While the end of the year is usually filled with the hustle and bustle of holiday planning and vacations or time spent with the extended family, it’s also an important time of year for your personal finances. As 2023 comes to a close and we look forward to 2024, we’ve compiled an end-of-year financial checklist to help make sure you end 2023 by wrapping up financial loose ends and ensuring you make the most of this year (from a financial standpoint, but we hope it was a great year otherwise as well!).
Disclaimer: Our content is for generalized educational purposes. As always, note that we are not licensced in financial matters and you should consult appropriate legal, financial, and accounting expertise before taking action based on these ideas, which are not individualized to your personal situation. Though this information is accurate to the best of our (unlicensed) knowledge, you should confirm and make sure the information in this article is accurate and up to date on your own or with your advisors. Rules/laws can change frequently. To learn more, visit our disclaimers and disclosures.
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Checklist for End of Year Financial Planning for Physicians
1. Maximize Employer-Sponsored Retirement Accounts
If you are a W-2 physician and have an employer sponsored retirement plan as part of your compensation and benefits, ensuring that you max out the employee contribution can be a great way to help boost your financial independence planning while taking advantage of tax advantages offered by 401ks, 403b, and other similar plans. As a bonus, many employers offer some sort of match that is basically free money, so make sure that if you're able to afford it, you contribute at least enough to qualify for the match! For 2023, the maximum that you can contribute as an employee for 401k and other related employer sponsored plans is $22,500.
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Self-Employed and Side Hustlers
If you have self-employed income, run your own business, or have a side gig you bring in extra cash with, you can qualify for self-employed retirement plans such as SEP IRAs and solo 401ks. You can usually fund them for the entire year at once if you open the account before year end. If you have the opportunity, don’t forget to look into this. They can help not only load up tax-advantaged savings but lower your 2023 self-employed taxes burden. Check the contribution limits (for the employEE and the employER) for your plan of choice and max them out if financially possible. While you have can fund the employER portion until you file your taxes for the year, you want to max out the employEE contributions by year end of 2023.
If you don't have an existing solo401k, while you don't have to fund the solo401k employER contribution until the tax filing deadline, you do have to create the account by the end of the tax year.
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2. Fully Fund IRAs for the Year
Like employer plans, IRAs are a great tax-advantaged way to build wealth on your way to financial independence. For 2023, the IRA contribution limit is $6,500 or $7,500 with catchup contributions for physicians 50 and older. As a reminder, stay at home spouses can be eligible for IRAs even with no earned income. Make sure you meet the income requirements if you are doing a regular Roth IRA, or if you’re above the threshold, consider the Backdoor Roth.
Backdoor Roth IRAs
If, like most full-time physicians, you’re above the income limit to open a Roth IRA, traditional IRAs and Backdoor Roth IRAs are still options you can take advantage of. Open your account before year end and you can fund it even into 2024 before the April tax deadline.
If you have your accounts set up but haven’t finished your conversions, now is the time! And make a note for your accountant come 2023 to make sure you file the proper paperwork with your tax return.
Learn more:
Tax-Advantaged Retirement Accounts (traditional versus Roth, IRAs, etc.)
3. Maximize Medical Savings
Depending on your health insurance plan, you might have a Flexible Spending Account (FSA) or a Health Savings Account (HSA). They are not the same!
FSA
Most of these are use or lose before the end of the year, or limit the amount you can rollover. Make sure to check and if you have funds that are going to expire, make sure you submit reimbursement requests or finally go get those new contacts or glasses you’ve been meaning to buy since August.
HSA
If you qualify for an HSA with a qualifying high deductible health plan, check to make sure you’ve maxed out your contribution limit for the year. For 2023, the limit for self-only coverage is $3,850 and $7,750 for family coverage (prorated if you haven’t have a high deductible plan all year).
Remember, assuming that you have the cash, the HSA is very different than the FSA. You don’t have to use it. An HSA is more like a medical savings bank (with lots of tax benefits) and can be used as a great tax-advantaged retirement account. Look into investing that portion instead.
Learn more about health savings accounts (HSAs)
4. Fund Tax-Advantaged Accounts for Kids
If you plan on saving to help your children get a jump start on their financial futures, there are lots of tax-advantaged opportunities to take advantage of here before the end of the year. Plans like the 529 and ESA are great ways to save for educational expenses. UTMAs offer greater opportunities for future spending (first house, wedding expenses, etc.). ABLE accounts can help cover a wide range of expenses for children with disabilities.
Each account has its own contribution limits, so spend some time before the end of year comparing which is the best for your situation, and then start contributing.
529s are our favorite for physicians. They now cover more than just tuition and fees as a traditional university and offer tax free growth, as well as tax deductions or credits in some states.
Note that while you can fund your 529s throughout the year, if your state offers a tax deduction for doing so that you'd like to take advantage of, most states require that you fund the 529 by the end of December for the year you are claiming the deduction in.
