Retiring Healthcare Professionals: Three vital planning opportunities

by | Jul 23, 2021 | Healthcare Professionals, Retirement

(Vital..see what I did there?  😉) Are you ready to take on retirement planning at 50? Whether you are or not, read on for some helpful tips!

Retirement planning at 50: Ketchup on your nest egg?

Retirement Planning at 50

Happy Birthday! You’ve just turned 50. The big Five-OH! After the balloons deflate and the streamers and ribbons settle, a realization may start to creep in. “I’m just as close to 65 as I am to 35”! Where does the time go? I want to be clear here, there’s nothing wrong with aging. Aging is a privilege, every day above ground is a good one in my book! Plus, I’m sure you would probably rather spend time with yourself at age 50 than age 35, just saying…

So now that retirement suddenly feels that much closer. It’s the right time to do a little bit more preparing. Well, you’re in luck! There are options for retirement planning at 50 that you didn’t have at 49! I have outlined three (I didn’t think you’d be interested in a novel here) ways for Healthcare Professionals to take advantage of these final years of work. I’ve always believed it’s not how you start, it’s how you finish!

Catch Up Contributions for Retirement Planning at 50

Catch-up, ketchup, catsup… One of these things is not like the other. I’ll give you a hint, one is (by definition of the IRS): an elective deferral made by a participant age 50 or older that exceeds a statutory limit, in other words, a plan-imposed limit.

The other two are different names for the same thing: A condiment that rose to fame when Henry John Heinz added vinegar to assist in preserving his tomatoes. He also bottled it in glass so we customers could see what we’re about to eat (novel concept, eh?). All three have helped people accumulate wealth, though!

Now, to the matter at hand. The first opportunity to grow your nest egg once you turn 50, involves being able to contribute more to all of your qualified accounts. How much more depends on what kind of account you have. Most healthcare professionals have a qualified plan available to them through their employer.

According to an analysis of Vanguard 401(k) plans, 98% of 401(k)s allow catch up contributions. But, only 15% of people offered the option take it. Assuming a modest return of 5%-6% between the ages of 50 and 65. It’s likely the extra money invested could grow into over $100,000. In a Transamerica retirement study, 46% of Americans acknowledged they were just guessing at how much they need for retirement. Only 12% had used a retirement calculator or worksheet to get an educated estimate! Now is the time to do your homework and use these strategies to put yourself and your family in the best spot possible. Maybe you’ll learn you haven’t saved enough so far. If that’s the case, this could be your opportunity to make up for lost time!

There are strategies to get in the habit of saving for your future that are never too late(or too early) to start. Strategies such as increasing your 401(k) contributions as soon as you receive a raise. This way you won’t miss the extra money! Ideally, you would defer each raise until you reach the contribution cap but that may not be realistic when you factor in inflation.

Tax Tips for Retirement Planning at 50

Don’t you just love tax time? (Said no one ever…) The second way to make your money work harder is actually a byproduct of the first. The catch-up limit takes a huge jump for folks that have any variation of a 401(k) or a 403(b), which most Healthcare Professionals have available to them. Some individuals may have even another type of account listed that they can contribute a little bit more to as well. Tax time can be a nice time of the year with some prior planning and the help of professionals.

Simply put, the tax advantages of putting extra money into your accounts during your “Catch-up” years can be huge; the numbers don’t lie. Someone over 50 in the 35% tax bracket can reduce their tax liability by over $9,000 if they were to contribute the full $26,000 to their 401(k). Even someone in the 24% tax bracket would reduce their tax bill by over $6,000 with a full contribution. This should all be done with the care and consideration of a tax professional, but it’s something that everyone has the ability to do. Many folks just don’t think of it(or they’re too busy hiding under their bed from the Tax Monster)!

Leveraging Life Insurance

The third way to make your money work harder for you after you turn 50 involves a few moving parts, and who doesn’t like a nice puzzle? Do you have a Universal Life insurance policy? One of the most appealing components of Universal Life is the flexibility of the owner to shift funds from the savings and insurance aspects of the policy. This allows you to leverage your life insurance in certain situations. If you’ve had a Universal Life policy for a reasonable amount of time, there is likely cash value in the policy. Borrowing against those policies is one of the most tax-advantaged ways to use the funds.

There are two ways to borrow: withdrawal or loan. There are pros and cons to both ways, and to borrowing in general. Oftentimes, you can access the basis (money you contributed, not the growth) with no tax implications! It can indeed be a “puzzle,” to make sure your end goal is met: do you still need/want a death benefit? It is important to confer with an insurance professional before making changes to your policy because it’s important to note that any money you borrow, plus interest, will be deducted from the death benefit when you die.

Now what?

Whether you just turned 50, it was a few (cough cough) years ago, or you aren’t there yet, these three crucial opportunities are in front of you and can make a world of difference. Working as a Healthcare Professional, no matter what your job title is, you help people. I strongly encourage everyone to take the time to look into these possibilities and learn how they can help themselves and their family. This is a vital time to save more if you can, potentially reap those rewards during tax-time, and maybe even leverage an old life insurance policy. These are the kinds of planning steps and strategies that can make or break your retirement. Or you could invent the new “Ketchup,” like Heinz did. Just remember that I’m the one who gave you the idea!

John Kohout is an investment advisor representative of, and securities and advisory services are offered through USA Financial Securities Corp., Member FINRA/SIPC. A registered investment advisor located at 6020 E. Fulton St., Ada, MI 49301. Hudson Agency, LLC is not affiliated with USA Financial Securities.
This publication is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation.

If you would like further information on planning for or reevaluating your retirement, or simply want to chat, give us a call at 231-421-7391.

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