Along with the business-related pressures physicians face related to healthcare reform, they also must grapple with personal financial and tax planning challenges.
Hospital-based physicians should approach these personal financial matters with a coordinated overall strategy to tie employer-sponsored retirement benefits with individual planning considerations, according to KeyBank. Physician financial planning strategies could include the following three components.
1. Roth Individual Retirement Arrangements. Although Roth IRAs don't provide immediate tax benefits, they can lead to significant tax-free wealth accumulation, according to KeyBank.
2. Cash value life insurance. Physicians can diversify their retirement income with cash value life insurance policies, which can be tapped into during retirement with tax-free withdrawals.
3. Non-deductible traditional IRA. This type of IRA can serve as a retirement strategy for physicians who exceed the income thresholds for Roth IRA eligibility (below $127,000 for an individual or $188,000 for those who are married and jointly filing). When traditional IRA assets are distributed at retirement, the growth portion will be taxed at ordinary income rates.
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