By Antonio Porretta
As a doctor, you work hard to save lives and make the world a better place. You’ve spent years dedicated to honing your craft, but long workdays and a complex financial situation mean you often put retirement planning on the back burner as you deal with more pressing matters. Now, as you draw closer to the end of your career, you realize you have some important financial decisions to make. The problem is, many of those decisions, especially pension elections and Social Security options, can be confusing and overwhelming. If you’re in this boat, read on to learn what you need to know about pensions and Social Security—and how we help doctors just like you prepare for a well-planned retirement.
The Truth About Pensions
Pensions are far less common than they once were. Back in the 1950s, over 50% of private-sector workers had access to traditional pensions. (1) Fast-forward to today, and only 7% of employers offer pensions and 14% offer hybrid plans. (2)
But if you’re a high-earning doctor with your own practice, you have the option to establish a defined benefit plan for you and your workers, which is essentially a modernized pension. These plans often have “hybrid” options known as cash balance plans, which allow you to save even more money per year than you ever could with a 401(k). For 2021, you can contribute up to the lesser of these two amounts: (3)
- $230,000; or
- 100% of your average compensation for the highest three consecutive years
As you move forward in your career and earn a higher income, your contribution limits increase drastically. That’s why these hybrid options are an attractive choice for older physicians who are trying to make up for lost time when saving for retirement. Plus, contributions are usually tax-deductible as a business expense.
The Truth About Social Security
It’s important to understand that Social Security was only designed to cover 40% of income for the average worker. (4) For high-income earners such as doctors, this percentage is even less. For 2021, the maximum amount anyone can receive in Social Security benefits is: (5)
- $3,895 for someone who files at age 70
- $3,113 for someone who files at full retirement age
- $2,324 for someone who files at 62
Your Social Security payout increases by 8% each year you wait to claim benefits—until it maxes out at age 70. As you can see from the example above, postponing benefits could add an additional $1,500 in your pocket each month. But deciding when to take Social Security is a highly personal decision. From a mathematical standpoint, it makes sense for everyone to wait until age 70. Ultimately, factors like your health, age, and financial obligations will influence your decision.
How We Help
The truth is, Social Security will only cover a portion of your expenses in retirement and choosing pension plan elections is a tough thing to do. We at Blackbridge Financial have years of experience helping doctors navigate these tough decisions. Together, we help physicians just like you gain financial clarity with these three easy steps:
- We start by creating a clear picture of your current financial situation (including talking through your current level of wealth, risk tolerance, health, current mix of assets, and family obligations).
- From there, we analyze your current mix of fixed and additional sources of income and discuss the advantages and disadvantages of each (e.g., pensions, Social Security, annuities, taxable brokerage accounts, rental income, and more).
- Lastly, we develop a Social Security election strategy that helps you maximize your benefits.
Just as you wouldn’t leave your patients’ physical and mental health to chance, you shouldn’t leave your financial health to chance. At Blackbridge Financial, we’re dedicated to helping you maximize your Social Security benefits and make pension elections you won’t outlive in retirement. We welcome the opportunity to assess your current financial situation and offer suggestions on how we can help you gain financial clarity. To get started, email me at email@example.com or call 704.960.9646.
Antonio Porretta is an independent wealth manager at Blackbridge Financial with over 20 years of experience. He specializes in helping people create, distribute, and preserve their wealth. Antonio received an executive MBA from Saunders College of Business at Rochester Institute of Technology in 2007 and also holds the Accredited Asset Management Specialist (AAMS®) designation. Originally from Rochester, NY, Antonio has been a resident of Harrisburg, NC, since 2007. Outside of work, he enjoys playing soccer and tennis, coaching, and spending time with his wife, Laura, and their children, Cristiano, Victoria, and Matteo. To learn more about Antonio and how he can make a difference in your financial life, visit www.blackbridgefinancial.com.
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Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance, a registered investment advisor. Independent Advisor Alliance and Blackbridge Financial are separate entities from LPL Financial.