I am a 55-year-old primary care physician. Two years ago I left the “system” (hospital employment) and started my own direct care (membership model, no insurance) practice and thank the Lord, it has grown rapidly. My patient panel is full and I have a sizeable waiting list. I'm getting ready to hire a nurse practitioner (NP) and one more nurse (my staff will then consist of 2 nurses, a nurse practitioner, and me). Once the NP has a full panel, it should produce an extra $100k of profit per year for the practice after expenses.
My practice is set up as a PLLC with S Corp. Last year I contributed 25% to a SEP IRA for myself and my nurse. But with the addition of another high-earning employee (the nurse practitioner) and a second nurse, I fear that a SEP contributions will be too expensive. So one of my questions below is related to business retirement plan options. I’m considering either a SIMPLE IRA or a Safe Harbor 401k. Here's my thinking:
* SIMPLE would be cheaper and easier, but I could only contribute $16,000 + $3,500 (catch-up) + $3,600 (3% of $120k declared salary) = $23,100 per year.
* 401k would cost more (at least $1,500/year in fees), but I could contribute $23,000 + $7,500 (catch-up) + about 4% match = $35,300 per year.
Not to mention, I'd still be able to contribute $7,000 + $1,000 (catch-up) to an IRA, which would give me a total of $43,300 per year in tax-deductible contributions.
Also, there's the possibility of future profit sharing contributions with the plan I am considering.
My second question is regarding my pursuit of financial independence. If only I had discovered the Boglehead philosophy 25 years ago! Without boring you with all the details of my investment adventures, about 7 or 8 years ago I sold all my stocks and rolled my 401k funds into a self-directed IRA in order to start purchasing rental homes with the help of an experienced realtor. My homes are renting well and staying occupied, but overall I don't think I'm where I need to be at this age in order to retire well and become financially independent, so I would like to get back into the stock market (and bonds) with any new savings from this point forward. Hoping I can turn things around by age 65 or so. I love what I do and I could see myself practicing part-time even into my 70s if I'm healthy, but I would rather do it because I want to rather than have to.
My questions are as follows:
1. I would greatly appreciate input regarding choosing a retirement plan for my practice. Considering switching from the SEP IRA to either a SIMPLE IRA or a safe harbor 401k. I'm leaning toward a 401k based on my reasoning above, but am I looking at this wrong?
2. I would appreciate any other advice on optimizing my chances of reaching financial independence by age 65. Hoping to invest $50k or more per year into a taxable account from this point forward.
Thank you in advance!
Summary of my finances:
Emergency funds: 4 months of expenses in money market account at 4.25% interest.
Debt: Mortgage balance is $447k (30 year fixed, 3%). Credit cards are paid in full each month. Auto loan $10,700 at 1.99% (will be paid in full in 6 months).
Tax Filing Status: Married filing jointly. 1 dependent child.
Tax Rate: 24% Federal, 4.75% State
Household annual expenses: $134k
Total Income: $255k
Taxable Income: $164k
Declared Income (for S Corp purposes): $120k
Anticipated Income once Nurse Practitioner is at capacity: $355k
State of Residence: NC
Age: 55
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 20% of stocks
Please provide an approximate size of your total portfolio $916k.
Current retirement assets:
Taxable (8.5% of total portfolio)
CASH 37% (3.2% of total portfolio) (for investing – do not include emergency funds)
SWTSX Shwab Total Stock Market Index 37% (3.2% of total portfolio) stock company name (ticker symbol)
SWISX Schwab International Index 26% (2.1% of total portfolio)
SEP IRA at American IRA (90% of total portfolio)
Own 4 rental properties paying $61k yearly after expenses. Value of homes $767k; current cash $56k.
Roth IRA
None.
Rollover IRA at Schwab
1.5% of total portfolio. Half in NVDA, ¼ in XMMO and ¼ in cash.
