Congratulations now that you’ve finished your internship and residency programs after graduating from medical school. Now, you’re officially ready to reap the financial rewards of all your hard work. Here’s a secret no one has told you yet: this is the moment your financial decisions will affect the rest of your life, at least the next 25 years. Making the right decisions here can be a make-or-break situation. Did you hire a business manager? Did you set up a physician pension? Did you avoid both and are leading a life towards paycheck-to-paycheck living? Not to be too scary, but this is more normal than not, and we’re here to make sure this doesn’t happen to you. These three tips will help you start your finances off on the right foot and losing your footing along the way.
Tip #1: Avoid Tax Liens
Tax liens are easily avoidable, but also easily attainable. They accrue by physicians not paying quarterly estimated tax payments or simply not spending everything as the checks come in. As a physician, the IRS knows you make a lot of money, so underpaying your taxes is never a smart idea. A smarter idea would be to set yourself up as a Physician Corporation and pay the business expenses that are allowed and file your payroll tax payments and returns on time. The physician business expenses will reduce some of your income and the regular salary will keep you from overspending. Don’t think your savings account (or piggy bank) will be sufficient come tax time; only a business manager can confidently keep you safe from these financial threats.
Tip #2: Set Up Your Physician Investments
Payroll deductions can include funding your retirement accounts. After all, you don’t want to work shifts forever. You, as an officer of your corporation, can have a “pre-tax salary deferral” in your 401(K) plans, as well as a “post-tax contribution” to your Roth 401(K) plan. You’ve probably never heard of the Physician Pension Plan. You can establish a pension for yourself that is an expense to your business. Essentially, this will reduce your taxable income and maximize your annual savings. With a business manager, you will establish the right type of plan and the appropriate funding level to meet your needs.
Tip #3: “Judgement Proof” Your Assets
There are countless companies that will gladly take your money and set up a captive insurance company or create an elaborate offshore trust system to shield your assets from judgment. We’ve even known physicians to place all their assets in their spouse’s name. With all things considered, the least expensive and most effective method for a physician to protect their assets is to extensively fund their retirement. Physician retirement plans are also exempt from bankruptcy (in case you didn’t know). With a business manager, you’ll learn more about this.
With the proper team, you as a new physician can prevent yourself from years of paying off debts and living paycheck-to-paycheck. Hiring a business manager will save you more in annual taxes than you will ever pay in services. With Ritterband CPAs, you can have a well-trained and knowledgeable professional on your team. With Ritterband CPAs, you will have business management who specializes in Corporate filings and ongoing Compliance, Accounting and Payroll, and Investment Management. We will be with your every step of the way, so you don’t make silly mistakes that new physicians tend to make. You can speak to an experienced Outsourced CFO today by visiting our website at
www.ritterbandcpas.com and learning more about how we can your future simpler and much brighter.