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Education | Feb 15, 2023

Four Critical Financial Planning Strategies for Medical Professionals

Adam M. Souply


In money, as in medicine, it pays to have a plan. Treatment plans lead to better health. Financial plans lead to growing and securing long-term wealth. There’s never a wrong time to give your financial wealth a proper checkup.

While going through the wealth planning process, the over-arching priorities should be asset protection and your unique personal and financial circumstances. Practicing medicine is an incredibly rewarding profession, but it can be fraught with personal liability, unique financial challenges, and limited work/life balance. For our purposes, we will focus on four key areas that medical professionals should focus on when building a plan with their advisor: tax savings, insurance, retirement planning, and investment strategies.

Many physicians find that, as they continue to grow in their careers, they run into situations where their wealth is compromised. Tax liabilities, lawsuits, health issues, and even divorce can impact their ability to protect hard-earned assets built over years and decades. Protecting your assets as a physician can feel overwhelming, but you can create the right plan with proper planning and expert assistance.

1. Look for ways to reduce taxes

Tax liabilities can pose a significant impediment to long-term wealth creation. It can be especially challenging to manage tax burdens as your income inflects higher and you accumulate more financial assets over time.

To appropriately offset tax liabilities, there’s a lot more to planning than keeping receipts and making a few end-of-year charitable contributions. Take a forward-thinking approach and make sure you’re aware throughout the year of the credits and deductions you may be eligible for as a physician. You can reduce your tax liability, keep more money in your pocket, and have more to contribute to your retirement plan. Your professional partners can also help you stay abreast of current tax laws, including your eligibility for credits, deductions, and exemptions.
One of the best ways to reduce your tax liability is to maximize your deductions. Here are a few strategies to consider:

  1. Increase contributions to your 401(k), 403(b), or other qualified company retirement plans. Taxes are usually paid only when money is withdrawn, allowing capital gains and earned income to be reinvested, compounding in value over time. If you believe you will pay higher taxes at retirement than at present, you can also convert to a Roth IRA. The Simplified Employee Pension, or SEP-IRA, is another great investment vehicle for self-employed physicians. Unlike Roth IRAs and 401(k)s, the contribution limits for SEPs are considerably higher.

  2. Take advantage of Health Savings Accounts (HSAs). HSAs are designed to provide a way to make tax-deductible deposits that will grow tax-free. An HSA offers triple tax benefits of contributions that are tax-deductible, savings that grow tax-free, and withdrawals that are tax-free if used for qualifying medical expenses. Should you need to withdraw the money to pay for medical expenses later in life, you won’t be taxed on it then, either. You can also pay for your spouse’s and dependent’s medical expenses tax-free and penalty-free. After age 65, you can withdraw funds from an HSA for any purpose without penalty, but it will be taxable.

  3. Maximize available business deductions. If you are a physician in private practice, your business deductions can add up quickly. These include everything from the overhead on your office, to medical supplies and insurance premiums.

  4. Utilize charitable contributions, which represent an additional avenue for tax savings. Among them are donor-advised charity funds, starting a private foundation, charitable trusts, or even donating some of your appreciated securities without having to pay capital gains taxes.

2. Conduct an insurance review

Do you have enough coverage, and do you have the right insurance for your needs? A good first step would be to review your current malpractice insurance. Most physicians are well-versed in malpractice liability; however, it always good to ensure this area is fully protected. Malpractice insurance should cover:

  • The resulting fees from any judgments
  • Your defense and other legal fees
  • Expert witness costs
  • Settlement costs

In addition, be sure you have adequate disability and life insurance based on your current income and lifestyle needs. Full disability coverage, including supplemental disability, protects your lifestyle and your family against the unforeseen, as the ability to work is a physician’s most crucial asset.

You should also review your home and auto insurance coverage, and explore obtaining an umbrella policy. An umbrella policy is extra liability coverage that goes beyond the limits of what your current insurance provides. For example, it could extend the cap of your homeowners or auto insurance.

Lastly, keep a close eye on insurance costs and expenses. While it is critical to be fully covered, over-coverage can be expensive. Maintaining dated or unexamined policies can similarly create unnecessary and redundant expenses.

