Physicians’ financial planning is unique, with typically a short time between finishing their training and when they step away from practicing medicine. Less time working compared to other professions generally leads to different rules to becoming financially independent. With such busy schedules of seeing patients and limited time to spare, a way that physicians can make sure they are on the right track and increase their odds of financial success is by hiring a financial advisor. But how do they know the right time to hire an advisor and partner with an expert?
Here are the top four reasons physicians should hire financial help.
Overwhelming and Complex Financial Situation:
Physicians are very focused on patients and their careers, and many of them have families, leaving very little time to focus on their finances. Additionally, it is not uncommon to see them with roles in several organizations, making navigating the employee benefits, retirement savings plans and complexities of potentially being paid as a 1099 contractor incredibly difficult. Financial advisors, especially ones who work with other physicians, can help coordinate the intricacies of different roles and often perform much of the financial management that physicians can find overwhelming. Additionally, physicians working as independent contractors may have the ability to start their own retirement plan, super charging their tax and retirement savings.
High Income Leads to Significant Taxes and Savings Needed:
According to the Bureau of Labor Statistics (BLS), physicians and surgeons earn among the highest of all occupations, with a median annual wage of $208,000. High income causes many doctors to be in the top Federal tax brackets, which are currently approaching 40%. This typically also means that physicians need to save more than the maximum allowable limits to various retirement plans. Financial advisors can help physicians develop tax savings strategies to keep more of what they make and implement a savings strategy that utilizes more than a 401(k) so they can meet their savings goals.
Major Life Changes:
Significant life events such as a job change, marriage, divorce, having children, or selling a practice can lead to new challenges and can dramatically impact someone’s financial situation. An advisor can provide guidance during these transitions and help navigate the financial implications, leading to informed decisions that align with the new circumstances.
High Student Loan Debt:
According to data from U.S. News, the average debt among medical school graduates who borrowed for school was about $184,000, making student loans likely the largest debt physicians have other than a mortgage. Managing this debt while saving for other financial goals, such as retirement, children’s education, or a vacation home, can be difficult to prioritize. Hiring an advisor can help determine whether to refinance, take advantage of student loan forgiveness, or pay extra towards the loans.
These are just four of the many reasons physicians may find themselves needing a financial advisor. While determining a need for support is the first step, the second step of determining where to go for help is typically more difficult. Choosing an advisor is a very important and personal decision, but I would start with seeking a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional who has demonstrated the knowledge required to deliver holistic financial planning and is required to put their clients’ interests ahead of their own.
Partnering with a knowledgeable advisor can lead to better organized financial management, enhanced strategies and accomplishing long-term financial goals with confidence and peace of mind. A financial advisor can be invaluable in securing your financial future, giving physicians time back to excel in their medical career.
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