In years past, the thought of retirementconjured up images of quietmornings on the lake, relaxingdays on the golf course, and pleasantevenings on the back porch swing.But as a recent study conducted forMerrill Lynch by Harris Interactiveindicates, the face of retirement is dramaticallychanging. According to thestudy, The New Retirement Survey,baby boomers are not interested in pursuinga traditional retirement of leisure.
The overwhelming majority (ie,76%) say they plan to keep working andearning in retirement, cycling betweenperiods of work and leisure. Not surprisingly,baby boomers are creating a newmodel of retirement. That trend is evidentamong physicians as well.
Pat Raskob, president of RaskobKambourian Financial Advisors (www.rkfin.com), says that doctors like toknow that they can retire or opt to keepworking, albeit at a lower stress level."Emergency room doctors have becomeresort area physicians on a part-timebasis and OB/GYN-physicians are doingpart-time clinical work with no on-callduty,"Raskob explains. "Younger doctorshave this dream of what retirementis going to be like, but that dreamchanges dramatically as they get age andexperience behind them."
Although the face of retirement ischanging, the importance of planningfor retirement is just as crucial today asit was yesterday. Whether your idea ofretirement is a sunny day at the beachor a reduced workload at the office,mapping out a strategy that will allowyou the lifestyle you desire is a key elementto achieving those goals.
Mapping Personal Data
According to Raskob, the first stepphysician-investors should take whenplanning for their retirement is to examinetheir personal situation. For example,consider where you are in yourcareer, where you want to be in 10 or 20years, your current lifestyle, and whetheryou want to maintain that lifestyle inyour future retirement. Once you knowwhere you're going, steps can be put intoplace to ensure that you get there.
David Rourke, principal of theStrategic Planning Group (www.relaxingretirement.com), echoes the importanceof assessing status. "What are theodds that a doctor, or anybody for thatmatter, has exactly the right amount ofmoney to fund their retirement?"Rourke asks. "People either have toomuch or too little."
Rourke calls this the gap; it's the difference betweenan individual's perception of how well-off they are andhow well-off they really are. The only way to get to realityis by sitting down and figuring things out. To thatend, Rourke developed what he calls The RelaxingTransition to Retirement program—a seven-step processthat all his clients go through, designed to determine,early on, what they want to do and if it can be done.
The goal is the development of a retirement roadmap. "If an individual is working and wants to retirein 3 years, can it be done?" Rourke asks, "If so, howdo you do it?"
Jerry Yeager, CEO of SYM Financial Advisors, saysthat physicians are no more or less prepared for retirementthan anyone else. As such, he urges all futureretirees to start planning early and make the act of savinga lifelong priority. "Saving will prepare you forretirement more than anything else," Yeager explains."Good investing helps too, but if you had to do one,you should be a disciplined saver. A lot of people aren'tgood savers, and that makes the retirement planningprocess more complex than it needs to be."
Yeager cites a physician's practice to illustrate theimportance of saving. Physicians, he says, earn significantincome, but they're not really growing an assetwith their practice. The practice has value, but not inthe way a traditional small business does.
"That puts greater importance on acknowledging,as early as you can, that you have to pledge a certainamount toward your retirement," Yeager says."There's no company watching out and creating apension for you. You have to do it yourself. That'swhy I believe the discipline of saving will further yourretirement more than anything else."
Tracking the Plan
Developing a retirement strategy is one thing, butknowing how that strategy will play out over the nextfew decades is another. You've built an investment portfolioaimed at carrying you to and through your retirementyears. But how will the markets perform?
"The only thing we know for sure about marketsis that they cycle," explains Tom Fee of VectorFinancial Network (www.vfnadvisors.com). "Physiciansshould construct their portfolios in accordancewith that fact." Since most don't, Vector Financial hasdeveloped an application called Pension(P-).This two-tiered software system consists of Policy-Trac for younger, more aggressive investors who arestill accumulating wealth and P-for individualsapproaching the distribution phase of their lives.
Both systems allow Vector to build an investmentplan based on specific requirements. Once in place,asset allocation is driven by established criteria, therebyminimizing unrealistic assumptions. Fee suggeststhinking of this phase as preplanning. "You don't justplan to retire and then do it,"Fee says. "You have toanticipate what's going to happen. The sooner youanticipate, the fewer mistakes you'll make." Accordingto Fee, physicians should begin the preplanning stage atage 35 or 40, if possible.
Preplanning affords more time to correct any mistakesor bad decisions. "It really becomes criticalabout 10 years before your retirement," Fee explains."If you're age 50 and the average market cycle is 3.2years, we know that by age 62 the market will havegone through between three and four cycles. That'swhere Einstein's eighth wonder of the world, compounding,can still have an impact. If you shorten thattime frame to two market cycles, you're placing a lotof pressure on assets to do what you want them to."
Fee says that today's physician-investors need tounderstand that they have multiple elements to manage.Certainly, they need to manage their practice, butthey also need to manage their personal finances. Thebest way they can achieve this, according to Fee, is tohandle the details of their personal life as they do thedetails of their medical practice.
"When a physician considers bringing in anotherdoctor for a particular specialty, the physician considerswhether that specialty will still allow the practice tofunction within the service provider model in their market,"Fee points out. "Physicians need to transfer thatthinking to their personal life. But frankly, few do."
Seeing the Big Picture
Some people fear outliving their savings. ScottEiniger of Hoffman Einiger & Polland PLLC(www.heplawfirm.com) suggests that greater attentionshould be paid to ensuring that your retirement savingswill be there when you want and need them.
"Doctors spend a lot of time building their practiceand growing revenues," Einiger says, "but ifthey're not mindful of liability pitfalls, they couldhave nothing left for retirement. That's why asset protectionand retirement planning go hand-in-hand."
In partnership with Hub International Northeastand Chubb Group of Insurance Companies, Einiger'sfirm developed a strategy called Asset Protector, whichdebuted last month at the Doctor's Expo in New YorkCity. The goal is to get doctors who spend a lot of timebuilding and growing their practices to think about protectingtheir assets.
"When we talk about asset protection and planningfor retirement, physicians are more than likely not goingto have a problem with malpractice liability becausethey're planning for it," Einiger says. "Where people gethurt is in areas they don't plan for."
Einiger says it's critical for physicians to evaluatetheir assets and how those assets are being held. Hepoints out how some physicians create a corporation tolimit their liability, when in fact creating one doesn'tlimit a physician's personal exposure. "Suppose youhold assets like real estate and equipment within yourcorporation," he explains. "If you get sued and gobeyond your policy limits, all those assets are exposed."
Alternatively, physicians who own the building orfacility in which they practice medicine should createa real estate trust or a separate corporation. In thiscase, you would simply lease the office space to yourselfrather than hold it within the corporation. "It's asimple strategy, but one that many physicians fail toimplement because they're not properly advised,"Einiger points out. "The Asset Protector is about educatingdoctors on protecting their nest egg so that itwill be there when they retire."
Of course, because life events happen, it's importantto reexamine your retirement plan on a regularbasis. "So many things can change," Rourke says."Children get married, and then there's grandchildren.That overtakes the grandparents, who nowdecide they don't want to move out of the area whenthey retire. So you can plan to get an idea, but youneed to revisit that plan."