Marcus P. Miller, CFP®, MBA, EA, Author at Mainstay Capital

Balancing Financial Certainty and Growth: A Guide for Physicians and Dentists

Balancing Financial Certainty and Growth: A Guide for Physicians and Dentists
As a busy physician or dentist, you’ve worked hard to build wealth—but are you confident you can transform that net worth into reliable retirement income? Many medical professionals find themselves “cash‐strapped millionaires,” flush on paper but constrained by illiquid assets. This guide explores the trade-off between financial certainty and portfolio growth, reveals simple spending frameworks, and explains the true price of certainty so you can make informed decisions about your retirement income strategy.

The Cash-Strapped Millionaire: When Net Worth Doesn’t Mean Liquidity
According to recent studies, millions of U.S. households have achieved $1 million+ in net worth—yet a large share of that wealth sits in real estate, practice equity, and retirement accounts. For physicians and dentists, tying up capital in a practice building or long-term retirement savings can create cash flow gaps:

Practice equity: Your practice may be your biggest asset, but selling or borrowing against it takes time and planning.
Real estate holdings: Rental properties or office buildings generate returns but aren’t instantly accessible.
Retirement accounts: IRAs and 401(k)s offer tax advantages but penalties and distribution rules can limit flexibility.
Understanding liquidity management for doctors is essential to avoid short-term cash shortages and enjoy the lifestyle you’ve earned.

On the Fence About a Spending Decision? Try the 0.01% Rule
Even high-income professionals hesitate over seemingly small purchases. To simplify decision-making, consider the “0.01% Rule.” This approach suggests ignoring spending decisions that represent 0.01% or less of your net worth.

How It Works
If your net worth is $2 million, 0.01% equals $200—don’t overthink purchases under this amount.
Use this threshold to free mental bandwidth for high-impact financial choices.
Implementing this rule in your physician financial planning routine helps you focus on strategic moves—debt reduction, tax optimization, or portfolio rebalancing—rather than fretting over everyday expenses.

Understanding the Price of Certainty in Retirement Planning
When transitioning from an active career to retirement, many professionals prefer a conservative allocation to avoid market downturns. However, that safety comes at a measurable cost—the price of certainty. Recent research quantifies how much capital is required to guarantee a fixed income stream under different credit quality and inflation-protection measures.

Illustrative Example
Inflation-protected income (TIPS cash-flow match): Roughly $850,000 is needed today to generate $40,000 per year for 30 years with full inflation adjustments.
BBB-rated corporate bonds: Approximately $615,000 can produce the same $40,000 annually, but carries default and inflation risk.
This difference—nearly $235,000—represents the tangible cost of achieving maximum income certainty versus accepting moderate credit and inflation exposure.

Comparing Certainty Options: TIPS, Bonds, and Customized Portfolios
No single solution fits every physician or dentist. Below is a comparison to help you weigh safety against potential returns:

Treasury Inflation-Protected Securities (TIPS):
Pros: Inflation hedge, government-backed
Cons: Lower yield, higher initial capital requirement
Investment-Grade Corporate Bonds (BBB+ to A-rated):
Pros: Higher yield than Treasuries, diversified issuers
Cons: Credit risk, potential principal loss
Laddered Bond Portfolios:
Pros: Smoother reinvestment yields, partial liquidity
Cons: Complexity in construction, reinvestment risk
Partial Annuities:
Pros: Guaranteed lifetime income, no market risk
Cons: Surrender charges, limited legacy value, high fees
Through Our Process, we build tailored combinations—balancing liquidity, growth potential, and certainty—to fit your practice stage, risk tolerance, and legacy goals.

Tailoring Strategies for Doctors and Dentists
Medical professionals often share similar financial profiles—high early-career debt, growing income, equity in a practice, and concentrated stock positions in healthcare companies. A specialized dentist retirement planning or physician financial planning strategy should address:

Debt management: Refinancing student loans and practice acquisition financing.
Practice succession: Structuring buy-sell agreements and funding them efficiently.
Portfolio diversification: Reducing concentration in healthcare equities or practice value.
Tax optimization: Utilizing defined-benefit plans or cash balance plans to accelerate retirement savings.
Liquidity buffers: Maintaining a six- to twelve-month cash reserve plus a bond ladder for near-term spending needs.
These components combine to form a resilient retirement income plan that accounts for both risk and return.

Steps to Evaluate Your Trade-Offs: A Decision Framework
Quantify Your Income Goals: Determine the annual cash flow you need in retirement, factoring in healthcare costs and lifestyle aspirations.
Assess Current Liquidity: Calculate how much liquid capital you hold versus illiquid assets.
Define Risk Tolerance: Survey your comfort with market volatility, credit risk, and inflation uncertainty.
Model Scenarios: Compare the capital requirement for various solutions (TIPS vs. bonds vs. annuities).
Implement Gradually: Phase in certainty layers—e.g., purchase longevity annuities at age 65 while maintaining growth assets earlier.
Review Annually: Revisit projections, spending needs, and market conditions to adjust allocations.
This structured approach ensures you understand both qualitative factors (peace of mind) and quantitative metrics (capital cost) before committing.

Mainstay Capital’s Process: How We Help Medical Professionals
At Mainstay Capital, we specialize in cash flow management for dentists and liquidity management for doctors. Our multi-step process:

Discovery: We learn your personal goals, practice structure, and current financial picture. (See About Us)
Analysis: Detailed cash flow modeling and scenario testing to identify liquidity gaps and certainty costs.
Implementation: Customized portfolios blending bonds, TIPS, laddered structures, and annuities.
Ongoing Monitoring: Regular check-ins, performance reviews, and rebalancing to keep your plan on track.
This process helps you navigate the trade-off between certainty and growth with clarity and confidence.

Actionable Next Steps
Run your own liquidity analysis: List all assets and categorize them by accessibility.
Apply the 0.01% Rule: Free up mental bandwidth by ignoring low-impact spending decisions.
Quantify your desired retirement income and model multiple “price of certainty” scenarios.
Consult with a specialist advisor—consider Services tailored for healthcare professionals.
Every physician and dentist’s journey is unique. By understanding the trade-offs between certainty and returns, you can build a retirement income plan that aligns with your personal goals and risk tolerance.

Conclusion
Balancing growth potential with income certainty is a core challenge for high-net-worth medical professionals. From the simplicity of the 0.01% Rule to detailed analyses of inflation-protected securities versus corporate bonds, having a clear, data-driven framework empowers you to make informed decisions. For personalized guidance, visit our homepage or reach out to learn more about how Mainstay Capital supports physicians and dentists in achieving both financial peace of mind and portfolio growth.

Building a Resilient Investment Portfolio for Young Healthcare Professionals in 2026

Building a Resilient Investment Portfolio for Young Healthcare Professionals in 2026
As a physician, dentist, or other early-career healthcare professional, you’ve spent years mastering your craft and helping others. Now it’s time to turn that same dedication toward your financial future. With markets showing strong returns over the last decade and key events on the horizon—like the 2026 U.S. midterm elections, a new Federal Reserve Chair, and evolving AI innovations—crafting a thoughtful, diversified investment strategy is more important than ever.

Why Long-Term Discipline Pays Off
Over the past seven years, the S&P 500 has delivered double-digit annual returns in six of them. This resilience underlines a core principle: staying invested through market ups and downs generally rewards disciplined, long-term investors.

