GPs & Doctors: Your 2019 Financial Checklist
- Financial Advice
We are bombarded with generalist advice at this time of year, from diet to decluttering, exercise and energy bill switching. Managing your finances is right up there in terms of column inches however this article specifically includes GP/Doctor focussed information. A short read that may confirm your solid status or prompt one or two items to get in order at the beginning of the year.
Funding for Children’s Education & Tax Efficient Gifts
One day your child is starting school, and suddenly they are looking to start driving, turning 21, getting married and buying a house. When you plan in advance, you can put yourself in a position to help your child without it being a sudden or major impact to your finances.
‘Give early and give often’. This simple statement is the best methodology when it comes to passing on money in the most efficient way.
You are allowed to gift €3,000 per person, per child each year without having to pay CAT (Capital Acquisitions Tax) or affecting their inheritance tax threshold. €250 per month saved in trust growing at a rate of 5% per annum could be worth €60,000 after 15 years. By doing so from an early age a substantial nest egg can be built up for when it is needed. A simple bare trust can accommodate this for parents with the maturing funds being gifted to their children at a time they see fit down the road.
Simply put, your income is your most important financial assets. Without it, you cannot pay a mortgage, car payments, household & family costs, fund your savings and pension and the other myriad of every day costs. In addition, the HSE locum benefit does not cover the total cost of a locum.
If you are a self-employed GP, Consultant or Doctor, the state invalidity benefit of €203.50 per week is unlikely to go very far in meeting your personal and practice costs. The financial burden of missing work due to illness or injury can be hugely stressful and certainly not conducive to a quick recovery. Income protection policies provide a replacement salary in the event of illness of injury. You can choose from policies that commence from the first day of illness or a deferred period such as 4, 8, 12, 26 weeks which is more appropriate for those who are employed or have limited HSE sick leave cover.
Retirement Planning, Superannuation, The GMS Pension Scheme
General Practitioners face a very specific set of challenges when planning for retirement. As is the case for most professionals, GPs may have accumulated multiple funds over their working careers. However, the GMS Pension Scheme works differently to commonly held funds and needs to be researched thoroughly and handled in conjunction with any private arrangements to gain maximum entitlements. Given the varied path that medical careers can take, it can be a challenge to keep track of the entitlements related to this particular scheme. It is important that whoever is managing your retirement plan knows the following:
- How the scheme operates and how contributions work
- How your funds are invested
- Your choice of investment options
- How GMS & Private Pension savings work together
- Your Options at Retirement
Pension Term Assurance – be tax efficient on your life cover
Most of us fully intend on living to a ripe old age and while matching the world’s oldest living person Kane Tanaka at 116 years might be a little unrealistic, the majority of us would like to give it a go at least! Unfortunately the fact of the matter is that we won’t all be that lucky. Doctors generally speaking have studied very long and hard and it takes time for them to build up enough wealth to mean their family are financially secure in the event of their demise.
With this in mind it is important that they cover themselves and their spouses to protect their families. The most efficient way to do this is to use a Pension Term Assurance Plan (as opposed to a regular life insurance plan) and the reason why is that you are entitled to tax relief on the premiums with it, so it can be it up to 40% cheaper for you. This is totally separate and unrelated to any other pension savings you may have. There are limits to the amount of cover you can get and some other rules must be adhered to but nothing too onerous, so make sure you get good advice on it.
By John O’Connor
MD, Omega Financial Management