Pub. 2 2018 Issue 1

By Caitlin Gochnour W hile everyone’s situation is different, physi- cians face several common challenges at different stages of their careers, such as debt management, maximizing employer retirement plans, education savings for children, tax and estate planning, investments, and com- prehensive retirement planning. The Debt Dilemma: Whether you’re in residency, fellowship, or early in your ca- reer, many physicians face significant levels of student debt, and the process for eliminating debt is anything but an easy-to-solve financial equation. Many people wonder how they should balance paying off their debt, buying a home, raising a family, and starting to save for retirement. Although there are certainly some exceptions, we gener- ally recommend physicians focus on paying down their debt as a priority. Unfortunately, the interest rates on student loans tend to be high enough that aggressively paying down this debt is often the right approach. For example, if one can earn 6% net in the stock market, but has student debt at 7%, then paying down the debt is a better trade off. For younger physicians, regardless of their position, in- come levels tend to be lower than in later years. Utilizing “Income-driven repayment plans” can be a great way to manage your debt repayment liability depending on your situation. These plans are designed to help people main- tain a manageable debt payment, based on their income level. As physicians progress in their careers, you can adapt your repayment plan as your income increases. Figuring out how much someone should pay down their debt every month can be a vague and constantly changing figure. “The Percentage Method” strategy selects a percentage of monthly income and uses that amount to pay down debt every month. This helps create a system for people and make paying down debt a habit (versus a choice). Save for a Rainy Day: Before paying down debt (beyond required payments) or set- tling on an investment strategy with other available assets, make it your first priority to put funds aside for an emergency reserve. We recommend three to six months’ worth of living expenses. These funds should be in traditional savings or very short-term, highly liquid, low-volatility investments, such as certificates of deposit (CDs). Employer Retirement Plans: At some point, you will likely become eligible to participate in an employer-sponsored retirement plan, such as a 401(k), 403(b), 401(a), or 457, which allow physicians to contribute and invest funds for their retirement. Furthermore, many employers will offer a “match” and will contribute additional funds on an employee’s behalf. We highly encourage you to take advantage of this excellent long-term opportunity and at a minimum, contribute enough to receive the employer match. With the compounding of interest hard at work on your behalf, the earlier you start contributing, the larger your retirement has the potential to grow. It’s Personal: As you address debt, don’t forget to consider the emotional side of your strategy. If paying off a certain obligation more quickly than necessary helps you feel more secure, it may be appropriate to do so. You’ll enjoy a growing sense of financial freedom as you stay on course and get your debt under con- trol. As it shrinks over time, you may find you have more funds available for enjoying the present and investing in your future.  Wealt h Cor ne r This article was provided courtesy of UAFP Partner, Coury / Pyper Wealth Management: Salt Lake City, (801)453-7122. Investments in securities and insurance products are: NOT FDIC INSURED/NOT BANK- GUARANTEED/MAYLOSE VALUE. Wells Fargo Advisors is a trade name used by Wells Fargo Clearing Services, LLC. Member SIPC, a registered broker dealer and non-bank affiliate of Wells Fargo & Company. 19 |