Retirement planning for physicians

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Physicians are often at a disadvantage when it comes to planning for retirement compared to other professionals, as they enter the workforce later in life and are typically heavily in debt. In fact, the average medical student graduates with over $ 200,000 in debt.

No matter where physicians are in their careers, it’s never too late to start planning for the day when they hang up their stethoscopes and retire. In addition to retirement, physicians also need to protect their family’s financial future with a strong estate plan that retains the wealth they have worked so hard to accumulate.

With a solid investment plan and a financial strategy that minimizes taxes, it is possible for physicians to achieve all of their financial dreams.

Learning objectives

How to prepare for retirement at all stages of your career

Estate Planning 101: Protecting Your Family’s Financial Future

Investment advice and tax minimization

Meet the panelist

Joël Greenwald, MD, CFP Greenwald wealth management

Follow these key steps to
ensuring a financially secure retirement

The # 1 question doctors ask about retirement is, “How much money do I need to retire?”

The answer can vary greatly depending on a multitude of factors, including age and spending levels. Creating long-term projections can be complicated, so doctors can rely on a simple rule of thumb, such as the 4% rule – essentially taking 4% out of your retirement savings each year – to simplify the rules. things.

Joel Greenwald, MD, CFP, says this kind of oversimplification can lead to running out of money in retirement. “Unfortunately, as with all rules of thumb, especially simple ones, they are not entirely reliable,” says Greenwald.

For example, the 4% rule only covers a maximum of 30 years of retirement. “People seem to extend that to 35 or 40 years of retirement, which can certainly happen now with people retiring earlier and especially with longevity,” he says. This, however, means that they will most likely be strapped for cash.

Additionally, the type of account holding the money may affect the calculations as taxes may take a larger portion of the money than expected. On the other hand, doctors can die with too much money, which means they may have missed out on many experiments for fear of running out of funds in retirement.

One of the best strategies for making sure you have the right amount of money is to ask a slightly different question. “It’s not, ‘How much can I (I) safely withdraw from a retirement nest egg? “Said Greenwald.” It’s, ‘How much do I have to save each year during my working years, during my accumulating years, to make sure I have enough money?’ “

In most cases, saving 20% ​​of your gross income allows you to retire in your 60s. And the fastest way to reach that 20% is to automatically invest each month in a growth-oriented brokerage account.

“The reason it has to be automatic is because a lot of people say, ‘OK, I’m going to go through the year, and at the end of the year, all the extra money I have, I (I’ll put) in my investment account, ”says Greenwald. “There you go, come on at the end of the year, there is no money for the investment account.” Automatic investing ensures that the money is not spent and, instead, builds up over time to grow retirement savings.

Another good strategy is to anticipate market downturns so that you don’t have to withdraw money from your investment accounts. “What some people advocate is to spend at least a year or two on cash or short-term bonds, so that when you retire or soon after, (if) the market goes down, you don’t. not to sell stocks to pay the bills. You have money on the side, “Greenwald says.

Physicians also need a long-term tax strategy to minimize the impact and should consult an accountant who is used to working with physicians on this matter. “Rather than just looking, ‘How can I save on this tax? “People need to see the big picture,” says Greenwald. “What things can you do in your life to save taxes? “

The other financial element that doctors often overlook is creating a solid estate plan. For younger, married doctors without children, having a financial power of attorney and a healthcare directive in place is probably sufficient. But for older, richer doctors, they’ll need a much more detailed plan that can include a revocable trust to hold their assets. Without a proper estate plan, a lifetime’s income can be diverted to taxes or withheld in court. A good plan ensures that your money is protected and goes to the people you want it to go to.

Solutions and takeaways:

Don’t rely on simplistic investment guidelines to fund your retirement.

Create a long-term investment plan that includes money for contingencies and market fluctuations.

Analyze your spending habits now to better understand your retirement needs.

Approach tax planning with a long-term view.

Build a rock solid estate plan to protect your wealth.

About Ian Crawford

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