What “Tax-Free Retirement” by Patrick Kelly Says for Doctors

by Michael Goodman

Tax-Free Retirement by Patrick Kelly

Way back in 2011, I reviewed the book, “Tax-Free Retirement” by Patrick Kelly and gave it a strong recommendation. That review is one of the most popular pages on my site. Now that my practice is focused on doctors, I thought this would be a good time to look at what Mr. Kelly’s book recommends for doctors.

Chapter 20

In chapter 20 of Patrick Kelly’s 10th Anniversary version of “Tax-Free Retirement” (2017), Patrick writes, “Doctors have many unique attributes. And in my opinion, their unique attributes are what makes this group one of the most significant to benefit from the strategies in this book.”

He then lists four reasons why doctors are a great fit for using an indexed universal life policy (IUL) for retirement planning.

“Reason #1

Most doctors make more than $196,000 per year, which is the phase-out limit for being able to contribute to a Roth IRA. Therefore, they have no truly viable tax-free retirement option available to them other than life insurance.” (NOTE: in 2021, a married couple making over $208,000 cannot contribute to a Roth IRA, while the maximum deposit is only $6,000 unless you’re over 50 years old)

“Reason #2

Doctors are specialists. They have given their lives to be the best at what they do – and they are. However, this level of specialty often leaves little time for less urgent activities such as retirement planning”

“Reason #3

Doctors are often taken advantage of by snake-oil salesmen in the financial realm hocking half-baked, poorly-formed investment strategies promising wonderful returns.

“Reason #4

Doctors generally need a lot of life insurance for three reasons. One, they need to protect a large income for their families. Two, they usually carry high debt. Often this is due to starting out in debt from large medical school bills and low wages during their residency and internship years. Three, doctors as a group have one of the lowest life expectancies of any profession.”

Bottom Line

Most doctors that work at a hospital have a contract that provides a life insurance policy (usually a term policy) and a retirement plan of some sort (usually a 401k plan these days). But the life insurance policy often leaves them under-insured and the qualified retirement plan is likely to create an income tax problem later. Doctors in private practice usually have to pay for everything themselves, or through the organization that owns the practice.

When comparing the various options available to doctors that want to supplement the benefits in their contracts, or create a retirement plan by themselves, Patrick Kelly says on page 147 of his book there is “one superior option – life insurance!” Explaining why, he summarizes that life insurance offers an “unlimited contribution potential,” “grows without annual taxation,” “takes no time to manage,” “provides a huge sum of money to the physicians family in the case of an untimely death,” and “best of all, if structured properly, the policy can allow access to future money tax-free.”

What’s not to like?

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