Stay the Course: Market pullbacks—whether from tariff news or geopolitical flashpoints—are normal. Historically, markets recover and often reach new highs.
Avoid Timing Traps: Attempting to jump out of stocks after a dip or chase the latest hot sector (like AI) can lead to missed gains.
Focus On Goals: Align your portfolio with your timeline—retirement, buying a home, children’s education—and your comfort with market swings.
The Pillars of a Diversified Portfolio
Diversification is more than a buzzword; it’s your shield against unexpected market events. Here’s how to build a balanced mix:

1. U.S. Equities
Large-cap U.S. stocks have led global markets, but valuations are elevated. To help manage risk:

Include a mix of growth and value funds.
Consider small- and mid-cap exposure for potential extra growth and diversification.
2. International Stocks
A weaker U.S. dollar over the past year has boosted returns for U.S.-based investors in foreign markets. Benefits include:

Access to fast-growing economies outside the U.S.
Reduced portfolio correlation when U.S. markets stumble.
3. Fixed Income & Alternatives
Bonds and alternative assets—like real estate or commodities—can smooth returns when stocks pull back. Key points:

Short- and intermediate-term bonds can offer stability if rates rise under new Fed leadership.
Alternatives may provide inflation protection and low correlation to equities.
Navigating 2026’s Key Market Themes
Next year brings several influences that merit attention but shouldn’t derail a long-term plan.

Midterm Elections
Historical Impact: Midterm years often see volatility around November, yet over the full calendar year, market returns have averaged positively.
Action Step: Avoid reacting to daily news. Stick to your asset allocation.
Federal Reserve Leadership Change
Policy Shifts: A new Fed Chair may adjust interest-rate targets, influencing bond yields and stock valuations.
Action Step: Maintain a laddered bond portfolio to manage reinvestment risk as rates adjust.
AI and Technology Valuations
Rapid Growth vs. Premium Pricing: AI firms have soared, but lofty valuations can amplify drawdowns if growth slows.
Action Step: Limit single-sector concentration. Balance core technology holdings with broader market funds.
Putting It All Together: A Sample Allocation
Below is a hypothetical portfolio for a young healthcare professional with a 20- to 30-year time horizon and moderate risk tolerance. Always tailor to your personal situation.

U.S. Equities: 63%
Large-Cap Core Fund: 40%
Small/Mid-Cap Blend Fund: 23%
International Equities: 25%
Developed Markets Fund: 15%
Emerging Markets Fund: 10%
Fixed Income: 10%
Intermediate-Term Bond Fund: 3%
Short-Term Bond Fund: 7%
Alternatives & Cash: 2%
Commodities/REITs: 1%
Cash or Cash Equivalents: 1%
This blend seeks growth while cushioning potential downturns.

How MainStay Capital Partners Can Help
At MainStay Capital, we specialize in guiding healthcare professionals through complex markets. Here’s how we support you:

Personalized Planning: Learn about our approach on our Our Process page.
Ongoing Education: We share regular market updates and tailored insights for physicians and dentists.
Holistic Services: From retirement planning to tax-efficient strategies—see our Services.
Ready to get started? Visit our About Us page to meet our advisors committed to your financial success.

Key Takeaways for Young Healthcare Investors
Stay invested through market cycles—discipline is rewarded.
Diversify across U.S. and international equities, bonds, and alternatives.
Keep single-sector concentration, like AI, in check to manage volatility.
Don’t let midterm or Fed-related headlines drive emotional decisions.
Partner with a fiduciary advisor to build and monitor a plan that aligns with your goals.
Your dedication to your patients deserves an equally thoughtful approach to your investments. By following these principles—and leaning on qualified advisors when needed—you’ll be well on your way to financial confidence and freedom.

Disclaimer: This blog post is for informational purposes only and does not constitute investment advice. Please consult with a qualified financial advisor before making any investment decisions. Past performance is no guarantee of future results.

How Young Healthcare Professionals Can Reduce ACA Marketplace Premiums After the Enhanced Premium Tax Credit Expires

How Young Healthcare Professionals Can Reduce ACA Marketplace Premiums Now That Enhanced Credits Have Expired
The Affordable Care Act’s Premium Tax Credit (PTC) has been a lifeline for many early-career physicians, dentists, residents, and other healthcare workers purchasing individual coverage on the Marketplace. From 2021 through 2025, Congress temporarily enhanced the PTC to cap premiums at a lower percentage of income and broaden eligibility. That enhancement expired on December 31, 2025, meaning premiums in 2026 will spike for those above 400% of the Federal Poverty Level (FPL).

For busy young professionals, higher costs can strain tight budgets already stretched by student loans, residency expenses, and personal milestones. This guide walks through the 2026 changes, outlines practical strategies—like adjusting your Modified Adjusted Gross Income (MAGI) and leveraging retirement, Health Savings Accounts (HSAs), and Flexible Spending Accounts (FSAs)—and offers an action plan to preserve as much subsidy as possible.

Understanding the “Subsidy Cliff” in 2026
Between 2021 and 2025, legislation removed the income cap, allowing even high earners to qualify for some subsidy if premiums exceeded 8.5% of their income.

In 2026, the rules have reverted to the “Subsidy Cliff”:

Strict Income Caps: Subsidies end entirely for those with incomes above 400% FPL. If you earn $1 over the limit, you pay the full premium price.
Higher Contributions: Premium caps return to higher percentages (up to ~9.6% or more) of household income.
For 2026 planning, the 400% FPL thresholds (the “Cliff”) are:

$62,600 for single individuals
$84,600 for couples filing jointly
$128,600 for a family of four
⚠️ CRITICAL 2026 WARNING: The “Clawback” Risk
Unlike in previous years where repayment was capped, new regulations for 2026 mean that if you estimate your income incorrectly and end up above the 400% FPL threshold at tax time, you may be required to repay 100% of the advanced subsidies you received during the year. Precision in managing your MAGI is now more important than ever.
Top Strategies to Reduce Marketplace Premiums
Below are proven tactics to manage your MAGI and retain subsidy eligibility in 2026. Remember, because of the “Cliff,” reducing your income by even a few thousand dollars can save you thousands in premiums.

1. Maximize Retirement Account Contributions
Contributing to retirement plans is the most effective way to lower your taxable income and MAGI.

401(k) or 403(b): For 2026, the contribution limit has increased to $24,500. If you are age 50+, you can contribute a total of $32,500.
Self-Employed 401(k): Physicians and dentists in private practice can open solo 401(k)s, allowing the $24,500 employee deferral plus employer contributions (up to 25% of net earnings).
Traditional IRA: The 2026 limit is $7,500 per year (plus a $1,100 catch-up if over 50). Deductibility depends on your income and workplace plan coverage.
2. Leverage Health Savings Accounts (HSAs) and FSAs
HSAs and FSAs offer triple tax benefits and lower your MAGI.

HSA: If you’re enrolled in a High-Deductible Health Plan (HDHP), you can contribute up to $4,400 (individual) or $8,750 (family) in 2026. (Plus $1,000 catch-up if 55+).
FSA: The contribution limit for 2026 has risen to $3,400.
Note: While FSA contributions reduce taxable income, they don’t always reduce MAGI for ACA purposes in every specific scenario—check with your tax pro. However, HSA contributions generally do reduce MAGI.

3. Fine-Tune Business Income (Self-Employed)
Self-employed physicians and dentists can adjust income timing to stay under the cliff:

Equipment Purchases: Use Section 179 expensing to fully deduct medical equipment purchased in 2026.
Defer Billing: If you are near the threshold in December, delay sending invoices until January 2027.
Case Studies: Examples for Physicians & Dentists (2026 Rules)
Case Study 1: The Resident Physician
“Dr. A” is a resident earning $68,000 (Single). The 2026 subsidy cliff is $62,600. Without adjustments, Dr. A earns too much to get any help and must pay full price (approx $450/month).

Strategy: Dr. A maximizes a Traditional IRA ($7,500) and increases 403(b) contributions by just enough to drop MAGI further.
Result: MAGI drops below $60,000. Dr. A qualifies for the subsidy, saving roughly $3,000/year in premiums.
Case Study 2: Self-Employed Dentist (Solo Practice)
“Dr. D” is single and nets $110,000 from their practice. The cliff is $62,600. This seems like a big gap to bridge.

