Many of you are likely aware that my wife, Lauren, is a Registered Nurse. What some of you may or may not know is that I also have 4 other immediate family members, plus several cousins, who also work in healthcare professions. I have also been fortunate over my time as a financial advisor to work with quite a few clients who are healthcare professionals. That may not come as much of a surprise, since Northeast Ohio is blessed to have several large, well-known and respected healthcare systems in our backyard.
While working in healthcare can be a challenging, and rewarding career, often those in healthcare find themselves facing unique financial circumstances. Whether you're early in your career or an established healthcare professional, effective financial planning is crucial to helping build a secure future for you and your family.
There are several different key financial planning topics to consider, so I am going to break this topic into two parts. The first will focus on managing student loan debt, cash flow planning and tax planning, while part two will focus on retirement planning, insurance planning and investment strategy.
- Managing Student Loan Debt
Often a significant financial burden that many of my healthcare professional clients face is student loan debt. Medical, dental, and veterinary schools are expensive- and so are other Master’s and Doctorate level degrees for professions like physician’s assistant, nurse practitioners, and physical and occupational therapists. Here are a few strategies to consider to help manage this debt:
- Refinancing: Depending on current interest rates and what the rates were when the loans were initiated, it may be beneficial to refinance at a lower interest rate, which can reduce monthly payments, and the total interest paid over time.
- Public Service Loan Forgiveness (PSLF): Working for a qualifying employer, like a non-profit hospital, could allow for eligibility for loan forgiveness after making 120 qualifying payments.
- Income-Driven Repayment Plans: Federal loan programs often offer income-driven repayment plans, which can adjust the payments based on earnings, making them more manageable early in a career when salary is likely lower.
- Understanding Your Cash Flow
Depending on where they work in the medical field, medical professionals have the potential to earn high incomes. However, they also face unique financial pressures, such as delayed career starts and high tax brackets. It can be critical to do the following things regarding cash flow:
- Budgeting: Create a budget that accounts for both personal expenses and practice-related costs (if a professional is self-employed or running a private practice).
- Emergency Fund: Set aside three to six months’ worth of living expenses in a liquid, accessible account. This ensures that unexpected costs, both personal and professional, can be managed without disrupting your long-term goals.
- Tax Planning
Often, healthcare professionals find themselves in higher tax brackets. Efficient tax planning can reduce tax liability and free up more funds for saving and investing.
- Tax-Advantaged Investments: Maximize contributions to retirement accounts and other tax-advantaged vehicles like Health Savings Accounts (HSAs) and 529 plans for educational savings.
- Hiring a Tax Professional: Healthcare professionals, especially those running a private practice, should consult a tax advisor to help with tax-efficient strategies, such as maximizing deductions, structuring your income efficiently, and staying compliant with tax regulations. At Impel Wealth Management, we work collaboratively with clients CPAs and tax advisors on their unique tax situation.
Financial planning for healthcare professionals requires a tailored approach that accounts for the unique challenges and opportunities in the healthcare field. Whether you're just starting your residency or nearing retirement, proactive financial planning is essential to a successful and fulfilling career in the healthcare industry. With my experience in helping many friends, family and clients who work in healthcare towards their financial goals, I would love the opportunity to continue serving those in this field as we all keep Moving Life Forward Together.
© 2024 Nathan Ollish
Senior Financial Advisor
The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. Investors cannot directly invest in indices. Distributions from traditional IRAs and employer sponsored retirement plans are taxed as ordinary income and, if taken prior to reaching age 59½, may be subject to an additional 10% IRS tax penalty. The information on Health Savings Accounts (HSAs) provided herein is general in nature. It is not intended, nor should it be construed, as legal or tax advice. Because the administration of an HSA is a taxpayer responsibility, you are strongly encouraged to consult your tax advisor before opening an HSA. You are also encouraged to review information available from the Internal Revenue Service (IRS) for taxpayers, which can be found on the IRS website at IRS.gov. You can find IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans, and IRS Publication 502, Medical and Dental Expenses, online, or you can call the IRS to request a copy of each at (800) 829-3676.
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