3. Focus on your retirement plan

Early retirement may be a goal, but is it feasible? It can be. Constructing a retirement plan early in a career is one of the most important steps a physician can take.
When personal or career setbacks occur, you usually have time to recover financially. But that may not be possible during your retirement. That’s why you will want to spend more time focusing on optimizing and protecting your retirement accounts early in your career to ensure they provide enough income to support your lifestyle in retirement. Also, planning early can provide valuable insight on saving, budgeting, and lifestyle desires. Letting these items linger for too long makes it difficult to catch up as retirement approaches.

One important strategy is to take full advantage of any employer-sponsored plans. Maxing out an employer match - especially if they are ERISA plans - and identifying all the tax-advantaged plans available to you is critical. It might also be beneficial for you to consider the advantages of Roth IRA conversions relative to your situation. As an additional benefit, retirement plans are exempt from creditors in a bankruptcy proceeding in most states.

We would also recommend looking into back door Roth IRAs. You can contribute $6,000 ($7,000 if over 50 years old) to a non-deductible IRA and subsequently convert those contributions to a Roth IRA. This resolves the issue of exceeding the allowed income level for making direct contributions to a Roth IRA. This is an important step to increase your retirement savings while also diversifying your retirement income from a tax perspective. Roth contributions get no up-front tax deduction, but the money grows and may be taken out tax- and penalty-free after age 59 ½. After-tax contributions can sometimes be made beyond the standard $20,500 and $6,500 catch-up contribution levels that can typically be converted to a Roth.

4. Review your investment portfolio

When was the last time you reviewed the asset allocation of your employer-sponsored savings plan or other investment accounts? When was the last time you viewed all your investments in totality, as if consolidated into one account? Effective asset allocation for the total portfolio is the most direct path to long-term wealth. It provides a plan for the appropriate mix of risk and income-generating assets, and facilitates rebalancing based on the evolution of your risk profile and return goals.

Additionally, asset allocations change over time and individual holdings can become concentrated. Though you may have a broad asset allocation that includes assets such as cash, bonds, and stocks, it is still possible that your portfolio is highly concentrated. For example, if all of your stock market holdings are only in large cap companies in the technology or communications sector, you don’t have enough diversification within your portfolio.

Some vehicles that could improve your portfolio’s diversification include savings, CDs, bonds, stocks, real estate, derivatives, commodities, currencies, and even cryptocurrencies. Your assets could also include partnerships in businesses, annuities, and the home(s) you own. The key to successful asset allocation is determining what your risk tolerance is based on your age, your target date for retirement, and your willingness to bear risk.

Understand that the younger you are, the more risk you can assume and the more you can allocate to risk assets, such as equities. But as you near retirement, it likely makes sense to reduce your portfolio’s risk by shifting to less volatile income-generating assets, such as bonds.


As a physician working long hours, it’s almost impossible to stay on top of financial markets, regulations, and tax laws. Regularly sitting down with professionals to review your current taxes, insurance, financial plan, and investments may be the best investment of your valuable time.

Thanks for reading.


This material has been provided for general, informational purposes only, represents only a summary of the topics discussed, and is not suitable for everyone. The information contained herein should not be construed as personalized investment advice or recommendations. Rather, they simply reflect the opinions and views of the author. D. B. Root & Company, LLC. does not provide legal, tax, or accounting advice. Before making decisions with legal, tax, or accounting ramifications, you should consult appropriate professionals for advice that is specific to your situation. There can be no assurance that any particular strategy or investment will prove profitable. This document contains information derived from third party sources. Although we believe these third-party sources to be reliable, we make no representations as to the accuracy or completeness of any information derived from such sources, and take no responsibility therefore. This document contains certain forward-looking statements signaled by words such as "anticipate," "expect", or "believe" that indicate future possibilities. Due to known and unknown risks, other uncertainties and factors, actual results may differ materially from the expectations portrayed in such forward-looking statements. As such, there is no guarantee that the expectations, beliefs, views and opinions expressed in this document will come to pass. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. All investment strategies have the potential for profit or loss. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses. The impact of the outbreak of COVID-19 on the economy is highly uncertain. Valuations and economic data may change more rapidly and significantly than under standard market conditions. COVID-19 has and will continue based on economic forecasts to have a material impact on the US and global economy for an unknown period.

Adam M. Souply


Senior Financial Advisor

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