Contributions:
New annual Contributions
IRA or 401k (see question below): I plan to max out my contribution each year going forward.
Taxable account: Target is $50k-100k added to this per year going forward.
My practice is set up as a PLLC with S Corp. Last year I contributed 25% to a SEP IRA for myself and my nurse. But with the addition of another high-earning employee (the nurse practitioner) and a second nurse, I fear that a SEP contributions will be too expensive. So one of my questions below is related to business retirement plan options. I’m considering either a SIMPLE IRA or a Safe Harbor 401k. Here's my thinking:
* SIMPLE would be cheaper and easier, but I could only contribute $16,000 + $3,500 (catch-up) + $3,600 (3% of $120k declared salary) = $23,100 per year.
* 401k would cost more (at least $1,500/year in fees), but I could contribute $23,000 + $7,500 (catch-up) + about 4% match = $35,300 per year.
Not to mention, I'd still be able to contribute $7,000 + $1,000 (catch-up) to an IRA, which would give me a total of $43,300 per year in tax-deductible contributions.
Also, there's the possibility of future profit sharing contributions with the plan I am considering.
My second question is regarding my pursuit of financial independence. If only I had discovered the Boglehead philosophy 25 years ago! Without boring you with all the details of my investment adventures, about 7 or 8 years ago I sold all my stocks and rolled my 401k funds into a self-directed IRA in order to start purchasing rental homes with the help of an experienced realtor. My homes are renting well and staying occupied, but overall I don't think I'm where I need to be at this age in order to retire well and become financially independent, so I would like to get back into the stock market (and bonds) with any new savings from this point forward. Hoping I can turn things around by age 65 or so. I love what I do and I could see myself practicing part-time even into my 70s if I'm healthy, but I would rather do it because I want to rather than have to.
My questions are as follows:
1. I would greatly appreciate input regarding choosing a retirement plan for my practice. Considering switching from the SEP IRA to either a SIMPLE IRA or a safe harbor 401k. I'm leaning toward a 401k based on my reasoning above, but am I looking at this wrong?
2. I would appreciate any other advice on optimizing my chances of reaching financial independence by age 65. Hoping to invest $50k or more per year into a taxable account from this point forward.
Thank you in advance!
Summary of my finances:
Emergency funds: 4 months of expenses in money market account at 4.25% interest.
Debt: Mortgage balance is $447k (30 year fixed, 3%). Credit cards are paid in full each month. Auto loan $10,700 at 1.99% (will be paid in full in 6 months).
Tax Filing Status: Married filing jointly. 1 dependent child.
Tax Rate: 24% Federal, 4.75% State
Household annual expenses: $134k
Total Income: $255k
Taxable Income: $164k
Declared Income (for S Corp purposes): $120k
Anticipated Income once Nurse Practitioner is at capacity: $355k
State of Residence: NC
Age: 55
Desired Asset allocation: 70% stocks / 30% bonds
Desired International allocation: 20% of stocks
Please provide an approximate size of your total portfolio $916k.
Current retirement assets:
Taxable (8.5% of total portfolio)
CASH 37% (3.2% of total portfolio) (for investing – do not include emergency funds)
SWTSX Shwab Total Stock Market Index 37% (3.2% of total portfolio) stock company name (ticker symbol)
SWISX Schwab International Index 26% (2.1% of total portfolio)
SEP IRA at American IRA (90% of total portfolio)
Own 4 rental properties paying $61k yearly after expenses. Value of homes $767k; current cash $56k.
Roth IRA
None.
Rollover IRA at Schwab
1.5% of total portfolio. Half in NVDA, ¼ in XMMO and ¼ in cash.
Contributions:
New annual Contributions
IRA or 401k (see question below): I plan to max out my contribution each year going forward.
Taxable account: Target is $50k-100k added to this per year going forward.
Statistics: Posted by Manny40 — Sun Jun 23, 2024 7:07 pm — Replies 0 — Views 86