What Physicians Need To Know About Social Security


By Jeffrey J. Brown, MD, MBA, CFA®, CFP®


When you retire, you may have several sources from which to draw your income. These sources might include taxable investment accounts you’ve funded with after-tax dollars, tax-deferred retirement accounts such as a 401(k) or IRA, Roth accounts, a pension plan, and Social Security. Each income source has its own withdrawal requirements and unique tax characteristics, so it’s important to structure your withdrawal strategies appropriately.


This is easier said than done, but failing to do so can result in unpleasant consequences, such as drawing down your income sources too quickly or paying more in taxes than necessary. In the following article, we’ll cover some of the basics, but we also recommend working with a financial advisor to help structure your own assets appropriately.


Social Security Benefits

If you’re wondering when to begin taking Social Security benefits, one important factor to consider is the number of years you’ve worked. Social Security payments are calculated by averaging your indexed monthly income from the 35 years you earned the most money.

If you’ve worked less than 35 years, the Social Security Administration will insert zero dollars of income for the years you didn’t work, thereby lowering your benefit amount. If you earned significantly less in your first few years of employment, your benefit amount will increase the more years you work at a higher income, as the lower-earning years fall off the list.

To estimate the amount of your Social Security payments, you can create a mySocialSecurity account that will allow you to input information about your unique situation. If the estimated amounts are lower than anticipated, you may be able to increase your monthly benefits by working longer and/or waiting to take your benefits. Delaying the onset of Social Security benefits increases the payments for the rest of your life and is often a good strategy; however, the advice may vary depending on your specific situation. Situations that warrant more consideration include:

  • Families with two working spouses

  • Couples who are more than 10 years apart in age

  • Unique cash flow needs

  • Families eligible to take Social Security with young children

  • Poor overall health status

How Does Social Security Impact Other Income Sources?

A frustrating part of retirement planning for many physicians is navigating the tax implications. If your income in retirement is above a certain threshold, your Social Security benefits will be subject to taxation at higher rates. Consideration and planning should also be focused on the interplay between Social Security benefits and required minimum distributions (RMDs).


Retirees actually have more options for tax planning in retirement than during their working years. Done properly, income withdrawal strategies allow retirees to engage in forward tax planning because they have more control over when and how much they pull from particular income sources.


Forward tax planning involves strategically structuring your investments and withdrawals so that, due to Social Security taxation formulas, your Social Security payments are not showing up on your tax returns. Up to 85% of your Social Security benefits can be taxed at your income tax bracket if your provisional income is not properly structured.


Partner With Experts Who Know What It’s Like

To properly structure your retirement assets and withdrawal strategies, you may need to partner with an expert. At Shearwater Capital, we provide investment and retirement advice to physicians because, as physicians ourselves, we know the challenges you and your family face when approaching retirement.


We want to help you make the decisions that will result in a better future with less stress about income withdrawal, Social Security taxation, and how to properly structure your assets. Contact us by calling (314) 434-4750, emailing contact@shearwatercapital.com, or scheduling an introductory phone call online to get started.


About Jeff

Jeffrey Brown is principal and chief investment officer at Shearwater Capital, LLC, a fee-only fiduciary financial advisory firm helping physicians and their families attain financial security using a scientific, evidence-based approach. Jeff has been a practicing radiologist for over 30 years and is currently chair of the Department of Radiology at Saint Louis University School of Medicine. He earned his bachelor’s degree from the University of California, Irvine and his medical degree from the University of California, San Diego. He has been named one of St. Louis’s Top Doctors every year since 2011 in St. Louis Magazine. Jeff saw a need for physician-tailored financial services and earned an MBA from Washington University in St. Louis, going on to found Shearwater Capital, LLC with fellow MBA classmate and radiologist, Eric Malden. Jeff is a Chartered Financial Analyst (CFA®) and CERTIFIED FINANCIAL PLANNER® (CFP®) practitioner. Learn more about Jeff by connecting with him on LinkedIn.