By Forrest Friedow, Partner & Senior Financial Advisor, Larson Financial Group
You’ve maximized your contribution to a 401k or 403b through employee deferral for 2019 (and employer deferral if you have your own plan) and find yourself with excess funds available to invest.
Assuming you already have an emergency/opportunity fund, what else can you fund? What options do you have? Fortunately, there are numerous other products you can use to supplement your savings after your employee deferral.
Here are some accounts you may want to consider:
- Deferred Compensation Plan – Many doctors are employed by institutions that offer a type of plan that allows an employee to put away additional dollars annually. While there a variety of deferred compensation plans, the 457b plan is common for physicians at public or non-profit institutions. This plan allows a physician to contribute additional dollars from income on a tax-deferred basis.
- Roth IRA – For physicians in practice, their income typically won’t not allow a direct contribution into a Roth IRA. However, because the IRS allows anyone to contribute to an IRA and there is no income cap for converting traditional IRA accounts to a Roth IRA, it is possible for anyone without other existing IRAs and with sufficient earned income to contribute to a non-deductible IRA and convert to a Roth IRA annually.
- Health Savings Account – If your employer offers a health savings account (HSA), this is another place to put away monies on a pre-tax basis. Unlike health reimbursement or flexible spending accounts, the balance of the account can roll over from year to year and can be used later in life for large healthcare expenditures and other goals depending on your situation. The one caveat: An HSA is typically attached to a high-deductible health plan, so your out-of-pocket expenses will be higher annually.
- Brokerage Account – While it is important to set aside monies for an emergency, retirement and other goals, for many doctors it can also be important to invest in an account that can be accessed without penalty at any point in the future. A brokerage account will experience volatility unlike a cash account so there is more risk involved. If you utilize a brokerage account, it is important to determine when and if you will need the money so you choose a portfolio with the appropriate level of risk.
Financial planning and investment management should be managed based on your specific situation. It is important to coordinate the two together, preferably with one professional who can assess your overall situation, including income, time horizon, risk tolerance, etc., as well as short-, mid- and long-term goals. Again, there is no cookie cutter approach to planning or investing. Be sure your financial professional understands you, your family and your goals.
Do you find yourself with excess investible funds? We’ll work with you to develop a plan.
Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.