Make Your Successful Retirement Reality

Physician's Money Digest, September30 2003, Volume 10, Issue 18

There is no question that retirementplanning in today's economicenvironment is a seriouschallenge. The need to plan and savewith determination and resolve is paramountfor today's physician-investor.

Face the Changes

Inflation for goods, services, housing,and health care should be factors in anyretirement equation. In addition,retirees should expect to live longer andreceive fewer benefits from the federalgovernment. Because more than 25% ofcurrent Social Security recipients receive30% or 40% of yearly distributions, significantbenefit changes seem imminent.

It's logical to assume that benefitswill be reduced for retirees with higherincomes, while those with lowerincomes should expect slightly higherpayouts. Experts suggest that, on average,recipients will probably receiveapproximately 25% less than what thesystem currently provides. Consequently,more savings will be needed to fundcomfortable retirements.

In addition to the shaky future of governmentbenefits, companies can nolonger be counted on to provide sufficient retirement security for theiremployees. Twenty-five years ago,employees often had a corporate pensionsafety net. The advent of 401(k)plans, however, shifted the responsibilityto the worker to independently manageand diversify retirement contributions.

Save for Tomorrow

What can physician-investors do toachieve real retirement security? Considerimplementing the following 5 savingstips in your own retirement plan:

  • Save as much as you can. To securereal financial independence, you shouldstart living well below your means. Stopmost deficit spending. Eliminate expensivecredit card debt. Save at least 15%of your annual income.
  • Be realistic about your needs.Maintain your current lifestyle level withcarefully planned changes and splurges.Figure in increasing health care expensesand any support you might envision foraging parents and/or children.
  • Invest according to your needs. Letyour time horizon determine your investmentstrategy, degree of risk, and liquidity.If you have a sufficient amount oftime until retirement, you can afford tobe more aggressive and flexible with variedinvestment vehicles. If you have onlya few years to invest, minimize your riskand preserve capital.
  • Remain diversified. Putting allyour eggs in 1 basket can be dangerous,as the disappointing performance ofgrowth vehicles over the past few yearshas demonstrated. Make sure yourinvestments fall into different risk categoriesand into different types (eg,stocks, bonds, and cash). Realistic calculations:Remember to limit your positionto no more than 10% of your nest eggtotal in each investment.

Consider downsizing. If your currenthouse has more space than youneed, think about downsizing. By sellingyour home, you can avoid paying taxeson a profit of $500,000 or less. You canthen invest the proceeds and also saveon the taxes, utility bills, and maintenancecosts of a smaller property.

Douglas C. Smith is senior vice president and generalmanager of the wealth management solutionfor Metavante Corp, which includes 401(k) services,and is responsible for establishing the company'sstrategic direction and long-range growth.For more information, visit