The Surgeon’s Financial Blueprint for Building Wealth, Security & Legacy

Qualified retirement plan options may vary depending on whether you're employed or self-employed, so consider how these plans fit into your overall financial strategy, including Roth conversions and backdoor Roth IRAs.

Qualified Retirement Plans for Employed Surgeons

If you work for a healthcare organization, you likely have access to employer-sponsored plans like 401(k)s or 403(b)s. These plans offer considerable advantages, such as tax-deferred growth, allowing your pre-tax contributions to increase in value without being taxed until withdrawal during retirement, and lowering your taxable income. 

Many employers provide matching contributions that can significantly boost your retirement savings. If you're 50 or older, you can use catch-up contributions to enhance your savings before retirement.

Qualified Retirement Plans for Self-Employed Surgeons

If you're self-employed, you can access different qualified retirement plans, each providing unique benefits.

SEP IRAs: These plans are simple to set up and allow for substantial tax-deductible contributions—up to 25% of your net self-employment earnings, subject to a maximum limit.

Solo 401(k)s: If you run a solo practice without employees, a Solo 401(k) allows you to contribute more than a SEP IRA. This plan lets you contribute as an employee and an employer.

Like employer-sponsored plans, self-employed surgeons aged 50 or older can make catch-up contributions. Our team of financial advisors for surgeons can assist you in selecting a plan that best fits your income, retirement goals, and tax strategy.

Traditional and Roth IRAs for Surgeons

Beyond employer-sponsored and self-employed plans, consider contributing to IRAs.

Traditional IRA: Contributions may be tax-deductible based on your income and participation in other retirement plans. Account growth is tax-deferred, and you'll pay taxes when you withdraw funds in retirement.

Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are tax-free. However, the ability to contribute directly to a Roth IRA depends on income, which may limit options for high-earning surgeons.

Roth Conversions and Backdoor Roth IRAs

Here are some strategies for higher-income surgeons who can't contribute directly to a Roth IRA.

Roth conversion: This involves converting a traditional IRA into a Roth IRA. Although you'll pay taxes on the converted amount, future withdrawals will be tax-free, and there are no income limits on who can convert.

Backdoor Roth IRA*: This strategy allows high-income earners to contribute to a Roth IRA indirectly by making a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA.

By strategically integrating qualified retirement plans, IRAs, and Roth strategies into your financial blueprint, you can design a powerful wealth-building plan customized to your needs as a surgeon.

Non-qualified retirement plans offer high-earning surgeons alternative savings options beyond traditional retirement plans. Unlike qualified plans, non-qualified plans are not governed by ERISA, allowing greater flexibility in contributions and withdrawals.

Key Benefits for Surgeons:

• Higher contribution limits: Non-qualified plans often allow larger contributions, helping you accelerate wealth accumulation when traditional plans fall short.
• Tax-deferred growth: Although contributions are made with after-tax dollars, earnings grow tax-deferred, allowing investments to compound over time without immediate tax burdens.
• Strategic tax planning: These plans enable you to defer taxes on investment earnings and delay withdrawals, reducing tax liability during peak earning years.

Types of Non-Qualified Plans:

• Deferred compensation plans: These plans let you defer a portion of your income, such as bonuses, until retirement, allowing tax-deferred growth.
• Executive bonus plans: Employers provide life insurance policies as bonuses, with premiums paid by the company and taxable to you as compensation.
• Split-dollar plans: Shared ownership of a life insurance policy between you and your employer, where you receive most of the death benefit, and the employer recoups its costs.
• Group carve-out plans: Converts excess group life insurance coverage into an individual policy, avoiding imputed income tax on the excess.

SCM can advise you on how these non-qualified plans provide unique surgeon-specific financial strategies, offering flexible and tax-efficient ways to supplement retirement savings beyond the limitations of traditional plans.

In addition to retirement savings, your unique financial situation requires a carefully crafted investment strategy due to the demands of your profession and potential income fluctuations.

Surgeon Risk Management Investment Strategies

Risk tolerance: Evaluate your comfort level with risk and volatility, factoring in your age and financial situation.

Time horizon: Determine your investment time frame. Longer time horizons generally allow for increased risk-taking potential, while shorter ones may require a more conservative approach.

Income needs: Evaluate your current and future income needs, including retirement expenses, healthcare costs, and potential lifestyle changes.

Tax-efficient investing: Efficient tax management can boost after-tax returns. Using tax-loss harvesting to offset gains and strategic asset location can be effective strategies.

Rebalancing: Over time, the performance of various assets in your portfolio may cause it to drift from its target allocation. Regular rebalancing helps maintain the right balance and manage risk.

Investment Diversification Strategies for Surgeons

Diversification is critical to mitigating risk in an investment portfolio and reducing the impact of market fluctuations on your overall portfolio. Here are some strategies to consider:

• Asset allocation: Diversify your investments across different asset classes, such as stocks, bonds, and cash. This helps to mitigate risk and potentially enhance returns.
• Sector diversification: Spread your investments across various sectors to reduce the impact of any single sector's poor performance.
• Geographic diversification: Invest in assets from different countries and regions to reduce exposure to specific economic or political events.
• Investment style variety: Distribute investments across different strategies, such as growth and value investing.
• Alternative investments: Consider adding less traditional assets such as real estate or private equity to your portfolio for further diversification.