Strategy: Open a Solo 401(k). Contribute the max employee deferral ($24,500) plus ~20% employer profit sharing (~$22,000). Also fund an HSA ($4,400).
Total Reduction: ~$50,900.
Result: MAGI falls to ~$59,100—safely under the $62,600 cliff. Dr. D saves thousands in premiums and builds a massive tax-advantaged nest egg.
Case Study 3: Married Couple (Nurse & Physician)
Combined income is $145,000. The subsidy cliff for a family of 2 is $84,600. They are facing a “subsidy cliff” loss of over $10,000 in annual benefits.

Strategy: Both spouses maximize their workplace 403(b)/401(k) plans (2 x $24,500 = $49,000 reduction) and max out a family HSA ($8,750).
Total Reduction: $57,750.
Result: New MAGI is ~$87,250. They are still slightly over the $84,600 cliff. They decide to contribute $4,000 to a Traditional IRA to bridge the final gap, securing full subsidy eligibility.
Step-by-Step Action Plan for 2026 Enrollment
January 2026: Calculate your projected MAGI. Compare it strictly against the 400% FPL limits ($62.6k / $84.6k / $128.6k).
February 2026: Adjust payroll deferrals to hit the new $24,500 limit if necessary to stay under the cliff.
Mid-Year: If you receive a bonus or raise, immediately recalculate. If you will exceed the cliff, consider if it’s worth increasing pre-tax contributions or preparing for the full premium cost.
End of Year: Ensure all contributions (Solo 401k, IRA) are made before tax deadlines to lock in your MAGI reduction.
How Mainstay Capital Can Support Your Planning
At Mainstay Capital, we specialize in financial guidance for healthcare professionals. Our process is designed to fit your busy schedule and complex needs:

Our Process: A systematic approach to tax-efficient income planning, retirement strategy, and insurance optimization.
Services: From cash flow modeling and MAGI projections to retirement plan selection and tax guidance, tailored for physicians, dentists, and allied health.
About Us: Learn how our CFP® professionals partner with healthcare providers nationwide.
Get started today—visit our homepage or contact us for a complimentary consultation. Together, we’ll craft a roadmap that keeps your premiums manageable and your long-term goals on track.

Disclaimer & Compliance Notice
This blog post is for informational purposes only and does not constitute tax, legal, or investment advice. Mainstay Capital is a Registered Investment Advisor. Past performance is no guarantee of future results. Always consult your own qualified professional before making decisions related to taxes, insurance, or investments.

Navigating the ACA Premium Tax Credit Cliff A Physicians Guide to Affordable Health Coverage After 2025

Navigating the ACA Premium Tax Credit ‘Cliff’: A Physicians’ Guide to Affordable Health Coverage After 2025
For many physicians and dentists in the early to mid stages of their careers, employer-sponsored benefits are the gold standard. But what happens if you switch jobs, take a sabbatical, pursue private practice, or retire early? The Affordable Care Act (ACA) marketplace becomes a critical backstop – especially the Premium Tax Credit (PTC) that can significantly lower premiums. However, the “enhanced” PTC is set to expire after 2025, meaning any provider with an income above 400% of the Federal Poverty Level (FPL) could face a sudden cost spike in 2026.

In this guide, we’ll explore:

How the ACA Premium Tax Credit works and why the 400% FPL threshold matters
Projected cost increases for physicians crossing the subsidy “cliff” in 2026
Income-management strategies, from retirement contributions to timing bonuses, to stay below key thresholds
Alternative coverage options like COBRA and healthcare sharing ministries
Actionable planning steps and how Mainstay Capital can support you
By the end of this article, you’ll have a clear playbook to protect your health coverage affordability, no surprise costs, no guesswork.

1. Understanding the ACA Premium Tax Credit and the 400% FPL Threshold
The Affordable Care Act’s Premium Tax Credit is designed to cap your monthly health plan premium at a percentage of your household income. That cap climbs with income, but only up to 400% of FPL. In 2025, thanks to temporary enhancements under the American Rescue Plan, even higher-income households enjoyed subsidies. After 2025, the old rules return:

Household income between 100%–400% of FPL: Eligible for a sliding-scale subsidy.
Income above 400% of FPL: No subsidy – full premium cost.
For a physician couple aged 60, 400% of FPL in 2025 is roughly $80,000. Cross that line by even a single dollar in 2026, and the difference can exceed $20,000 in annual premiums.

This isn’t a smooth phase-out; it’s a cliff. Understanding this cliff is crucial to avoiding an unexpected six-figure medical expense over retirement or career changes.

2. The Financial Impact: Case Study for a 60-Year-Old Physician Couple
Let’s illustrate with a hypothetical but representative example:

Average salary plus practice income: $80,000 (400% FPL).
2025 marketplace premium after PTC: ~$8,000 per year.
2026 if income hits $80,001: Full premium ~$30,000 per year.
Cost increase: ~$22,000 for the same coverage.
For busy physicians planning early retirement or reduced clinical hours, a $22,000 surprise can derail their budget and retirement income projections.

Key takeaway: Effective income planning around the end of 2025 is nonnegotiable if you rely on the ACA marketplace.

3. Income Management Strategies to Maintain Subsidy Eligibility
To avoid the subsidy cliff, the goal is to keep your Modified Adjusted Gross Income (MAGI) at or below 400% of FPL. Here are proven strategies:

3.1 Max Out Tax-Advantaged Retirement Accounts
401(k)/403(b) Contributions: Reduce taxable W-2 income. For 2025, the physician catch-up limit is $30,000+ for those over 50.
SEP-IRA/Solo 401(k): If you run a private practice, consider significant owner contributions.
3.2 Utilize Health Savings Accounts (HSAs)
Contribute up to $8,300 per family (2025 limit) if enrolled in a high-deductible plan.
HSA contributions reduce MAGI, and withdrawals for qualified medical expenses are tax-free.
3.3 Defer Bonus and Partnership Distributions
Request year-end bonuses in January 2026 if your 2025 income is near the threshold.
Coordinate with partners to delay distribution timing.
3.4 Municipal Bond Interest and Tax-Free Investments
Coupon payments from municipal bonds are exempt from federal income, keeping MAGI lower.
Use Roth IRAs for tax-free growth, but remember conversions count toward MAGI.
4. Alternative Coverage Options: COBRA and Healthcare Sharing Ministries
If subsidy planning falls short or you need continuity coverage, evaluate alternatives:

4.1 COBRA Continuation Coverage
Pros: Keeps the exact same employer plan and network.
Cons: You pay 102% of the full premium—often 2–3× more than subsidized marketplace options.
4.2 Healthcare Sharing Ministries
Not insurance, but members share eligible medical expenses.
Lower monthly “shares” but limited benefits and potential membership eligibility rules.
For many, the marketplace with a reduced subsidy remains the most predictable. But understanding these options can provide peace of mind if you unexpectedly lose subsidies or need gap coverage.

5. Projecting Healthcare Costs into Retirement
Even once you reach Medicare eligibility at 65, premiums and surcharges like IRMAA can hit high earners. Integrate ACA planning with long-term Medicare projections:

Estimate Part B and Part D IRMAA based on projected MAGI in retirement.
Factor in Medicare Supplement (Medigap) premiums.
Model combined out-of-pocket, premium, and IRMAA costs for a complete forecast.
By aligning your income-reduction strategies pre-65, you can minimize both ACA cliffs and IRMAA surcharges after 65. A unified health-coverage plan eliminates surprise expenses and protects your nest egg.

