Watch for Retirement and Estate Pitfalls

Physician's Money DigestMay 15 2003
Volume 10
Issue 9

So, you've worked hard in your practicefor many years now and you'rehappy to be nearing the retirement finishline, just around the bend in yourprofessional road. Be sure you've bestprepared your retirement fund andavoided the following common retirementand estate planning pitfalls:


Sadly, the majority of participants incompany retirement plans don't put awayanything close to the maximum contribution.For 2003, you can contribute $12,000($14,000 if you're over age 50 and yourplan allows it) to 401(k) plans, 403(b)plans, and 457 plans. If you have a profitsharing or simplified employee pension(SEP) plan, you may be able to sock awayas much as $40,000 a year.

If you own or co-own your practice, inaddition to the qualified types of plansdiscussed above, you may be able to takeadvantage of nonqualified plans. Theseplans allow you to put away money anddefer paying tax on the income until afuture date when you take withdrawals.They have fewer restrictions on howmuch and who can contribute than qualifiedplans do. The downside is that youcan't generally roll over these plans intoan IRA. When you take distributions,they are immediately taxable. Goodplanning can help you make the most ofthese opportunities.


One of the biggest fears retirees haveright now is running out of money toosoon. The past 3 years of stock market losseshave heightened that anxiety. You needto spend time thinking carefully aboutwhat you'll have coming in during yourretirement years, as well as how much youexpect to spend. You should seek professionalhelp to quantify the probability ofwhether your assets will provide the typeof retirement you've envisioned.

Even with careful retirement planning,there's always going to be change. You'llneed to revise your plan as time goes by. Ahealthy dose of common sense also goes along way. In times when the economy issluggish and the stock market is gloomy,you can at least control your own expenses.This can mean voluntarily tighteningyour belt by spending less as well as choosinginvestments with low costs.


The estate planning arena is loadedwith wealth management pitfalls. Many ofyou may not have any plan in place at all.That's your biggest pitfall. The best way tocare for your family if something happensto you is to put an estate plan in place.

Other potential pitfalls include settingup a plan but forgetting to fund yourtrusts and forgetting to change yourbeneficiary designations on life insurance,company benefits, IRAs, etc.Another important part of your planningshould include considerations for disabilityas well as death. Powers of attorneyfor health care and property can help ifyou are disabled. So can living trusts.

One of the biggest concerns for familieswith significant wealth is how toteach their heirs to responsibly managethe money they'll eventually inherit. Youcan set up children's trusts within yourestate documents that stagger the agesfor access to the money over time. If theyblow the first installment, there is still achance they can make the most of theremainder of the estate.

Having family meetings during yourlifetime can also go a long way towardeducating your loved ones on how tomanage that wealth.

Sue Stevens is director of financialplanning for MorningstarAssociates, LLC, and columnistfor Morningstar FundInvestor.She is also president andfounder of Stevens PortfolioDesign LLC, a private financial planningpractice specializing in retirement and portfolioplanning. Named one of the top 250 plannersin the country by Worth magazine for thepast 2 years, she has over 14 years of financialplanning experience. She welcomesquestions or comments from readers at 847-444-0209 or article was reproduced with permission from Morningstar.

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