Form the Core of Retirement Planning

Physician's Money Digest, August15 2004, Volume 11, Issue 15

As physicians look to retirement,they should considerthe role life insurance willplay in their financial plan.Retirement does not necessarily put anend to the need for life insurance,although it does mean that you shouldreevaluate your insurance coverage.

There are three key elements to awell-constructed retirement plan: SocialSecurity, a pension plan, and personalsavings. Physicians who are currently employedand meet the requirements will receivesome income from Social Securitywhen they retire. They might also be eligibleto participate in their employer'spension plan, if one is offered.

Policy Strategies

The following are some optionalstrategies if you have a whole life policy:

  • Continue the policy as is. This willallow the death benefit and cash value togrow at their maximum potential.
  • Keep the policy indefinitely by convertingit to a paid-up policy. You don'tpay more in premiums, but the insuranceis reduced. The cash value continues togrow and can be used for living benefits.
  • Use the annual cash value growth tosupplement other retirement income insteadof letting it accumulate.
  • Use the policy's accumulated cashvalue to purchase an annuity, which canprovide a guaranteed income for life, oruse the cash value for another purpose.

Building up personal savings and otherassets for retirement may be more challenging,since this involves determininghow much income will be left to investafter meeting financial obligations. Asretirement assets grow to substantial sums,make sure your investments are as effectiveas possible. You don't want to be workingat age 70 unless it's by choice.

Asset Allocation

Your asset allocation should be appropriateto your risk tolerance, time frame,and investment objective. Consider thelevel of risk you are taking with yourinvestments. As you get closer to retirementand the need to liquidate assets toprovide for retirement income, you maywant to move all or a portion of thoseassets into lower risk categories.

Because of varying degrees of gainsand/or losses in each asset class, yourasset allocation is destined to changeover time. Rebalance your account periodicallyto ensure that you maintain theasset allocation you've chosen to reachyour planning objectives.

Alexander A. Conti is a financialrepresentative with the NorthwesternMutual Financial Networkbased in New York for the NorthwesternMutual Life InsuranceCompany, Milwaukee, Wis. Hewelcomes questions or comments at 646-366-6577or alex.conti@nmfn.com.