By Mike Gibbons, RICP®
As a pharmaceutical employee, you play a vital role in advancing healthcare and improving lives. Your dedication to your field drives innovation, allowing access to life-saving medications and groundbreaking treatments for countless individuals in need. Yet amidst your dedication and hard work, it’s crucial not to overlook your own financial well-being, particularly when it comes to retirement planning.
Many workers in the healthcare field worry that as retirement approaches, they won’t have enough of a safety net to fall back on. Since your retirement is just as important as the success of your career, take a look at these three steps that can help you catch up for retirement in a hurry.
1. Find the Right Plan for You
If you find that you don’t have access to an employer-sponsored 401(k) account with matching contributions at your fingertips, the good news is there are other options to build your nest egg. Here are some savings options to consider.
Traditional IRA
A traditional IRA is similar to a 401(k) in that you can contribute pre-tax dollars to an investment account that grows tax-deferred. For 2023, you can contribute up to $6,500, or if you’re over age 50, up to $7,500.
Roth IRA
With a Roth IRA, your contributions are not tax-deductible like traditional IRAs. However, your earnings grow tax-deferred and your withdrawals are tax-exempt (subject to IRS guidelines). Like a traditional IRA, you can contribute up to $6,500, or if you’re over age 50, a total of $7,500. However, one caveat to the Roth is that there are income restrictions. If your income surpasses the cutoff amount for a Roth IRA, you can still contribute to one through a backdoor Roth transaction.
SEP IRA
A SEP IRA, also known as a Simplified Employee Pension, is an IRA similar to a traditional IRA. As an employer of yourself, you can make contributions on your own behalf for your retirement. You can set up a SEP IRA in addition to a solo 401(k) and can contribute either 25% of your self-employed income or $66,000 per year (whichever is the lesser amount).
Solo 401(k)
A solo 401(k) is similar to a traditional 401(k) you’d contribute to as an employee. Funds invested within a solo 401(k) plan grow on a tax-deferred basis. The powerful feature of this plan is that you can contribute in two separate capacities, as an employee and as an employer. Wearing your employee hat, you can defer up to $22,500 (or $30,000 if age 50 or older). As the employer, you can also contribute up to 25% of compensation as defined by the plan. Combined, you can contribute up to $66,000 if you are under 50 and $73,500 if you are 50 or older.
Adding a Defined Benefits Plan
In order to save more than what your IRA limits you to, you can set up a defined benefit plan. These plans have much higher tax-advantaged contribution limits and can be designed to fit your specific needs. Depending on your age and income, a defined benefit plan allows you to set aside up to hundreds of thousands of dollars to fund your retirement, making it possible to save a lot, even if you have little time.
Ultimately, everyone’s situation is unique, so there’s no one right solution. However, for many people, it makes sense to contribute pre-tax and post-tax dollars to several different accounts. For example, along with a solo 401(k), you may also want to contribute to a Roth or SEP IRA.
2. Banish Debt
The less debt you have when you enter retirement, the better. Whether it’s personal debt in the form of credit cards, car loans, or a mortgage, reducing your debt before retiring will lower your monthly expenses and enable your savings to grow and last longer. Review all current debts you face and compare interest rates and balances. This can help you decide which to pay off first.
3. A Partner You Can Value
As a pharmaceutical worker, you have unique challenges that are different from other professions. You’re in a special situation, and it would be helpful to work with someone who understands the specific needs of your industry.
Here at Gibbons Financial Group, we focus on helping pharmaceutical workers just like you. We offer special services that take care of all your financial needs, and when you reach out to us, we will provide a sophisticated analysis of your potential cash flow and assets prior to retirement. If you want to learn how we can assist you in quickly catching up for retirement, get in touch with us by calling 224-419-5550 or emailing me at Mike@gibbonsfinancialgroup.com to schedule a complimentary consultation. And be sure to join our free webinar, Retiring Early From Pharma. Together we seek the path that has the highest probability of financially sustaining you through retirement.
About Mike
Michael J. Gibbons is founder and president of Gibbons Financial Group, an independent advisory firm providing custom-tailored financial planning and investment management services to pharmaceutical and healthcare professionals and their families. Mike has over 25 years of experience and spends a significant portion of his day working with pre-retirees and retirees, focusing on asset management, Social Security and pension planning, as well as retirement income preparation.
Mike has degrees in both business and psychology from Lake Forest College and currently holds his Retirement Income Certified Professional (RICP®) designation from the American College. Mike was named a Five Star Wealth Manager for 2016 and 2018* Mike is heavily involved in his community, having served on the Village of Gurnee Police Pension Board as a Community Volunteer and the St. Patrick’s Parish Financial Board. When he’s not working or volunteering, Mike loves playing golf and spending his time with his wife and children. To learn more about Mike and how he can help you, connect with him on LinkedIn, visit his website, and register for his free webinar, Retiring Early From Pharma, created specifically for professionals retiring from the pharmaceutical, biotechnology, and healthcare industries.
*Award based on 10 objective criteria associated with providing quality services to clients such as credentials, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2016/2018 Five Star Wealth Managers.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.