New Mexico Dental Journal Summer 2016

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Are You Reducing Your Taxable Income as Much as Possible?
By Phil Messuri, MS, CFP® , Travis Flandermeyer, MBA—The Doctor’s Financial Resource
16 New Mexico Dental Journal, Summer 2016
As the investment managers for
the New Mexico Dental Asso-
ciation reserve accounts, Phil
Messuri, MS, CFP® and Travis Flander-
meyer, MBA, of The Doctor’s Financial
Resource understand the acute pressures
doctors in our state face today—chief
among them the demanding schedules
faced on a daily basis.
Today, we’d like to talk to you about a
topic that we promise will be worth your
time: deferred income.
For years, The Doctor’s Financial
Resource has provided financial and
retirement planning for doctors in
New Mexico, with a focus on indi-
vidual investment planning and life and
disability insurance guidance. This insid-
er’s perspective gained from working in
medical offices and or working with
medical clients has proved invaluable.
Through our consultations, we’ve found
that many doctors have not taken full
advantage of their opportunities to defer
income—and maximize their savings—by
using a few straightforward strategies. In
fact, we presented on this very topic at
the recent New Mexico Dental Associa-
tion’s Annual Session.
Let’s start with the basics and address
a common misconception: that the
expenses of setting up a deferred income
plan are daunting. This simply isn’t the
case. Low-cost options with very little
up-front administrative expense, such
as a SIMPLE IRA, offer low barriers
to entry with many of the benefits that
come with more complex 401(k)s. For the
purposes of this article, we will dismiss
another option, the SEP IRA since it is
most cost effective for solo practitioners
with zero employees.
The administrative expenses may not
make sense for a relatively young practice
that cannot yet contribute the maximum
limit on a 401(k). As mentioned, the
SIMPLE IRA is a deferral option that has
low, if not zero, administrative costs, and
is easy to set up. The deferral benefits
are still consequential—the maximum
contribution to a SIMPLE IRA in 2016
is $25,000, or $28,000 for participants
over age 50.
When your practice is fully maximizing
its contributions to the SIMPLE IRA
and you could contribute more, you
may want to consider graduating to a
401(k). Administrative expenses are
higher and it may require an annual tax
filing, but your ability to customize and
defer more money are factors to consider
that can offset the administrative fees.
For example, practice owners have
some control over the structure of their
401(k)s and can define contributions to
employees and even disproportionally
reward specific lower-paid key employees.
They may also structure the plan to
allow for maximum contributions by
the business owner or highly compen-
sated participant s. The maximum
possible contribution to a 401K in 2016
is $53,000, or $59,000 for participants
over age 50.
For the practice that is already maxi-
mizing its 401(k)—and particularly for
doctors who are within 10 years of
retirement—a defined benefit plan may
also be worth discussing. A defined
benefit plan is more complex than the
other options discussed; however, it also
has higher annual limits depending on
age and income of the participants (pre-
tax contributions can exceed the other
strategies mentioned, in addition to what
may be contributed to a 401(k)).
This type of plan, as well as 401(k)s, are
often overlooked by advisers. If your
advisers are not fully exploring all of
the ways to reduce your taxable income
and tax liability, then we recommend
proactively researching your options.
The Doctor’s Financial Resource would
be happy to set up a meeting to discuss
your options on an exploratory basis,
without commitment or expectation.
Please feel free to contact us if you have
any questions or would like us to help
you determine if there are any further
opportunities to help you save your hard-
earned money.
This is the first in a series of articles on the business side of medicine from The Doctor’s Financial Resource.
Tax and Legal Disclaimer
This article is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal,
tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.
Tax Deferral Disclaimer
10% IRS penalty may apply to withdrawals prior to age 59 ½
Investment Advisor Representatives offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC.
Cetera is under separate ownership from any other named entity. The Doctor's Financial Resource and Cetera Advisor Networks LLC are not affiliated.