Houston CPA Reed Tinsely, who specializes in physicians and practices, recently wrote in his blog,
As I sit here about to complete my 26th straight tax season, I wonder why I continue to prepare physician tax returns that have high deductions (ex. mortgage interest) but have little or no investment income (ex. interest and dividend income). Yes many have large amounts of cash stashed away in retirement accounts (or so you would think) but many physicians just aren’t very “liquid”.
I’ve heard this before from other advisors – physicians own a house, a retirement plan – and nothing else. The cash gets spent all along. I knew one physician, with a very high family income (the spouse also did well) who did not contribute to their retirement plan. This physician was living beyond their means, and the debt showed but the assets (other than the house) did not.
Now that your CPA has returned to the land of the living, this is one of the topics to discuss as you do your semi-annual practice review. Get with your spouse and advisor and develop a long term plan for your finances. I’m about to send my oldest off to college in the fall, and I assure you, when you see the numbers on a piece of paper, they are eye-popping! Your home will need routine repairs, your income may have a drop, and your tax sheltered retirement plan may not generate the kind of income you want. A good plan stabilizes your finances, puts your spending on level with what is available, allows for the inevitable bumps in the road, and enables you to do some of the”big” things you want to do – just a bit later in life. Act now.