6. How Mainstay Capital Can Help
At Mainstay Capital, we understand that physicians and dentists have unique career paths, income fluctuations, and coverage needs. Our comprehensive services include:

Personalized Income Modeling – Visualize how contributions, deferrals, and timing affect ACA subsidy eligibility.
Retirement & Tax Planning – Coordinate retirement account strategies, HSA funding, and municipal bond allocation.
Ongoing Client Education – Quarterly check-ins to adjust for plan updates, legislative changes, and career transitions.
Integrated Medicare Forecasting – Ensure smooth transition from ACA to Medicare with minimized IRMAA impact.
Our process starts with a no-obligation consultation to understand your goals, current coverage gaps, and income dynamics. From there, we build a tailored plan that keeps you below critical subsidy cliffs while maximizing long-term retirement security.

7. Action Steps for Physicians Today
As 2025 winds down, take these immediate actions:

Review your 2024 and projected 2025 MAGI.
Schedule a call with your financial or tax advisor to explore 401(k)/403(b) and HSA max-out strategies.
Assess the feasibility of deferring year-end bonuses or partnership draws.
Run marketplace quotes now and compare against COBRA rates and healthcare sharing ministry “shares.”
Book a complimentary meeting with Mainstay Capital to model your customized scenario.
Proactive planning now can save you tens of thousands in premiums and keep your focus where it belongs, on patient care and life beyond medicine.

Disclaimer: This article is for educational purposes only and does not constitute individualized tax, legal, or investment advice. Consult with a qualified professional about your specific situation.

How Physicians and Dentists Can Slash Self-Employment Taxes by Electing S Corporation Status

How Physicians and Dentists Can Slash Self-Employment Taxes by Electing S Corporation Status
Self-employed healthcare professionals, whether you’re a dentist in private practice, a physician running a solo clinic, or an allied health practitioner building your own brand, face a heavy self-employment tax burden. With Social Security and Medicare taxes totaling 15.3% on net earnings, the impact on your take-home pay can be significant. Electing S Corporation status for your practice can reduce that tax load and help you keep more of your hard-earned income.

In this comprehensive guide, we’ll walk through everything you need to know, from the basics of self-employment taxes to a step-by-step roadmap for converting your practice to an S Corp. We’ll also provide best practices for bookkeeping, payroll setup, and IRS filings, plus a real-world example of how an S Corp election can translate into thousands of dollars in annual savings for doctors and dentists. Ready to optimize your tax strategy? Let’s dive in.

Table of Contents
Understanding Self-Employment Taxes
What Is an S Corporation?
Key Benefits for Healthcare Professionals
Eligibility & Considerations
Step-by-Step Conversion Process
Real-World Tax-Savings Example
Bookkeeping & Payroll Best Practices
Next Steps & How We Can Help
Disclaimer
1. Understanding Self-Employment Taxes
Self-employment tax covers both the employer and employee portions of Social Security (12.4%) and Medicare (2.9%), totaling 15.3%. As a self-employed physician or dentist, you’re responsible for paying the full amount on your net practice profits. Here’s how it breaks down:

Social Security Tax (12.4%) applies on net earnings up to the annual wage base limit (for 2025, $176,100).
Medicare Tax (2.9%) applies on all net earnings, with an additional 0.9% surtax for incomes above $200,000 (single) or $250,000 (married filing jointly).
Example: If your net practice income is $200,000, you owe roughly $30,600 in self-employment tax alone (15.3% of $200,000). By contrast, as an S Corp, only your salary is subject to payroll taxes; distributions avoid the employer/employee rate, saving you 15.3% on that portion.

2. What Is an S Corporation?
An S corporation is a special tax election available to eligible corporations and LLCs. By filing IRS Form 2553, your practice can be taxed as an S Corp. Key characteristics include:

Pass-through taxation: profits and losses flow through to your personal return (Form 1040), avoiding double taxation.
Reasonable salary requirement: owners must pay themselves a market-based salary, subject to payroll taxes.
Owner distributions: shareholders receive distributions not subject to self-employment or payroll taxes, reducing overall tax liability.
Not every healthcare practice is suited for S Corp status. You must weigh administrative complexity, state rules, and the need for diligent payroll compliance before electing.

3. Key Benefits for Healthcare Professionals
Electing S Corp status can yield significant advantages for doctors, dentists, and allied health practitioners who meet eligibility requirements:

Self-Employment Tax Savings: Only W-2 salary is subject to FICA; distributions are exempt from the 15.3% Self-Employment Tax.
Income Flexibility: Optimize the ratio of salary vs. distribution to balance tax savings with retirement plan contributions.
Retirement Plan Opportunities: Contribute to a 401(k) or SEP IRA based on salary, potentially boosting deductible retirement savings.
Professional Credibility: Operating as a corporation can enhance perceived professionalism with vendors, insurers, and patients.
On average, physicians and dentists might see an annual tax savings ranging from $5,000 to $25,000 (depending on income levels and reasonable salary benchmarks).

4. Eligibility & Considerations
Before proceeding, ensure your practice meets these criteria:

Entity type: You operate as an LLC or C corporation (to elect S Corp status).
Domestic business: All shareholders must be U.S. citizens or residents.
Single class of stock: You cannot issue preferred stock or special allocations.
Reasonable compensation: You can set and document a fair market salary for your role.
State compliance: Some states impose fees, franchise taxes, or disallow S Corp elections – confirm local regulations.
If you’re a solo practitioner or part of a small group, an S Corp election often makes sense. Larger group practices may instead consider professional corporation (PC) structures with similar benefits.

5. Step-by-Step Conversion Process
Step 1: Entity Evaluation & Agreement Update
Begin by reviewing your existing entity documents. If you practice as an LLC, confirm that your operating agreement allows for an S Corp election. If necessary, amend your agreement to include all owners/shareholders and designate equity interests.

Step 2: QuickBooks & Bookkeeping Setup
Accurate accounting is critical. Use QuickBooks (or your preferred bookkeeping software) to establish separate accounts for payroll, distributions, and operating expenses. Engage an advisor or CPA to configure:

Chart of accounts aligned with S Corp requirements.
Payroll vendor integration for W-2 processing.
Automated reports to track salaries vs. distributions.
Step 3: File IRS Form 2553
Complete and submit Form 2553 no later than two months and 15 days after the beginning of the tax year you want the election to take effect. Key fields include:

Election date and effective tax year.
Shareholder signatures and consent.
Reasonable compensation method description.
Your CPA can handle filing; confirm mailing addresses and timely submission to avoid defaulting back to sole proprietor status.

Step 4: Establish Reasonable Salary
The IRS requires S Corp owners to receive “reasonable compensation” for services rendered. To determine a fair salary:

Research market rates for your specialty and region.
Document your time allocation between clinical, administrative, and management duties.
Maintain payroll records: including pay stubs, quarterly filings (Form 941), and W-2 issuance.
Any net profits above your W-2 salary can then be distributed as shareholder distributions, free from Medicare and Social Security payroll taxes.

Step 5: Quarterly Payroll & Estimated Tax Payments
Run payroll at least monthly for yourself and any staff.
Deposit payroll taxes (federal and state) on schedule using the Electronic Federal Tax Payment System (EFTPS).
Continue making quarterly estimated tax payments on distributions and other non-wage income.
Staying current on payroll and estimated taxes prevents underpayment penalties and interest.

Step 6: Annual Compliance & Reporting
File Form 1120-S (U.S. Income Tax Return for an S Corporation) by March 15 (or extension).
Provide each shareholder with Schedule K-1 reflecting their share of profits, deductions, and credits.
Maintain corporate minutes for elections, distributions, and shareholder meetings.
Work with your CPA to calendar deadlines and ensure state-level filings (annual reports, franchise taxes) are satisfied.

