National surveys indicate that in recent years physicians have begun to aspire to retire earlier due to increased government healthcare regulation, but some financial planners in the Mid-South believe physicians aren’t necessarily retiring sooner, but are inquiring earlier about retirement.
Additionally, financial experts say physicians today are faced with more challenges when making decisions concerning retirement, including saving and allocating enough money, factoring for long-term healthcare costs and deciding if they want to work part-time.
“It depends on the specialty, but I have seen more physicians frustrated with government regulation,” said William Howard, president and certified financial planner with William Howard & Company Financial Advisors. “There is some dissatisfaction and unhappiness there that we didn’t see a decade ago.
According to the latest survey by The Physicians Foundation, 39 percent of physicians indicated they would be accelerating their retirement plans due to changes in the healthcare system.
Although physicians may be dissatisfied with mounting paperwork and the shift to electronic heath records, Howard said physicians are retiring around 65 or 70, which he said are the traditional ages for retirement.
“We are seeing physicians show an interest in planning for retirement earlier,” Howard said. “They are more knowledgeable and aware of the topic because information is more accessible than it was 25 years ago. This is largely due to the media embracing the profession, and doctors discussing it with each other.”
Karen Kruse, president and certified financial planner with FTB Advisors, advisory services division, says the main concern for those seeking retirement is wondering if they have saved enough money to do so.
“We aren’t seeing baby boomers retire early,” Kruse said. “Even though they may want to, most of the time, they aren’t prepared.”
Kruse says this is for a variety of reasons.
“We work with a lot of physicians and physician groups, and the most common issue we see is that many clients don’t properly allocate their investments,” Kruse said. “Either clients are too aggressive with their investments or they aren’t risk tolerant at all and will put money away in a money market fund or CDs, which don’t generate enough growth.”
In addition, Kruse says healthcare professionals need to maximize their tax-deferred investments such as a 401k or 403b, as well as look at other options that are advantageous such as an annuity, IRA or a 457 deferred compensation plan.
“Higher income earners have more options than the average person for saving money,” Kruse said. “It’s important to get with a certified financial planner who can help see where you are. There are other vehicles you can look at that are tax efficient that you may not know about.”
Kruse says estate planning is crucial to retirement.
“Baby boomers are a unique group because they have aging parents who are still living and children who are still in college,” Kruse said. “It is important to prepare for these two groups when considering retirement by creating a comprehensive plan.”
Howard says physicians must allocate for more than just monthly expenses.
“It’s important when saving to account for big life events, too, such as college, private school or a wedding,” Howard said.
According to Kruse, there is a potential crisis for retirees because many are unprepared for long-term healthcare costs, and as a result they don’t allocate enough for it.
“If a physician plans to retire early, they must have an accumulation of assets and plan for long-term healthcare," said Bill Drennan, financial adviser with Northwestern Mutual. ”Healthcare costs have been growing at a rate of 7 percent, which is very high. Retirees are living longer, sometimes 30 years after retirement, and they need to allocate enough for long-term health insurance needs.”
According to Howard, the biggest decision for physicians considering retirement isn’t just a financial one sometimes.
“For some physicians, deciding what they want to do outside of work can be hard,” Howard said. “Some are used to working in a vibrant practice and enjoy what they do. We encourage doctors to think about their hobbies. Some clients stay just as busy with their families and hobbies after retirement, and some want to work part-time.”
Howard says he encourages physicians to make a “trial run” to discover what a typical day of retirement might be like.
“Sometimes a client may not be sure what they want to do after retirement,” Howard said. “We tell them try four days without being on call and see if they like that and go from there.”
Drennan says the biggest challenge for financial planners is that most people procrastinate planning retirement.
“It’s important to start planning at least 10 years from when you plan to retire,” Kruse said. “The earlier the better. We see many people put it off. It’s easier to make adjustments in your saving and spending habits 10 years out than two years out.”
Howard says the key to retirement is planning early and for physicians to align themselves with a certified financial planner who can assess where they are financially and help them define their goals and objectives.
“A good time to start planning is out of residency,” Howard said. “Get back to basics and maximize your retirement plan, develop habits to save money and spend less than you make. It takes hard work and discipline, but the reward pays off.”
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