Sourcing Your Benefits As A Self-Employed Doctor

Options & Opportunities

I grew up in the flatlands of Midwest farm country. Corn, soybeans, and trees occupied most of my vistas. Therefore, I was astounded the first time I saw the towering sand dunes along the shores of Lake Michigan. It was truly amazing that they were only an hour and a half away from my home. Despite being right there next to me all my life, the massive body of water and the vast dunes felt like another world to me, as I honestly didn't know they existed. It was a delightful discovery to realize that I now had the option and opportunity to periodically enjoy this stunning natural resource whenever I desired, thanks to the relatively short drive. Having choices and opportunities in life is truly marvelous!

This week, I want to address one of the biggest fears that doctors have when considering self-employment: the transition to being responsible for sourcing their own benefits. It's understandable that this option can seem overwhelming to many of you.

I remember the first time someone slid a benefits sheet in front of me as an employee. I knew nothing about personal finance then, and had no idea what to do with the form.   ​ It had information about the various numerical plans like 403B and 457 (what the heck was a 457??). There were health benefits like a flexible spending account (FSA). And then, there was information on disability insurance provided by my hospital.

I didn't know what to think, and honestly didn’t think that it mattered all that much because what really mattered was the large paycheck that I was earning. How all the benefits got mixed and mashed into that direct deposit was simply the magic of the HR people.

Since all I could see was farmland where during my day to day living—knowing I had access to mountainous sand dunes and an ocean-like lake all my life was a pleasant discovery. Employment benefits are similar in that they are always available and not very difficult to source, but accessing them is simply a matter of preference and opportunity.

The great thing about the medical license that you have earned is that it provides you a large number of options and opportunities in life—including the option to be self-employed through your micro-corporation and the opportunity to self-source your benefit plans.

Introduction

Being a self-employed doctor through your micro-corporation comes with numerous advantages, including autonomy and control over your integrated personal and professional life. However, it also means you are responsible for managing various aspects of your career, including fringe benefits. While you may not have access to traditional employee benefits, there are still ways to maximize your benefits as a self-employed physician. In this blog post, I’ll explore how you can effectively manage your fringe benefits to enhance your financial well-being and work-life balance.

In the end self-employed doctors have the luxury of creating a personalized benefit plan that has no fluff-and just only what is needed to benefit your household. I would add that it’s important to understand that various tax classifications and business structures also influence which benefits you can utilize—this it’s important to work with an experienced tax or legal-business expert. I am neither of these type of professionals, but I am micro-business owner who has plenty of experience with doing this—and I have loved how it all works together to benefit our household.

1. Malpractice Insurance

   As self-employed doctors, it is crucial to protect ourselves and our practice from potential risks and liabilities. Malpractice insurance gives us peace of mind knowing that we have a support system in place should an unfortunate incident occur. It enables us to navigate through challenging situations with confidence, knowing that we have the necessary resources and expertise at our disposal. Obtaining malpractice insurance the right way requires a professional who will make sure you, your micro-corporation, and your household are protected. I recommend you use Christian with Risk Strategies to do this.

2. Health Insurance

   Health insurance is one of the most critical fringe benefits for self-employed doctors. Explore your options for individual health insurance plans, including those available through healthcare marketplaces. Pay attention to factors such as coverage, deductibles, premiums, and the network of healthcare providers. To maximize this benefit, consider establishing a Health Savings Account (HSA) to save money on a tax-advantaged basis for future medical expenses. I used to get my health insurance through my state medical association. This year I transitioned to a health sharing (not insurance) plan for my family. It’s much cheaper and more portable—which matches my profile for retirement this year-and lots of travel.

3. Retirement Plans

   Self-employed doctors have several retirement plan options to consider, such as Simplified Employee Pension Individual Retirement Arrangements (SEP-IRAs), Solo 401(k)s, and Defined Benefit Plans. These plans allow you to save for retirement while enjoying significant tax advantages. Choose a plan that aligns with your long-term financial goals and consult with a financial advisor to ensure you're making the most of these benefits.

4. Life and Disability Insurance

   Protecting your financial future is crucial, and having adequate life and disability insurance can provide you with peace of mind. Self-employed doctors should consider term life insurance policies that provide financial support to their families in case of their untimely demise. Additionally, disability insurance can replace lost income in the event of an illness or injury that prevents you from working.

5. Professional Development and Continuing Education

   As a self-employed doctor, investing in your professional development is vital for staying competitive and providing the best care to your patients. Allocate a portion of your income to attend conferences, workshops, and continuing education courses. These expenses can be tax-deductible, reducing your overall tax liability. Self-employed doctors have the luxury of choosing more exotic CME locations—like I recently returned from in Kenya—with an incredible Safari experience through CME Away.

6. Business Expense Deductions

   Take advantage of tax deductions for business expenses related to your medical work. This includes deductions for office rent, medical equipment, supplies, and marketing expenses. Keep detailed records and consult with a tax professional to ensure you're maximizing these deductions.

7. Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs)

   If you have a high-deductible health plan, consider setting up an FSA or HRA. These accounts allow you to use pre-tax dollars for qualified medical expenses, reducing your taxable income and overall healthcare costs. I personally love these stealth IRA’s since we rarely use our HSA money—thus it keeps growing. In the end it is like a mini-tax advantaged retirement account.

8. Work-Life Balance Benefits

   Self-employed doctors often have more control over their schedules, enabling them to prioritize work-life balance. This benefit can be invaluable for reducing stress and maintaining your overall well-being. Establish boundaries between work and personal life, and allocate time for rest, relaxation, and quality time with loved ones.

9. Tax Planning and Professional Advice

   Self-employed doctors should work with financial advisors and tax professionals who specialize in healthcare and self-employment. They can help you navigate the complexities of managing your fringe benefits, optimize your tax strategy, and ensure you're making the most of available deductions and savings opportunities.

10. Long-Term Care Insurance

    Consider long-term care insurance to protect your assets and provide for your future healthcare needs. Long-term care insurance can help cover the costs associated with nursing home care or in-home assistance should you require such services in your later years.

11. Workforce Benefits For Spouse and Children

    If you employ your spouse or children in your micro-corporation you can offer benefits to them that enhance your household financial health and are business deductions for your micro-corporation. These benefits can also provide tax advantages for your micro-business.

Conclusion

As a self-employed doctor, managing your fringe benefits is a critical aspect of securing your financial future and achieving a healthy work-life balance. By carefully selecting and optimizing your benefits, you can protect your income, enhance your retirement savings, and ensure you have the resources to provide quality healthcare while maintaining a fulfilling personal life. Remember to consult with financial and tax professionals who specialize in self-employment to make the most of the opportunities available to you as a self-employed physician.

You are missing out if you are letting the fear of managing your fringe benefits and business expenses keep you from starting a professional micro-corporation.

Reach out to me now and we can discuss your situation and I will provide you with micro-business consultation from as an experienced physician who is doing this now. The consultation small fee will be well worth it!

Tod