6. Tax-Savings Example
Dr. Smith is a solo dentist in Florida. Her net practice income is $180,000 annually. Prior to S Corp election, she paid:

Self-Employment Tax (15.3% on $180,000): $27,540
Federal & State Income Tax (assume 24%): $43,200
Total Tax Burden: $70,740
After converting to an S Corp:

Reasonable Salary: $100,000 → Payroll tax (15.3%): $15,300
Owner Distribution: $80,000 → No payroll tax
Federal & State Income Tax (24% on $180,000): $43,200
Total Tax Burden: $58,500
Annual Tax Savings: $12,240 (17% reduction in combined burden). Even after accounting for payroll service fees and additional bookkeeping, Dr. Smith nets over $10,000 more per year.

7. Bookkeeping & Payroll Best Practices
Segregate Accounts: Maintain dedicated bank accounts for payroll and distributions to avoid commingling.
Document Everything: Keep copies of corporate minutes, election consents, and payroll reports.
Engage Professionals: Partner with a CPA experienced in healthcare S Corps and a payroll provider familiar with medical practices.
Review Quarterly: Compare actual distributions vs. planned; adjust salary on an annual basis to remain reasonable.
Automate Where Possible: Use integrated software for bookkeeping, payroll, and tax filings to reduce manual errors.
Following these guidelines will ensure your S Corp structure remains compliant and continues to deliver tax-efficient results.

8. Next Steps & How We Can Help
Ready to explore an S Corp election for your healthcare practice? Here’s how to move forward:

Schedule a complimentary strategy call: Book Now
Learn about our process and team: Our Process | About Us
At Mainstay Capital, we specialize in financial planning for physicians, dentists, and other healthcare professionals. Our customized approach helps you reduce your tax burden, strengthen retirement planning, and build lasting wealth.

9. Disclaimer
This blog post is for educational purposes only and does not constitute tax or legal advice. Please consult a qualified CPA or attorney before making any entity election or tax-planning decision. Past savings examples do not guarantee future results. Mainstay Capital is a Registered Investment Advisor; see our About Us page for full disclosures.

Year-End Tax Strategies for Physicians: Roth Conversions & Tax-Loss Harvesting to Diversify Your Portfolio

As a busy physician, dentist, or healthcare professional, your focus is on patient care. But smart financial planning—especially as we approach year-end—can help you build lasting wealth and minimize taxes without adding complexity to your life. In this comprehensive guide, we’ll explore two time-sensitive, high-impact strategies:

Strategic Roth IRA Conversions to lock in tax advantages.
Capital loss harvesting and tax-free gains realization to rebalance and diversify.
These tactics leverage specific 2025 tax events to maximize your after-tax wealth and reduce future tax burdens. Let’s dive in.

Why Year-End Planning Matters for Healthcare Professionals
Doctors, dentists, and allied health specialists often find themselves in higher tax brackets due to elevated incomes. Without proactive planning, you could face substantial tax bills that erode your hard-earned gains. By focusing on year-end strategies, you can:

Minimize taxable income in the current year.
Convert tax-deferred assets into tax-free buckets.
Harvest losses and gains to rebalance without extra tax.
Achieve long-term portfolio diversification.
These steps not only reduce your tax liability but also set you up for smoother financial growth and easier retirement planning.

Strategy 1: Strategic Roth IRA Conversions
What Is a Roth IRA Conversion?
A Roth IRA conversion moves assets from a Traditional IRA (or other tax-deferred accounts) into a Roth IRA. In a conversion, the transferred amount is added to your taxable income, but future growth and withdrawals (after age 59½ and following the five-year rule) are tax-free.

Why It Works for High-Income Physicians
Physicians and dentists who make generous charitable donations or have large itemized deductions in the current year can “create” tax space—also known as deduction room—to absorb a Roth conversion without boosting their tax bracket. For example, a substantial donation to a Donor-Advised Fund (DAF) reduces your taxable income, allowing you to convert a significant IRA balance into Roth status at a low effective federal rate.

Step-by-Step Roth Conversion Guide
Review Itemized Deductions: Identify any one-time, large deductions (e.g., DAF gift, qualified medical expenses, state tax pre-payments).
Calculate Conversion “Shield”: Determine how much deduction room is available before you hit the next tax bracket.
Select IRA Amount: Choose a conservative conversion amount—ideally equal to or slightly below your deduction room—to avoid bracket creep.
Execute Conversion: Coordinate with your custodian to transfer assets from Traditional IRA to Roth IRA by year-end.
Confirm Reporting: Ensure Form 8606 accurately reflects the conversion on your tax return.
Real-World Example (Name anonymized to protect the client)
Dr. Smith, a cardiologist, donated $50,000 to a DAF in 2025. This gift reduced her taxable income, opening a “conversion shield” under the 22% federal bracket. By converting $50,000 from her Traditional IRA to a Roth IRA, she accelerated tax-free growth on that balance, ensuring no additional federal tax was due on the conversion.

Outcome: Dr. Smith secured tax-free retirement funds and preserved her lower tax bracket status. Over 20 years, assuming a 6% annual return, those converted funds could grow by more than $160,000 tax-free.

Strategy 2: Tax-Loss Harvesting & Tax-Free Gains for Diversification
Understanding Capital Losses and Gains
When you sell an investment for less than your cost basis, you realize a capital loss. These losses offset capital gains dollar-for-dollar—and up to $3,000 per year against ordinary income. Unused losses carry forward indefinitely.

Conversely, selling investments at a gain triggers capital gains tax. Long-term gains (assets held over 1 year) benefit from favorable rates (0%, 15%, or 20%), but they still eat into your returns.

Why Leverage Losses Now?
If you’ve incurred significant losses—such as a crypto investment write-off—you can harvest equivalent gains from appreciated assets without paying tax, effectively “rebalancing” your book.

Two-Part Diversification Plan
Rebalance: Realize a portion of gains in your accounts to meet target allocations.
Reduce Concentration Risk: Sell high-concentration holdings (e.g., large position in a single stock) to diversify across sectors or low-cost index funds.
Case Study: Dr. Patel’s Apple Stock Position (Anonymized)
Dr. Patel held $360,000 of Apple shares with massive unrealized gains. Meanwhile, a prior $100,000 crypto loss sat unused. By harvesting $100,000 of gains—$23,000 at Custodian A and $77,000 from Apple—she net zeroed her taxable gains. This allowed a $200,000+ sale of Apple to diversify into a broad market ETF, all without incurring new tax.

Implementation Checklist
Obtain a formal loss report for crypto or other losses.
Identify accounts with gains and calculate netting potential.
Prioritize sales by highest cost basis to minimize realized gain per dollar sold.
Execute trades before year-end, ensuring settlement dates fall within the tax year.
Document all transactions for your tax preparer.
Compliance & Best Practices for RIA-Recommended Strategies
As a Registered Investment Advisor, we adhere strictly to marketing and fiduciary regulations. All examples in this guide are hypothetical and for illustrative purposes only. Before implementing any strategy, please consult with your tax advisor to confirm suitability based on your individual circumstances.

Integrating These Strategies into Your Financial Plan
Year-end tax moves should align with your overall financial objectives. At Mainstay Capital, we follow a disciplined financial planning process that ensures every action—whether Roth conversion or tax-loss harvesting—fits within your long-term roadmap.

Our holistic approach covers:

Cash flow and debt management.
Retirement and college funding.
Investment management and asset allocation.
Tax optimization and insurance reviews.
Learn more about our comprehensive services designed for healthcare professionals.

Getting Started: Next Steps for Busy Healthcare Professionals
Ready to seize these year-end opportunities? Here’s how to proceed:

Gather your 2025 tax documents: charitable donation receipts, cost basis reports, and prior-year tax returns.
Schedule a brief strategy call with our team to review your deduction room and loss carryforwards.
Approve the proposed Roth conversion amount and loss/gain harvesting plan.
Monitor execution and confirm trade dates to ensure inclusion in the current tax year.
At Mainstay Capital, we make it simple. Who we are and what drives us is helping physicians and dentists achieve financial clarity and confidence.

