Monitor your Retirement plans:

As they say, “change is the only constant in this world”. Your retirement plans will also change frequently. All you have to do is to revise and monitor your financial planning regularly. Inflation and tax rates are the direct cost drivers of your living expenses. You may be changing a plan to move into another city, each locale comes with different living expenses. As your lifestyle changes, your retirement plans will need an adjustment.

Retirement planning for physicians’ working day in and day out remains a critical challenge. It’s a life-long goal and it will take a life-long effort. Starting with a sound and comprehensive retirement plan is only the first step in bringing you the peace of mind you deserve.

Contact an expert advisor today for more information on retirement planning for physicians. Sometimes a fresh perspective from a trusted source is all you need. Feel free to call us at 561-705-2005 or email us at Michael@AskWealthCare.com

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This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products. Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims-paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.