Investing is not a one-time event. It requires ongoing monitoring and adjustments to your portfolio to stay aligned with your goals and risk tolerance. SCM can help regularly review your investments and make necessary changes based on market conditions and financial objectives.

Understanding and leveraging these standard benefits can significantly enhance your financial security and help mitigate risks associated with your profession.

Health Insurance

Evaluate your plan options, including coverage details such as deductibles, copays, and out-of-pocket maximums.

Flexible spending accounts: An FSA lets you allocate pre-tax dollars for eligible medical expenses, reducing your taxable income and offering an easy way to manage out-of-pocket healthcare costs.

HSAs: If you have a high-deductible health plan (HDHP), a Health Savings Account provides three tax advantages: your contributions are tax-deductible, your earnings grow tax-free, and withdrawals for qualified medical expenses are tax-free.

Disability Income Insurance

Disability income insurance offers income protection if you cannot work due to illness or injury, and employer-sponsored coverage usually exists in two forms.

Short-term disability: Covers a portion of your income for a limited period, usually up to six months.

Long-term disability: Provides ongoing income replacement if you're unable to work for an extended period due to a severe health condition.

Supplemental Benefits

In addition to health and disability insurance, many employers offer supplemental benefits.

Dental and vision insurance: Often available as add-ons, these plans help cover costs for routine dental care, eye exams, and more significant procedures and eyewear.

Wellness programs: Some employers offer wellness programs that can contribute to your overall health and well-being, like gym memberships or incentives.

Surgeons Capital Management can help you navigate your benefits package, maximize coverage, and take full advantage of tax-saving opportunities.

While your benefits package provides a foundation, you face unique risks as a surgeon, making it essential to consider tailored insurance strategies to protect your income, career, and financial future.

Malpractice insurance: Consider opting for occurrence-based or claims-made policies with tail coverage, as these options ensure long-term protection even if claims arise after the policy ends. When evaluating malpractice insurance, it's also important to assess the financial stability and reputation of the provider, along with whether the policy covers the specific risks associated with surgical practice.

Personal disability income insurance: A higher level of income replacement may be needed to bridge the gaps left by standard benefits. This additional coverage will help you maintain your lifestyle and financial responsibilities.

Umbrella insurance: Extra liability coverage protects personal assets by extending beyond the limits of policies like malpractice, auto, and homeowners insurance.

Key person insurance: For surgeons who own or co-own a practice, this coverage helps protect it by covering costs associated with finding a replacement and compensating for lost income if a key individual can no longer work.

Business overhead expense insurance: This insurance covers the operating expenses of your practice—such as rent, utilities, and staff salaries—if you're unable to work due to a disability.

Creating a comprehensive insurance strategy involves more than just selecting the right policies—it's about protecting all aspects of your financial life. Surgeons Capital Management focuses on developing customized insurance plans that align with your unique career risks and financial goals.

Estate planning is a vital part of a surgeon's financial strategy. By clearly defining your goals and using effective techniques, you can ensure a smooth transition of your assets, safeguard your family's financial future, and leave a lasting legacy.

Critical Considerations for Surgeon Estate Planning

• Wealth preservation: High-net-worth individuals like surgeons face significant estate tax challenges. Advanced estate planning tools can help minimize estate taxes and protect assets from creditors.
• Philanthropy: Surgeons often have charitable goals that align with their values. Charitable trusts or donor-advised funds (DAFs) allow you to maximize the impact of your giving while receiving tax benefits.
• Inheritance: Organizing your estate to benefit your heirs can get complicated, especially with large sums of money. Setting up clear guidelines with trusts ensures your wealth is shared according to your wishes, preventing family disputes and providing financial security for your beneficiaries.

Estate Planning Tools

Trusts:

• Revocable Trusts allow you to maintain control of your assets during your lifetime, simplifying the transfer process after death while avoiding probate.
• Irrevocable Life Insurance Trusts (ILITs) remove life insurance proceeds from your taxable estate, providing liquidity for estate taxes or expenses without increasing the estate's value.

Life Insurance: Beyond basic coverage, life insurance can provide liquidity for taxes or personal debt, expenses related to your practice, and for loved ones, such as college costs for children and grandchildren.

Charitable giving vehicles: Surgeons with philanthropic goals can use tools like Charitable Remainder Trusts (CRTs) to provide income during their lifetime, leaving a remainder to a charitable organization and offering both income tax and estate tax benefits.

Surgeons Capital Management can help you and your attorney craft a comprehensive estate plan that reflects your values and goals.

Partner With Surgeons Capital Management 

SCM is dedicated solely to serving surgeons, their families, and surgical practices. When you work with us, we handle the financial planning and concerns you prefer to delegate. 

Our team of financial advisors for surgeons is committed to guiding you through each step of the financial planning process, helping you make informed decisions for your wealth management goals. Let us manage the financial complexities so you can concentrate on growing your practice and enjoying time with your loved ones.

Contact us today to schedule a complimentary consultation and create your Surgeon's Financial Blueprint for building wealth, security, and legacy.