Schedule your year-end strategy session today: Book a call with our team.

Disclaimer: This blog post is for informational purposes only and does not constitute personalized investment, tax, or legal advice. Please consult your own tax advisor or attorney before implementing any strategy described herein.

Why Liquidity Matters: A Guide to Avoiding Illiquid Investment Traps for Healthcare Professionals

As a physician, dentist, or healthcare professional, you understand the importance of preparedness, whether it’s stocking the clinic with essential supplies or setting aside funds for emergencies. Yet when it comes to your investment portfolio, many overlook a critical factor: liquidity. In an era where alternative investments and private equity seem attractive, tying up capital for months—or even years—can jeopardize your financial flexibility. This comprehensive guide will show you how to assess liquidity in investments, avoid common pitfalls of illiquid assets, and build a resilient portfolio suited to a healthcare career.

Table of Contents
Understanding Liquidity and Why It Matters
Pitfalls of Illiquid Investments
Case Studies: Lessons from Real Investors
Evaluating Liquidity in Your Portfolio
Strategies for Physicians and Dentists
Tax Considerations and Harvesting Losses
Ongoing Monitoring and Rebalancing
Conclusion and Next Steps
1. Understanding Liquidity and Why It Matters

Liquidity refers to how quickly an asset can be converted into cash without significantly affecting its price. Highly liquid assets—such as publicly traded stocks and bonds—can be sold within days or even minutes. Illiquid assets, including private equity, fractional real estate, or collectible art, often require lengthy sale processes or special markets.

Key Points:
Emergency Needs: Healthcare professionals may face sudden expenses, from malpractice premiums to practice upgrades.
Tax Planning: Selling assets before year-end can help manage gains and losses for tax efficiency.
Market Shifts: Liquidity allows you to adjust exposures when economic conditions change.
2. Pitfalls of Illiquid Investments

While private equity and alternative investments can offer higher returns, they carry unique risks:

No Ready Market: Without a secondary market, you may struggle to exit at a fair price.
Extended Lock-Up Periods: Commitments to venture capital or real estate deals can last 10–15 years.
Valuation Uncertainty: Quarterly or annual appraisals may not reflect true market value.
High Fees: Management and performance fees can erode returns even during lock-up periods.
3. Case Studies

Consider two scenarios that highlight the importance of liquidity:

Case Study A: The Art Collector

An entrepreneur invested in expensive artwork through fractional platforms. When a large tax bill came due, he discovered there was no active market for his shares. Forced to accept deep discounts, he realized the value of liquidity over speculative upside.

Case Study B: Private Equity Commitments

A dentist allocated a portion of his nest egg to a private equity fund promising 15% annualized returns. After three years, the fund’s valuations dropped, and distributions remained delayed. Unable to rebalance or pivot, he saw paper gains evaporate and struggled to harvest tax benefits until the next fund close.

4. Evaluating Liquidity in Your Portfolio

Before you commit capital, run a liquidity audit:

List All Assets: Include cash, marketable securities, retirement accounts, private investments, real estate, and collectibles.
Estimate Exit Times: Assign a timeline—from same day (cash) to decades (certain fund commitments).
Assess Lock-Up Provisions: Read subscription agreements for private funds to understand redemption windows.
Overlay Financial Goals: Match liquidity profiles to planned expenses—buying a practice, funding college, retirement transitions.
5. Strategies for Physicians and Dentists

To maintain flexibility while pursuing growth, consider these tactics:

Diversify Across Liquidity Buckets: Allocate portions of your portfolio to ultra-liquid (cash, money markets), liquid (stocks, bonds), and less liquid (private equity, real estate) assets.
Maintain an Emergency Reserve: Keep 6–12 months of cash or liquid equivalents accessible for unexpected expenses.
Stagger Commitments: If investing in alternative assets, choose funds with different vintages or maturities to avoid simultaneous lock-up expirations.
Partner with a Fiduciary Advisor: Work with a Registered Investment Advisor who understands your unique practice cash flows and can tailor a balanced portfolio.
6. Tax Considerations and Harvesting Losses

Illiquid assets can generate unrealized losses that might be used strategically:

Tax-Loss Harvesting: Realizing losses on underperforming assets can offset gains elsewhere.
Carryforward Benefits: Unused losses may be carried forward to future tax years.
Consult a Tax Professional: Coordinate with your CPA or tax advisor to optimize timing and reporting.
7. Ongoing Monitoring and Rebalancing

A portfolio isn’t “set and forget.” Regular reviews ensure liquidity needs are met:

Quarterly Check-Ins: Evaluate market conditions and any practice-related cash demands.
Rebalance Schedule: Don’t let one asset class dominate—automate rebalancing if possible.
Liquidity Drills: Simulate potential cash-out scenarios to test your readiness.
8. Conclusion and Next Steps

Liquidity is often the overlooked foundation of a resilient investment strategy. For healthcare professionals—whose careers involve unique income patterns and unexpected costs—ensuring access to cash without sacrificing growth is non-negotiable. By auditing your portfolio, diversifying across liquidity buckets, and partnering with a trusted fiduciary advisor, you can avoid the purgatory of illiquid investments and build a plan that supports your personal and professional goals.

Ready to optimize your portfolio’s liquidity and align your investments with your life as a physician or dentist? Contact MainStay Capital today for a complimentary discovery call.

Disclaimer: This content is for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Please consult your financial or tax advisor before making investment decisions.

Maximizing Tax Benefits: A Physician’s Guide to Converting Your Home to a Rental and Leveraging Section 121 + 1031 Exchanges

Maximizing Tax Benefits: A Physician’s Guide to Converting Your Home to a Rental and Leveraging Section 121 + 1031 Exchanges
As a busy physician, dentist, or healthcare professional, you dedicate countless hours to patient care. Yet, your personal finances—especially your home—can also work harder for you. By strategically converting your primary residence into a rental property, you can unlock powerful tax advantages: the Section 121 capital gains exclusion and the 1031 like-kind exchange. This combined approach may help you exclude a large portion of your gain from tax and defer the remainder to another investment property. In this comprehensive guide, we’ll walk through each step, timeline, and requirement—simplified for busy doctors—so you can confidently pursue this wealth-building strategy.

Why Convert Your Home to a Rental Property?
Before diving into the technical rules, let’s consider the “why.” Rental real estate can provide:

Consistent passive income that supplements your practice earnings.
Additional depreciation deductions to offset taxable income.
Opportunity to diversify your investment portfolio away from cash and equities.
Long-term capital appreciation in growing real estate markets.
By timing the sale correctly and employing the Section 121 exclusion alongside a 1031 exchange, you can keep more of your profits working for you in the real estate you truly want to hold.

The Building Blocks: Section 121 Exclusion & 1031 Exchange Explained
Section 121 Capital Gains Exclusion
Under IRC Section 121, when you sell your primary residence, you may exclude up to:

$250,000 of capital gain if filing single.
$500,000 of capital gain if married filing jointly.
To qualify, you must have owned and used the home as your primary residence for at least two of the five years immediately preceding the sale.

Section 1031 Like-Kind Exchange
A 1031 exchange allows you to defer capital gains taxes by reinvesting proceeds from a rental (or investment) property sale into another “like-kind” property. Key points:

The replacement property must be identified within 45 days of sale.
Closing on the replacement property must occur within 180 days.
Both relinquished and replacement properties must be held for investment or business use.
This deferral continues until you dispose of the replacement property without another exchange or trigger depreciation recapture.

