Should you contribute to your company’s cash balance plan?

Physician Family Financial Advisors Podcast; Personal Finance for Doctors with Children

Episode Overview:

Join Nate Reineke and Ben Utley as they unveil insights into optimizing retirement and investment strategies tailored for self-employed physicians. This episode explores why a solo 401(k) might be more beneficial than a SEP IRA, particularly for those considering backdoor Roth conversions. Additionally, the hosts delve into the intricacies of contributing to 457(b) plans, highlighting key differences and potential risks between governmental and non-governmental options.

Key Highlights:

1.Solo 401(k) vs. SEP IRA:

-Solo 401(k) plans often offer greater benefits than SEP IRAs for self-employed physicians, especially with higher contribution limits and compatibility with backdoor Roth conversions.

2.Governmental vs. Non-Governmental 457(b) Plans:

-Governmental 457(b) plans come highly recommended for their tax advantages and flexibility. Non-governmental plans, on the other hand, may carry risks of forfeiture and limited flexibility, making brokerage accounts a viable alternative for additional savings.

3.Pitfalls of Non-Governmental 457(b) Plans:

-These plans can pose risks such as forfeiture if the offering company faces bankruptcy, and they may lead to significant tax burdens if distributions are not managed effectively.

4.Cash Balance Plans:

-For older doctors nearing retirement, cash balance plans allow for significant pre-tax contributions and potential tax savings, offering a secured return useful for those close to retirement. Younger doctors should weigh the benefits against brokerage accounts, considering time horizon, rate of return, and tax implications as part of their strategic planning.

5.Rollover IRA vs. Backdoor Roth:

Managing small balances in rollover IRAs can facilitate backdoor Roth contributions, with strategies including consolidating these into active 401(k) or 403(b) plans to avoid immediate tax implications.

Transcript Samples From Key Chapters:

1.Retirement and Investment Planning Advice:

Discussion on the benefits and drawbacks of SEP IRAs versus solo 401(k) plans for self-employed physicians, as well as an examination of 457(b) plans and associated risks.

2.Rollover IRA Versus Backdoor Roth:

Strategies for effectively managing rollover IRAs to enable backdoor Roth contributions without incurring significant taxes.

3.Optimizing Cash Balance Plan Contributions:

Explanation of cash balance plans, their structure, and strategic considerations for doctors at different career stages.

ARE YOU GETTING ALL THE TAX BREAKS YOU REALLY DESERVE?

To find out, get your copy of The Overtaxed Doctor's Retirement Investing Checklist at https://physicianfamily.com/go

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