3. Delay Social Security
One of the best investments out there is to wait until you are age 70 to claim your Social Security benefit. If you are married, it may make sense to use the “file and suspend” technique for your spouse while waiting until 70 to take your benefit. Your Social Security benefit may be 85 percent larger at age 70 than it was at age 62.
Explore This IssueACEP Now: Vol 34 – No 06 – June 2015
If you have a year-old BMW, consider selling it, purchasing a five-year-old Honda Civic, and adding the $50,000 saved to your portfolio.
4. Convert Nonincome-Producing Assets to Income-Producing Assets
Many physicians have inadequate nest eggs late in life because they have spent too much money on consumption items like expensive cars, boats, airplanes, and second homes. These assets can often be converted to income-producing assets. This is most commonly done by selling them and using the proceeds to purchase stocks, bonds, mutual funds, or investment real estate. However, many times the doctor can keep the asset and simply rent it out. Even if your vacation home is not the best investment, obtaining an extra $10,000 a year in income from it will help offset its costs. If you have a year-old BMW, consider selling it, purchasing a five-year-old Honda Civic, and adding the $50,000 saved to your portfolio.
5. Get Rid of Debt
A surprising percentage of the salary of a physician with low net worth goes toward servicing debt. This may be a mortgage on a primary home, a second mortgage, a mortgage on a second home, car payments, consumer debt, or even student loan payments. By paying off these debts, you may be surprised how little income you need to maintain your standard of living.
6. Downsize the House
Once the kids are out of the house, you may no longer need the 4,000-square-foot mansion. Downsizing may help you get out of debt and free up funds to add to the portfolio, but it will also reduce your ongoing expenses. Smaller houses have smaller bills.
7. Maximize Tax-Deferred Accounts
Let Uncle Sam boost the size of your nest egg. If your nest egg is small, relative to your current income, be sure to maximize your use of tax-deferred accounts as you will almost surely pull that money out of the accounts at a lower tax rate than you saved when you put the money in.
8. Take Advantage of Catch-Up Contributions
Older investors are actually allowed to save more in tax-protected accounts than younger investors. These catch-up contributions are $1,000 for IRAs and Roth IRAs and $6,000 for 401(k)s and 403(b)s starting at age 50. Health savings accounts (stealth IRAs) allow you to contribute an extra $1,000 per year starting at age 55. In addition, 457(b)s may allow you to double your contributions for the last three years prior to retirement age.