Who Should Consider This Strategy?
This plan is particularly well-suited for:

Physicians, dentists, and specialists with high marginal tax rates seeking capital gains relief.
Young healthcare professionals looking to build a rental property portfolio.
Medical practitioners planning to move for a new position or retirement.
Those comfortable managing a rental or willing to engage a property manager.
If you expect significant appreciation in your current home, this dual approach can help preserve exclusion benefits while extending your deferral horizons.

Step-By-Step Timeline & Eligibility Requirements
1. Meet the Section 121 Ownership & Use Test
You must have owned and lived in the home for at least 2 of the last 5 years prior to sale. These years need not be consecutive. If your move is driven by a new assignment or residency, track your move dates carefully.

2. Convert Primary Residence to Rental
Begin renting the home—document lease agreements and tenant activity.
Start treating it as an investment property for bookkeeping.
Don’t convert more than three years before sale, or you may jeopardize the Section 121 exclusion.
3. Hold as Rental for 1–3 Years
To capture both benefits, most tax planners recommend renting the property for 12–36 months. This window:

Helps substantiate investment intent for a later 1031 exchange.
Keeps you within the 3-year look-back for Section 121.
4. Sell & Exclude Gains Under Section 121
At sale, exclude up to $250K/$500K in gain as long as your move-out date is within three years. Document your original purchase price, improvements, and selling expenses to calculate net gain precisely.

5. Deploy a 1031 Exchange for Gains Above Exclusion
Any remaining gain above your exclusion can be deferred via a 1031 exchange. Engage a qualified intermediary before closing to hold proceeds and identify suitable replacement properties within 45 days.

Illustrative Case Study: Dr. Patel’s Transition
Dr. Anita Patel, an orthopedic surgeon, purchased her home for $600,000 in 2016. By 2023, its market value soared to $1,200,000—an unrealized gain of $600,000.

Dr. Patel lived in the home from 2016–2021 (5 years), then relocated for fellowship.
She converted the property to a rental in January 2022, leasing it to a young family.
In December 2023, after 23 months of rental use, she listed the property for sale.
At closing, she excluded $500,000 of gain (married filing jointly) under Section 121.
The remaining $100,000 gain was rolled into a 1031 exchange to buy a multi-family property closer to her new practice.
By combining these provisions, Dr. Patel preserved half a million dollars of wealth and deferred taxes on the rest, all while growing her rental portfolio.

Additional Tax Benefits of Rental Ownership
Beyond gain exclusion and deferral, rental ownership offers ongoing tax advantages:

Depreciation Deductions: Residential rental property depreciates over 27.5 years—reduce taxable rental income each year.
Operating Expense Write-Offs: Property management fees, repairs, maintenance, insurance, and utilities become deductible business expenses.
Interest Deduction: Mortgage interest on financing remains deductible against rental income.
Advanced Tactic: Selling to an S Corporation
High-earning physicians sometimes consider selling the converted rental property to a wholly-owned S corporation before the three-year mark. Benefits may include:

Resetting depreciable basis under corporate ownership.
Preserving the Section 121 exclusion if structured properly.
Potential payroll tax efficiencies on rental income distributions.
However, this strategy involves complex entity planning. Always consult a tax advisor familiar with S corporation rules and state real estate regulations.

Deep Dive: Navigating the 1031 Exchange Process
Qualified Intermediary & Documentation
You must use a qualified intermediary (QI) to hold sales proceeds. Never touch the cash yourself—doing so can invalidate the exchange.

45-Day Identification Rule
Within 45 days of your sale’s closing, you must submit a written list of replacement properties to your QI. You can identify:

Up to 3 properties regardless of value.
Any number of properties provided their total value does not exceed 200% of the relinquished property’s net sale price.
180-Day Exchange Completion
Your QI must close on one or more of the identified properties within 180 days. Extensions are not available—plan transactions with realistic timelines.

Implementation Checklist for Doctors & Dentists
Confirm you meet the 2-of-5-year Section 121 residence test.
Engage a property manager or set up robust recordkeeping for your new rental.
Select a qualified intermediary for your 1031 exchange—research credentials and reviews.
Discuss entity considerations (individual vs. S corporation) with your CPA.
Identify potential replacement properties early—analyze cash flow, cap rate, and location.
Track all improvement costs and holding expenses for accurate basis calculation.
Consult a real estate attorney for local landlord-tenant law compliance.
Why Work with Mainstay Capital?
At Mainstay Capital, we specialize in helping healthcare professionals maximize real estate tax strategies. Our collaborative process includes:

Personalized portfolio analysis.
Coordination with your CPA, attorney, and qualified intermediary.
Ongoing asset management support.
Clear performance reporting and tax-impact projections.
Learn more about Our Process and how we partner with you at every step.

Explore our range of Services tailored for busy physicians and dentists seeking tax-efficient real estate solutions.

Next Steps & Getting Started
Ready to put your home to work? Here’s how to begin:

Visit our About Us page to learn about our team of CPAs, attorneys, and real estate specialists.
Schedule a complimentary discovery call to assess your unique situation.
Collect your home purchase docs, improvement records, and current rental analysis.
We’ll craft a step-by-step plan to convert, rent, and exchange—maximizing exclusions and deferrals.
Your next chapter of real estate investing starts now. Partner with Mainstay Capital to safeguard your wealth and optimize tax efficiency.

Disclaimer
This blog post is for educational purposes only and does not constitute tax, legal, or investment advice. Always consult with a qualified tax advisor, attorney, or financial professional before implementing any strategies described herein.

Finding Your Social Security Sweet Spot: A Guide for Young Healthcare Professionals

As a physician, dentist, or other healthcare professional early in your career, you’re laser-focused on training, patient care, and building your practice. Retirement planning—including the decision of when to claim Social Security—probably feels like a puzzle for decades down the road. Yet, the timing of your Social Security claim can have a profound impact on your lifetime income, tax situation, and legacy goals.

In this comprehensive guide, we’ll explore:

Why “delay forever” isn’t always the best strategy
How sequence of returns risk interacts with Social Security timing
Balancing mortality risk and break-even analysis
Actionable steps for high-earning medical professionals
1. The Traditional Case for Delaying Benefits

Conventionally, financial advisers encourage you to wait until age 70 to claim, because your monthly benefit grows by about 8% per year after your “full retirement age” (FRA). For a dentist with a projected benefit of $3,000 at FRA—say age 67—waiting to 70 boosts that to approximately $3,720 monthly. Strong, right?

But averages can deceive. While actuarial tables assume you’ll live to 85 or beyond, they don’t capture your individual health profile, family longevity patterns, or career-related stress factors. And—crucially—they don’t factor in what happens to your retirement portfolio in the meantime.

2. Introducing Sequence of Returns Risk

Imagine two doctors, both age 67, each with a $600,000 investment portfolio and identical spending needs. One claims Social Security at 67, using the benefit as a “floor” for essential expenses and drawing only modestly from her portfolio. The other delays to 70 but must tap investments more heavily in those three years. If the market tumbles early—say a 20% drop in the first two years—the delayed claimer’s portfolio could be depleted faster, jeopardizing her ability to stay retired if markets stay weak.

Key Takeaway:

Delaying benefits magnifies sequence of returns risk, especially in volatile markets. Your personalized break-even age may differ from the average 80–82 often cited in textbooks.

3. Mortality Risk vs. Longevity Risk

Longevity risk is the fear of outliving your assets. Mortality risk is the flip side—the chance you may not live long enough to recoup the extra benefits from delaying. While a 40-year-old surgeon might have a reasonable life expectancy, consider:

Family health history (cardiovascular events, early-onset conditions)
Specialty-related stress levels (emergency medicine vs. dermatology)
Work-related injury risks

For someone with elevated mortality risk factors, claiming at 67 or even 62 can provide more guaranteed lifetime income and reduce the psychological burden of “what if I don’t make it?”

