Protect your future: Financial checklist for doctors
Key Takeaways
Asset protection (also known as wealth-protection strategies) can apply to jointly held property, retirement accounts, and other assets. It’s important to set this up before a claim is made.
An emergency fund is a principal requirement for financial security and can amount to between 3 and 6 months of living expenses.
Make sure to contribute enough to your 401(k), 403(b), or 457(b) to qualify for full employer matching.
Although medicine is a highly rewarding and gratifying profession, it can also be demanding. Physicians care not only for their patients but also for their own families and loved ones.
For the sake of the future well-being of doctors and their families, it’s important to keep financial priorities in line.
Following these steps may help to ensure financial security for physicians.
Cover your assets
Asset protection refers to strategies for protecting one’s wealth, ensuring that assets are protected against creditor claims, according to an article published by Investopedia.[] Both individuals and businesses can engage in asset management.
This step helps to insulate assets in cases of legal proceedings without running afoul of the law through illegal practices such as concealment, contempt, fraudulent transfer, tax evasion, or bankruptcy fraud.
For asset protection to work, you must protect your assets before a claim or liability transpires. After a claim or liability occurs, it’s likely too late to protect them.
Common forms of asset protection are asset protection trusts, accounts-receivable financing, and family limited partnerships, according to Investopedia.
Certain assets are automatically protected, such as property held jointly with a spouse or retirement accounts. Certain states also offer protection of a certain amount of home equity.
Plan your estate
It’s never too early to plan your estate. According to an article published by Medical Economics, this includes a legal will and trusts to protect your assets.[]
By planning your estate, you remain in control of how assets are to be distributed to your loved ones. Don’t hesitate; make sure that your will and trusts are current. Keep in mind that moving forward, it’s possible to change the will as you see fit.
Related: How physicians can save money amid rising interest ratesBuy life and disability insurance
Be prepared for the unexpected by purchasing life and disability insurance. These measures work to further maintain your assets and lifestyle.
Professionals who are married or have children should seek term life insurance. High earners should secure adequate disability insurance through an insurance agent that specializes in this coverage.
As recommended in an article published by Physician on Fire, always seek two or three quotes when searching for a new policy.[]
Related: Is physician wealth tied to enhanced well-being?Create an emergency fund
An article published by The White Coat Investor says that your emergency fund should consist of about 3 to 6 months of living expenses.[]
This may, however, be just a minimum. If you anticipate further needs in the future, this number may be higher.
Related: What every physician should look for in an accountantMax out retirement savings
It’s vital to attain your employer’s matching contribution in your 401(k), 403(b), and 457(b) retirement accounts. However, this may be just a first step to saving more for your retirement.
Additional investment options may include a brokerage account, real estate investing, practice/surgical center buy-ins, and so forth, as suggested by The White Coat Investor.
Replenish healthcare savings accounts
Healthcare savings accounts (HSAs) are offered by employers—or through health insurance, a bank, or online. These tax-advantaged accounts can yield considerable savings on healthcare costs.
For doctors with high-deductible health plans, HSAs offer triple tax benefits: tax-free contributions, gains, and qualified withdrawals.
A related financial vehicle is the flexible spending account (FSA). The FSA, however, doesn’t offer the same advantages as an HSA and comes with lower contribution limits.
With FSAs, the balance doesn’t roll over from year to year, and the funds can’t be invested.
What this means for you
It’s likely that you may already be working with a financial planner, family lawyer, and accountant to keep your financial ducks in a row. Nevertheless, the time is always right to take stock of your finances and ensure that everything is moving forward smoothly.