10 Steps to a Financially and Socially Upbeat 2023

My financial planning practice involves working with physicians, whom I've gotten to know as hardworking and dedicated professionals. While taking time off in Alabama during the last week of 2022, I developed COVID-19 symptoms and found myself needing medical care.

Unfortunately, the waiting time at the local urgent care was 2 hours just to get a COVID test. I was lucky to have access to my physician clients, who in addition to helping me deal with my symptoms, called in a prescription for Paxlovid.

While talking to them, I asked about their New Year's resolutions, and most of them had similar answers: to spend more time with their families and develop a better work-life balance.

There are plenty of articles about making and keeping resolutions, but physicians, like my clients, have different struggles. Here are 10 tips that may guide physicians toward a happier, healthier 2023.

1. Make Health a Priority

The longer I live, the more I agree with the saying "health is wealth." According to Medscape's Physician Burnout & Depression Report 2023, the physician burnout rate increased 47%.

Your health is an integral part of your financial planning. To balance a busy career, look outside of work to enjoy other interests, including learning new skills and hobbies, volunteering in your community and your house of worship, and traveling. Take a step back to make time for yourself and your family.

One of the most-broken resolutions is getting regular exercise. Research has shown that physical activity has immediate health benefits, which include lowering blood pressure, improving sleep quality, and reducing anxiety. Give your health the same attention that you give your patients' health.

2. Organize Tax Documents Ahead of the April 18 Deadline

Tax time starts long before the April 18 filing deadline. As early as January, important tax forms will start arriving in your mailbox. Look through the documents as you receive them to make sure you know what you have and that those documents are accurate. Use time now to take stock of your 2022 expenses so you won't miss out on deductions once it's time to prepare your returns.

3. Update Your Will, Trusts, and Health Proxy

Give yourself the gift of peace of mind by ensuring that your estate planning is in place, including a properly drafted will and trusts that will protect your assets. You can make any adjustments you need, such as adding beneficiaries or addressing situations that have changed.

It's just as important to keep these documents up-to-date as it is to create them in the first place. If you've moved since creating a trust, make sure that the provisions conform to state laws and that your beneficiary designations are current.

4. Adopt a DB Plan or 401(k) Before the Tax Deadline

While you previously had to wait until the end of the year to adopt a 401(k) or defined benefit retirement plan, the SECURE (Setting Every Community Up for Retirement Enhancement) Act moved that date to the annual tax filing deadline.

One type of retirement benefit plan that may work for you is a cash balance plan. Like a 401(k) plan, employees receive a statement showing their account balance at the end of the year. This value is a combination of their contribution credits (the employer contribution, which may be a percentage of pay or flat amount, depending on the plan) and a guaranteed investment return (averaging 5% interest credit annually).

A business owner could save as much as $3 million by retirement age. While the specific age, salary, and legislative interest rate can affect the final contribution, a self-employed 60-year-old can contribute around $250,000 to a cash balance plan for 2022.

5. Convert to a Backdoor Roth IRA

Most physicians don't opt for Roth IRAs because their income level is generally too high. However, by converting a traditional IRA that has been funded with post-tax dollars into a Roth IRA, you can gain all the benefits of a regular Roth IRA. Roth IRA money grows tax-free, and future withdrawals are tax-free as well.

Imagine a couple of married physicians who each contribute a maximum combined $14,000 annually to two Roth IRA accounts for 20 years. Taking an average 7% rate of return into consideration, at the end of that period they will have over $668,000 in those two accounts. And the best part? When the couple takes future withdrawals, all of that income will be tax-free.

6. Cost Segregation for Real Estate

For physicians with real estate investments, whether it's rental property or medical buildings, cost segregation can be a tax-saving tool. Cost segregation is a way of accelerating property depreciation rates, thereby lowering the amount of taxable income.

The period for depreciating costs of residential and commercial property is usually 27.5 years. With a cost-segregation analysis, that schedule can be reduced to as little as 5 years, meaning a large tax benefit for the property owner.

7. Auto-Enroll in Your Employer's 401(k)

To maximize savings, take advantage of plans offered by employers. Physicians are automatically included in auto-enrollment plans and contribute a portion of their salary into the employer-sponsored retirement plan.

Many nonprofit hospitals may also offer a 457(b) plan into which physicians may choose to defer funds each paycheck. The ease with which a physician can save for retirement without having to take any action makes these plans great options.

To keep pace with inflation, contribution limits for 2023 are higher than ever before. For those under age 50, the maximum has risen to $22,500 (an increase of $2000), and for those age 50 or older, the maximum includes a catch-up amount that allows them to contribute as much as $30,000.

Get in touch with HR to learn the plans' details so you can get maximum benefits.

8. Understand Social Security Benefits and the SECURE Act 2.0

Recent legislation aids retirees and those planning for retirement. The cost-of-living adjustment for 2023 Social Security payments is an 8.7% increase, the largest increase in over 40 years. Social Security is a vital benefit, but it's important to understand that waiting to apply for Social Security usually results in increased benefits. (The increases stop when you reach age 70.)

For those approaching age 65, sign up for Medicare as soon as you're eligible. The SECURE 2.0 Act, signed into law by President Biden on December 30, 2022, contains provisions that may cover aspects of physicians' financial lives, including RMDs, catch-up contributions, access to 529 plan funds, and more.

9. Diversify Your Investments

Having investments is step one. Ensuring that your investments are protected is the more important step. Inflation and recession will be hot-button issues in 2023, because the war in Europe will continue to create supply problems, particularly for oil and gas.

Investment diversification — seeing that your finances are not concentrated in one area — will give your accounts some protection.

If you haven't taken a careful look at your portfolio in a while, now is the time to sit down with a financial advisor to go over your investments. You need to ensure that you are not overly exposed to one particular sector, and that you can make the allocation changes needed once the market rebounds.

10. Pay Off Your Debts

Saving money can be tough; it's so much easier to spend it. Even with a resolution to live below your means in 2023, you won't make real progress until you confront your debt and come up with a plan to combat it.

Many physicians are saddled with student loan debts, and the sooner those debts are paid off, the sooner you'll be able to truly save. Strategies such as creating an honest budget (and sticking to it), making a repayment plan (prioritize paying off debts with high interest rates), and consolidating your debts to make them easier to tackle will help you get your debt under control and paid off.

Physicians are always busy, and it can be difficult to carve out time to address financial matters. However, the time put into the above strategies is its own type of investment. By working on the items listed here, you will be able to better focus on your profession while making sure you have time for friends, family, and interests in 2023.

Securities are offered through Securities America, Inc., member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Wall Street Alliance Group and Securities America are separate companies. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation.

Syed Nishat is a partner and fiduciary advisor at Wall Street Alliance Group. He can be reached on LinkedIn and on Twitter @syedmnishat.

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