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    10 money mistakes physicians must avoid



    5  Know your risks

    Like other professionals with limited time to devote to managing money, some physicians are so keenly focused on investment returns that they don’t understand the importance of risk management or consider how they will generate income from their portfolios in retirement, says Mark Kemp, CFP, president and founder of Kemp Harvest Financial Group in Harleysville, Pennsylvania.

    “They’re looking for that all-or-nothing investment style that’s going to make them rich,” he says. “Or they’ll say, ‘I’m not greedy, just get me 12% a year,’ thinking back to the 1990s when that was a conservative yield,” he says.

    Rather than focus exclusively on returns, he tries to get these clients to redirect their energies to strategies for pulling income from their portfolios safely in retirement. Among them: using withdrawal strategies that minimize taxes and respond to market volatility in retirement. 


    6  Widen the focus beyond debt

    It’s hard to blame physicians for feeling uneasy about the mountain of debt many of them face by the time they graduate from medical school. But paying off loans to the exclusion of saving for other goals is often a big mistake, says Melissa Sotudeh, CFP, an adviser with Halpern Financial in Rockville, Maryland. Many physicians are already getting a late start on saving for retirement if they begin in residency, so delaying even longer means missing out on the enormous benefit of compounding that occurs over time, she says. Advisers today typically recommend saving 15% of income for retirement for clients who started to save early, and 20% for late starters. 

    She recommends putting some money toward buying a house if that is a goal,
    saving for retirement and saving for children’s college costs immediately after residency to get the benefits of compounding for as long as possible, along with paying down debt. Take those steps before buying new cars and taking expensive vacations, she says.


    7  Don’t rely on forgiveness

    Some physicians working in public health and nonprofit organizations thought they would qualify for public service loan forgiveness after making student loan payments for 10 years as part of a federal program that began in 2007. Now, the program’s future is uncertain as Congress debates trimming or killing it altogether. 

    Borrowers who were planning on forgiveness need to set aside extra savings they can access quickly if the loan repayments are going to continue, says Niv Persaud, CFP, CDFA, managing director at Transition Planning & Guidance LLC in Atlanta. This could be done via a taxable savings account, but contributions to Roth IRAs could also be used in a pinch, experts say, because contributions to those accounts can be withdrawn penalty-free before retirement age.


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