By Dejan Ilijevski
Healthcare workers are among those who have faced extra challenges in recent years, particularly due to the ongoing impact of the COVID-19 pandemic. Many are probably wishing for a calm and relaxed retirement.
In addition to the stresses of COVID-19, physicians and healthcare professionals at the Community Healthcare System come across other hurdles when it comes to building their retirement savings. Unlike professionals in other fields who typically begin saving for retirement in their early to mid-20s, physicians often complete their training later, in their late 20s or early 30s, resulting in fewer years to save.
Beyond that, healthcare workers often grapple with a high amount of student debt, which may linger for decades. This makes it all that much more important to start your retirement planning as early as possible. Here are four reasons why:
1. You’ll Get to Defer Taxes
If you don’t start early, you’ll miss out on deferring taxes on income by using vehicles like traditional IRAs and employer-sponsored retirement plans. For a physician in the 32% tax bracket, being able to save for retirement with pre-tax dollars is a great advantage. Pre-tax retirement contributions reduce your taxable income, thereby reducing the amount of taxes you owe.
For instance, many hospitals offer 403(b) retirement plans, which in 2024 allow employees to save up to $23,000 per year pre-tax ($30,500 for those over 50). If you’re a physician making $175,000 per year, your tax liability is $175,000 x 32% = $56,000. But if you maximize your contribution to your 403(b) plan, your tax liability would be ($175,000 – $22,500) x 32% = $48,800. That’s a difference of $7,200 saved in a single year! Imagine how much money you can save in taxes over the course of your working years if you start using this strategy right away.
2. You’ll Be Able to Reduce Fees
As you can see, using pre-tax retirement accounts like 403(b)s can be extremely advantageous for high-income earners like physicians and healthcare professionals at the Community Healthcare System. However, there is a downside to these accounts if you don’t take a proactive approach to managing them.
If you’re like many of our clients, you probably have several different retirement plans across multiple employers. And, with everything on your plate, you probably don’t have the time to manage all these accounts. We get it, but chances are you’re paying excessive fees year after year on old plans that are sitting in a previous employer’s account. Consolidating these accounts can save you big on management fees.
Organizing your finances takes time, but the sooner you start, the more options you have and the more money you can save.
3. You Can Take Advantage of Compound Interest
Just as contributing early allows you to take advantage of tax savings over time, there is a compound effect that occurs with money that is actually invested, as well. That $23,000 contributed to your plan each year will grow exponentially over time, but the key part of that equation is time.
A single penny that doubles its value every day for a month may not seem to amount to that much on the surface. But, by the time the 30th day of the month rolls around, you would have over $5 million in pennies. This same concept can be applied to your retirement account, but, because retirement investments are at the mercy of the highs and lows of the stock market, it will take more than 30 days to see that kind of growth.
Conversely, if you wait to invest, you miss out on growth year after year—and the resulting loss of earnings can be substantial.
4. You’ll Alleviate Stress and Anxiety
Many of our clients at the Community Healthcare System come to us stressed and anxious about their financial situations. They don’t know how they’re doing financially and didn’t know how to tell if they would be able to save enough for retirement. Reviewing your situation with a professional today can alleviate unnecessary stress by providing a clear picture of what you have and what you need.
It can be confusing and overwhelming to navigate your retirement goals—which is why you might be putting it off. But doing so will only delay the inevitable and possibly worsen your financial position as you get closer to retirement.
Take the Next Step
While you dedicate yourself to serving our communities as a healthcare worker, it’s vital to prioritize your own retirement planning for a financially stable future.
At SCM Investment Services, we’re here to assist you and workers at the Community Healthcare System in pursuing your retirement goals. Are you ready to make the most of your financial journey? To schedule a complimentary introductory meeting or request a free financial health checkup, call (219) 225-1934 or email dejan@scminvesting.com.
About Dejan
Dejan Ilijevski is Financial Advisor, Investment Manager, and Founder of SCM Investment Services, an independent, fiduciary, fee-only financial advisory and investment management firm based in Lake Elmo, Minnesota. With an evidence-based approach to investing grounded in economic theory and reliant on insights from financial science, he customizes globally diversified portfolios of mutual funds and ETFs for his clients. With 20 years of experience in the trading/financial services industry, and described as trustworthy and community-oriented, Dejan is passionate about helping individuals and families, prioritizing their best interest first and foremost.
Originally Dejan pursued a career in research and technology but was recruited by a startup trading firm at the Chicago Board of Trade. He took advantage of this rare opportunity, curious to learn more about capital markets. Dejan’s technical background provided a unique skill set, and by the end of his rookie year, he routinely transacted over $1 billion in U.S. Treasury notes daily, making him one of Chicago’s biggest bond traders. He consistently earned the highest profits for the firm for many years and continued to advance professionally in the trading arena.
With newfound experience and insight, Dejan came to realize his parents were being exploited by their financial advisor and that the financial services industry does not work in your best interest. After earning his MBA from the University of Chicago Booth School of Business, Dejan left the trading industry to start an independent financial advisory firm based on integrity and transparency and built on the belief that everyone deserves trusted, knowledgeable financial advice—blending Wall Street expertise with Main Street values.
Serving the broader community as an investor advocate, a proponent for financial literacy, and sponsoring nonprofit initiatives, Dejan is a trusted subject matter resource for many financial news media publications. He and his wife, Daniela, reside in Munster, Indiana, with their two kids. In his free time, he enjoys road cycling, reading, playing soccer, traveling, going on adventures (even skydiving!), and serving local charities. To learn more about Dejan, connect with him on LinkedIn.
