As a small practice owner or a partner in a medical or dental
practice, minimizing taxes and building your retirement savings are two
of your biggest financial goals. Many doctors and dentists have a
relatively late start and often have significant student debt upon
graduation, and they also may have a relatively short time horizon until
retirement, with many opting to stop practicing in their late fifties
and early sixties. So it is no surprise that saving more than what is
typically recommended by financial experts is the only way that such
early retirement can be accomplished. Even with a relatively modest
lifestyle, those who retire early will need to accumulate a sizeable
portfolio without much time to get this done. While it is important to
set up various buckets (including after-tax, Roth and tax-deferred) and
to fill them to capacity, doctors and dentists in the highest tax
brackets will see the most benefit from maximizing the tax-deferred
bucket first. A 401(k) with profit sharing
is the best plan for those who have the time to build up savings. A
defined benefit plan known as a Cash Balance plan can be opened in
addition to your existing 401(k). A Cash Balance plan helps boost your
tax-deferred savings if you plan to retire in 10 years or less and you
would like to catch up quickly. This type of plan can also increase
tax-deferred savings if you are making a lot of money now but are not
sure whether this will last over the long term.
Please read the rest of this article on my blog (with a link to the White Coat Investor Blog where the article originally appeared):
https://litovskymanagement.com/2018/10/cash-balance-plans-for-solo-and-group-practices/