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5. Spend Your CME
A lot of CME funds are use it or lose it. If you have funds leftover from your employer compensation and benefits package, there are plenty of creative ways to use them, such as on:
Certifications and recertifications
Courses
Conferences
Books and journals
Financial and wellness education
Supplies
Learning a new language
Learn more:
Online CME and Other Creative Uses of Your Educational Funds (with discounts and perks for our members!)
Ask the Physician Community group for recommendations
6. Disability Insurance
If you graduated training in 2023 and didn’t get your disability insurance yet, this is your last chance for trainee discounts before they expire (usually expire at most 6 months after).
If you aren’t a trainee but don’t have disability insurance yet, you probably should. Visit our disability insurance page to see who coverage is a good fit for, then call one of our disability insurance partners today to get covered. A five-minute online intake form and follow-up phone call could save you tens of thousands of dollars if you’re hurt and can’t work.
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7. Start Tax Planning for 2024
Have you already maxed out your tax-advantaged account for 2023? It’s not too early to start planning for 2024. The IRS has released their guidance for contribution and income limits for many of the accounts mentioned above, including:
401(k)s and other employer-sponsored plans
IRAs
HSAs
529s
The great news is that they each feature an increase in the maximum allowable contribution limits. Go ahead and plan out how you will tax advantages of these increases, whether you adjust auto contributions by paycheck, monthly, or do lump-sum contributions annually.
Self-Employed Tax Planning
If you’re self-employed, verify your income for the year, especially if it fluctuates in different months. Your final estimated taxes payment for fourth quarter is due January 15th, so it’s the perfect time to not only make your final estimated payment but analyze your overall withholding for the year to see if you need to adjust your estimated taxes for 2024. Also evaluate your income this year and think about whether another business structure would be better for next year (for example, electing S-corp taxation status on Jan 1).
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8. Capitalize on Year-End Deductions
This one is for our self-employed physicians and business owners. While W-2 physicians can’t write off business-related expenses, self-employed physicians can, and it’s a great way to legally lower your amount of self-employment taxes you’ll owe.
Check your income for the year. If it’s higher than normal or you have some buffer, see if there are any business-related expenses you can make before year-end to help lower your tax burden for 2023. We don’t recommend going out and buying a bunch of new equipment you don’t need, but if you’re looking to drum up sales or bring in new customers or patients, it might be the perfect time of year to do some advertising you can write off.
Bonus tips for those of you with self employed income finishing up 2023 tax planning:
Make sure you run your payroll.
If you have outstanding payments from vendors and anticipate it being better to get that income this year, ask them to pay quickly so that they can be counted for the 2023 calendar year.
Think about defined benefit plans if you are making a lot of self-employed income - you could potentially still set one up for this year's tax year as recent tax law changes allow you to set the plans up in the following year before you file your business tax return (make sure you check with your plan administrator as they may have their own rules or policies).
Get your 1099s to any vendors you need to send them to ready to send out, as they need to go out early next year.
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9. Year-End Charitable Contributions
While you’ve got taxes on the brain, check your annual tax deductions. US individuals can either take the standard deduction or itemize their actual deductions if they’re greater than the standard deduction. If you have a lot of the following, you may be able to itemize your expenses.
State and local income or sales tax
Real property taxes
Personal property taxes
Mortgage interest
Medical expenses
Charitable contributions
If you are typically on the margin of whether or not you can itemize, consider stacking your charitable contributions to take advantage of itemizing every other year. If you’re right on the limit this year, consider a year-end charitable contribution (or five) to your favorite cause(s) and use the deduction to help lessen your 2023 tax bill.
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10. Revisit Your Financial Planning and Decide What to Do Differently Next Year
With vacations and family festivities, along with holiday gifting and decorations, the end of the year can add a lot of financial strain, especially if you’re a resident or new attending. While you might not be in the financial situation to maximize all the tax-advantaged accounts above now, getting on a budget and assessing your financial independence goals is a great place to start so that you can start capitalizing on these tax advantages for retirement as soon as possible.
Before you even ask, yes: even physicians need to budget! If you haven’t budgeted before or haven’t developed a financial plan for retirement, there’s no time like the present. If you’ve already put together a comprehensive financial plan with a financial advisor and are already following a budget, it’s a good time to check in and make sure you’re staying on course with both your spending and your saving.
We often see people say that they will do things differently next year around tax time or the end of the year, but it’s a good time to look back on the year and make a list of the things you wish you’d done differently or that you want to be more intentional about next year while all of it is fresh in your mind on this checklist. Then enjoy the holidays and start January by scheduling meetings or learning more about those things early on.
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Conclusion
We hope this year-end financial planning checklist helps you prepare for a wonderful new year of financial success and wealth building. Keep an eye out yearly next year for an upcoming post on things to do at the beginning of the year. If you have questions after exploring our checklist and resources, drop a question into one of our physician only Facebook groups.
We wish you a wonderful holiday season and a prosperous New Year.