Most professionals spend their days focused on tasks that have an immediate effect on their careers, building their success only to risk it all by forgetting to prepare a proper exit strategy for retirement. In the case of doctors, putting the needs of patients over their own may seem like the right thing to do – but instability should never be the result of a life spent providing healthcare for others. It is never too early to start planning for retirement, and although the process can be laborious, you will thank yourself that you sorted through the headaches ahead of time when the time comes. Following are five strategies for a smooth exit.
- Understanding Post-Retirement Cost Of Living – In most cases, costs of living drop upon reaching the age of retirement. By this time, mortgages are usually paid off, kids are out of the house working, and taxes drop to a minimum – which means that the popular idea of putting aside 70% of one’s income per year post retirement may be, ultimately, unnecessary. Of course, needs differ from person to person, so careful consideration is still needed when deciding how to budget sufficiently, but a healthy understanding of how retirement affects cost of living is vital to knowing exactly what to do.
- Utilizing A Wide Pool Of Investment – One common financial practice amongst doctors (no matter the income bracket) is to spread investments over a wide selection of Certificates of Deposit, usually offered at banks, that yield higher-than-usual interest rates upon maturity. By deciding to keep these investments untouched, the chance of growing your money increases, improving the probability of having a sizable amount of savings by the time retirement comes around. Although not totally risk-free, this investment method is less volatile than many other options available and is a sensible financial strategy even now during the uncertainty of the global coronavirus pandemic.
- Just One More Year – Deciding to work just one more year can make a big difference. Doing so can net a doctor more than $10,000 per year of retirement, which is quite a large yearly sum just for working one more year. That is enough money to buy a brand-new car every twelve months – more than worth it if you ask most people. Alternatively, some doctors do decide to continue working on a part-time basis after retiring, signing up for locum tenens work to help add a little bit of income and to keep oneself more active during retirement years. This allows for semi-retired doctors to choose when and where to do their work, increasing time spent out of practice while still earning on the job.
- Timing When To Take Social Security – Knowing when to take social security can be tricky. On one hand, there are those that believe social security is something that should be taken as early as possible, thereby increasing the time one must plan their social security benefits. On the other hand, however, payments increase by 8% for each year one waits to cash in on those benefits – so it could pay off to delay that decision. The risk of waiting, however, is if one dies unexpectedly, then they and their family will stand to lose out on the benefits altogether. Weigh options carefully and make the call before it is too late.
- Effective Retirement Fund Management – How one should spend retirement money comes down to the personal choices one makes – there is no correct answer as it differs from person to person. The consensus is to keep withdrawal rates at around 4% of retirement funds every year, which should leave enough money to keep earning on interest (depending on the chosen investments). That is a good number to start with, but one should feel free to adjust according to their own needs.
TukkoMed is the place for updates relevant to physicians all over America. Stay tuned and get in touch with us for more information on what we do to help make doctors lives easier.