In today's economic environment, some physician-investors are finding themselves in a seriousretirement funding debacle. In mostinstances, it's around the 5- to 10-year windowwhen the panic button goes off and people askthemselves: Can I retire? Physicians can put theirminds at ease by establishing a clearretirement agenda. The following are 7simple steps to point you in the rightdirection in preparing for retirement:
1. Stop and take a look at the bigpicture. Recognize that a successfulretirement doesn't just happen; youhave to do your part. Examine allaspects of your financial health. A thoroughfiscal exam is mandatory. You needto know where you stand today beforeyou can begin planning for tomorrow.
2. Define your goals. Afteryou've taken a good look at where youare financially, ask yourself what you'dlike tomorrow to hold for you.Categorize these projections intoshort-, intermediate-, and long-termgoals. Prioritize goals based on theirimportance to your retirement. Thenexamine your goals to see if they'reachievable. You may need to revise and condensesome of them based on more realistic expectations.A period of 5 to 10 years is adequate timeto achieve many of your goals and objectives.
3. Create a budget. Your budget shouldallow you to save appropriate levels of funds forretirement purposes. This will probably changeyour lifestyle, and there's no doubt it will be difficult to adhere to. However, if you want toimprove your retirement situation, it will takechanges to achieve realistic expectations.
4. Improve your income stream andincrease your savings. If your goals and budgetseem well aligned, you probably won't needto alter your present situation. But if you findthat your goals and budget aren't quite the blissfulmarriage you had hoped for, you may need tomake some adjustments. This can be accomplishedby planning on working pastage 65, or finding a better-paying jobwith enhanced retirement benefits.
Additional income is an importantvariable that you have control over,and that can have a tremendous effecton your retirement circumstances. Beaware of Social Security benefits thatwill be paid to you at the time of yourretirement. They are also important inthe overall analysis and can make a differencein how much you're able tospend annually.
5. Invest prudently. Recognize thatyou have a long-term time horizon (ie,your life expectancy). So, your first priorityneeds to be protecting the assetsyou currently have from inflation anddramatic fluctuations. Your portfolioshould be properly diversified using anasset allocation strategy consisting ofcash, bonds, and stocks. Your asset allocation strategyshould be based on what goals you're trying toaccomplish and how much risk you can tolerate.Now is not the time to invest in extremely riskyventures to try to capture large returns. Conversely,being too conservative will probably limit theamount of income you have during retirement.
6. Examine your insurance policies. Lifeinsurance is typically more expensive as you getolder, so try to keep some of those cheap policiesthat you have had for years. Remember that youcan waste a great amount of money by beingoverinsured. Typically at this stage in your life,you'll want to make sure your surviving spouse hasenough funds to meet their needs throughout theirremaining years. This amount can vary dependingon lifestyle, spending habits, and outstandingdebts. This is also a great time to look at yourestate planning documents to make sure your willsare updated. Consult with a specialist to see if yourestate would benefit from trust protection.
7. Prepare for the act of retirement. Coldfigures are important to get straight, but don'tlose sight of the fact that it's a big period of yourlife that you're preparing to live, in a differentmanner than you're used to.What are you goingto do with all the free time that you'll suddenlyhave? Do you have enough outside interests orhobbies to occupy this free time? What hobbieswould you like to participate in? Can you handlethe routine of not working and the lack of dailysocial interaction? How will your retirementaffect your spouse? What is your spouse's retirementplans? Where are you going to retire? Willyou move to some dream location or stay whereyou are? Do you want to travel?
Of course, many of these questions shouldhave been asked long ago, but time changes youroutlook on life, and it's always prudent to revisitthese issues. The emotional and psychologicalelements of retirement play an important role inthe overall analysis. Nonfinancial issues and yourfinancial well-being should be considered.
These steps are general guidelines that shouldhelp improve most physicians' circumstances. Itwill require focus and diligence, but great stridescan be made, provided that you have ample time.Keep in mind that there are no real solutions fora lack of preparation. Seek the advice of a financialprofessional in your area for a more in-depth,personalized strategy.
William B. Howard, Jr,
is president of William Howard & Co Financial
Advisors Inc, a fee-only investment and financial
planning firm in Memphis,Tenn. He has
23 years of experience working with physicians
and was named 1 of the top 150 advisors by
Medical Economics. He welcomes questions or
comments at 901-761-5068 or firstname.lastname@example.org.