4. Crafting a Personalized Claiming Strategy

Here’s a step-by-step framework tailored for high-earning healthcare professionals:

Assess Your Health & Family History
Gather medical check-ups, family longevity patterns, and specialty-specific risks.
Run Your Portfolio Stress Tests
Model early, average, and late retirements using historical market data.
Incorporate a conservative withdrawal rate (3–4%) when delaying.
Calculate Your Break-Even Age
Compare cumulative benefits from ages 62, FRA, and 70.
Adjust for taxes, cost-of-living adjustments (COLAs), and spousal considerations.
Factor in Taxes & Cash Flow Needs
Higher early benefits can fill gaps and reduce portfolio withdrawals (and taxable income).
Delaying can bump you into higher tax brackets later if you also draw down IRA/Roth balances.
Consult Your RIA Team
A holistic view—Social Security, investments, insurance, and tax planning—is essential.
5. Common Pitfalls & How to Avoid Them
Over‐reliance on online calculators
Most ignore sequence risk and personal health factors.
Deferring all the way to 70 without backup cash reserves
Create a short‐term bond or CD ladder to cover essential spending if markets sour.
Neglecting spousal strategies
A higher earner’s late claim can boost survivors’ benefits—coordinate your claiming ages.
Ignoring taxation
Higher Social Security benefits can increase your Medicare premiums (IRMAA).
6. Next Steps for Action

Ready to refine your Social Security claiming plan?

Visit our Our Process page to see how we integrate benefits modeling with investment management.
Learn about our tailored Services for medical professionals.
Meet the team and read client stories on our About Us page.
Contact us today for a complimentary Social Security strategy session.
© 2025 Mainstay Capital. All rights reserved. Content is for educational purposes and does not constitute personalized financial advice.

Why Downside Protection ETFs Fall Short for Young Healthcare Professionals—and Smarter Ways to Balance Risk and Growth

Why Downside Protection ETFs Fall Short for Young Healthcare Professionals—and Smarter Ways to Balance Risk and Growth
Disclaimer: Past performance is not indicative of future results. Investing involves risk, including the possible loss of principal.

As a physician, dentist, or other healthcare professional beginning your career, building a robust investment portfolio is critical for your long-term financial health. The market offers a range of products promising “downside protection,” including a popular group of downside protection ETFs. These funds aim to cap losses in a downturn while still participating modestly in market gains. But do they truly deliver the protection and growth you need? In most cases, the answer is no.

In this in-depth guide, we’ll explore:

How downside protection ETFs work
Why they often underdeliver for young professionals
Cost, complexity, and hidden drawbacks
Traditional strategies that may serve you better
Steps to build a balanced, growth-oriented portfolio
1. What Are Downside Protection ETFs?
Downside protection ETFs (also called “buffer ETFs” or “defined outcome ETFs”) use options and derivatives to create a floor under losses—typically at the expense of capping upside returns. In a given 12-month period, these funds may limit your loss to, say, 10%, while also capping your gain at 6% or 7%. The theory is appealing: reduce extreme losses without giving up all market participation.

Key features:

Buffered downside loss in a defined period
Capped upside return, usually around 6–7%
Rolling annual windows or fixed terms
Option-based strategies requiring active rollovers
However, data shows these caps bite hard: 58% of 12-month S&P 500 returns exceed 7%—meaning you miss out on the majority of positive years. And while 71% of rolling windows are positive, you sacrifice material upside for limited downside relief.

2. Why Young Healthcare Professionals Are Drawn to “Protected” ETFs
Physicians and dentists often carry substantial student debt, variable compensation, and delayed peak earning years. Naturally, the promise of “safeguarding” your first significant investments is tempting. You want:

Peace of mind when markets swing wildly
Preservation of capital for short-term goals (residency start, down payment)
Exposure to equities for long-term growth
Downside protection ETFs market directly to risk-averse investors, touting simplicity and the allure of “set it and forget it” protection. But the reality is more nuanced—and often underwhelming.

3. The Hidden Costs and Complexities
3.1 Expense Ratios and Trading Costs
These ETFs typically charge higher expense ratios—often 0.50% to 1.00%—to cover option premiums and strategy fees. Compare that to broad market index ETFs at 0.03% to 0.10%. Over decades, those extra basis points compound to tens of thousands of dollars in eroded returns.

3.2 Timing and Rollover Risk
The protection works only if you hold from the designated start date to the end date. Buying “mid-cycle” means you pay for protection you can’t fully reap. Market moves between roll dates can leave you under-protected or over-paying for options that have already drifted.

3.3 Opportunity Cost of Capped Gains
In strong bull markets, your upside limit kicks in early. Historical data: 58% of rolling 12-month S&P periods exceed a 7% gain. By capping that, you sacrifice substantial compound growth—precisely what young investors need most.

4. Comparing to Traditional Risk Management Strategies
Rather than complex buffers, many advisors recommend straightforward diversification:

Equities (U.S., international, small cap, sector tilts)
Fixed income (Treasuries, investment-grade bonds, TIPS)
Alternative assets (real estate, commodities, real-asset funds)
Regular rebalancing to target allocations
Why these often outperform “protected” ETFs over time:

Lower fees and transparent holdings
No hidden timing requirements
Consistent exposure to market gains
Ability to tailor risk using bond ladders, duration management
5. Smarter Alternatives for Young Healthcare Professionals
5.1 Target-Risk Portfolios
A diversified mix of stocks and bonds matched to your risk tolerance. Rebalance annually to maintain your desired allocation. This simple approach has beaten many fancy structures over the long run.

5.2 Bond Ladders for Short-Term Goals
For dollars earmarked for a home down payment or expected tuition, build a series of short-to-medium-term bonds or CDs. You gain predictable income and principal return without equity volatility.

5.3 Tax-Efficient Retirement Accounts
Maximize your 401(k)/403(b), IRA, or Roth IRA to shelter growth from taxes. Equity-heavy allocations here compound faster when left to grow tax-free or tax-deferred.

5.4 Dollar-Cost Averaging and Automatic Investing
Consistent contributions smooth out volatility. You buy more shares when prices fall, fewer when they rise. Over decades, this disciplined habit can reduce risk without sacrificing growth.

6. Building Your Customized Plan
No two healthcare careers are identical. Your plan should reflect:

Current debt levels and repayment schedules
Short-term liquidity needs (residency, relocation, startup costs)
Long-term goals (early retirement, practice buy-in, legacy planning)
Risk tolerance and time horizon
At Mainstay Capital, our process begins with understanding your unique situation. From there, we craft a diversified strategy grounded in low-cost ETFs, bonds, and alternatives—no unnecessary complexity or hidden caps.

7. Step-by-Step Implementation
Define your goals: short, medium, and long term.
Assess your risk tolerance honestly.
Choose low-cost broad market ETFs for equities.
Build a bond ladder or select diversified bond funds.
Consider alternative allocations (real assets, private markets) if suitable.
Automate contributions and rebalance at predetermined intervals.
Review annually or upon life changes (promotion, practice sale).
Need help? Learn more about our services and how we guide young healthcare professionals toward financial confidence.

8. Conclusion
Downside protection ETFs may sound appealing, but their capped upside, higher fees, and timing pitfalls often leave young investors worse off over the long run. For most physicians and dentists just starting out, simple diversification, bond ladders for short-term goals, and disciplined contributions provide more growth potential and fewer surprises.

Your financial future deserves more than a promise of limited loss and capped gain. It needs a clear plan, low costs, and a portfolio built around your goals. Discover how Mainstay Capital can help you chart the path toward lasting financial health—no complex buffers required.

Disclaimer: Investing involves risk, including possible loss of principal. Consult your advisor before making investment decisions. Past performance is not indicative of future results.

Author: Marcus P. Miller, CFP®, MBA, EA