Broker Check
Retirement Moves to Make As a Healthcare Professional

Retirement Moves to Make As a Healthcare Professional

August 31, 2022

Everyone needs to be prioritizing retirement planning throughout their adult life. However, retirement planning can look different for healthcare professionals. Healthcare professionals tend to work longer than most Americans and can have a longer period of schooling, hindering them from beginning to save for retirement earlier. Continue reading to learn retirement moves to make as a healthcare professional.


Decide What To Do With Your Golden Years And When

One of the best places to start with retirement planning is envisioning what you want to do in retirement. After working hard in health care for so many years, you deserve to do more of what you like to do or what you have always dreamed of doing. Do you want to travel? Do you want to move? Do you want to volunteer? Knowing your golden year goals will help you estimate how much you will need in your retirement savings to live out your dreams.


Know How Much You Need to be Saving

A great rule of thumb is to save between 10-15% of your annual gross income for retirement. However, the earlier you can start saving the better. If you’re a physician, right out of residency you should begin prioritizing saving for retirement. By starting earlier, you allow more time for compound interest to do its magic and grow your savings.


Understand Your Retirement Savings Goal

There is not one number that everyone needs to strive for. Your retirement savings goal is individual to you and what you plan to do in your golden years. However, the common rule of thumb is known as the 4% rule. The 4% rule states that you would be able to withdraw 4% from your total retirement savings each year for your living expenses. To calculate your nest egg based on this rule, you will need 25 times your annual living expenses in retirement.


Figure Out Where You Should Be Saving

There are multiple types of retirement accounts you can utilize:

  • 401(k) or 403(b)

A 401(k) is an employer-sponsored retirement account. A 403(b) is the non-profit version of a 401(k). One of the best features of employer-sponsored accounts is employer matches. Employer matches are when your employer matches a certain percentage of your salary in contributions to the account. As far as taxes go, since these accounts are funded with pre-tax dollars, you will be taxed on your withdrawals. Contributions made with pre-tax dollars can lower your taxable income each year. For 2022, you can contribute up to $20,500, with an additional $6,500 if you are age 50 or older.

  • Traditional IRA

Traditional IRA accounts function similarly to 401(k)s; they are funded with pre-tax dollars, lowering your taxable income, so your withdrawals are taxed. However, you have a much lower contribution limit than with a 401(k). In 2022, the contribution limit is $6,000, with a catch-up contribution of $1,000 if you are 50 years old or older.

  • Roth IRA

The main difference between Traditional IRAs and Roth IRAs is Roth IRAs are funded with after-tax dollars. While your contributions will not lower your taxable income in the year of contribution, your withdrawals will not be taxed. The contribution limits are also the same as Traditional IRAs: $6,000 in 2022 plus a $1,000 catch-up contribution if you are age 50 or older.

  • Other After-tax accounts

Other retirement saving options include mutual funds, exchange-traded funds, and certificates of deposits. These different accounts leverage the stock market to grow your savings. There also is not a minimum age requirement to withdraw funds without penalty so if you retire early or need to withdraw money for other purposes, you can. It is important to note that any dividends earned from these accounts are taxed.

Retirement planning is essential for everyone but looks a bit different for healthcare professionals. If you are having trouble navigating retirement planning, our advisors at Lifebridge Financial Group are here to assist. Schedule a consultation with us today to get started.