Most articles on retirement planning arefocused on preparing decades inadvance. The following are tips fordoctors facing retirement a bit more urgently.
1. Rehearse your retirement. Try out yourretirement lifestyle on your vacation. Let'sassume you plan to live in a ruralarea—away from the hectic everydayexistence you have endured in a majorurban center. Find a place to rent (notbuy) for several months and spendyour vacation and weekends there. Youand your spouse may love the quietnessand privacy of country living, oryou may actually miss the noise andenergy you experienced in city life.
During your 30 to 40+ years of marriage,other than your honeymoon, yourarely have shared 24 hours a day withyour spouse, and this could be a majoradjustment for both of you. As the oldsaying goes, "We married for better orworse, but not for lunch."Be preparedfor the inevitable changes that retirementwill make to your marriage.
You may like to fish or play golf or tennis atevery available opportunity. However, after doingthis activity every day for 2 or 3 weeks, you may tireof it. You may find that the prospect of doing thatactivity every day for the next 20 or 30 years seemsmore like a chore than fun. Make sure that youhave an array of activities available that keep youactive and interested, rather than bored.
Journal of Financial Planning
2. Avoid "lifestyle creep." In the June2000 issue of the ,a retirement specialist wrote, "It is notuncommon during the last 5 years before retirementwhen the kids are gone, the mortgage andcollege are paid off, and employment earningsare at a peak, that many people boost their personalspending with cruises, country club memberships,even a new home."Others succumb tobuying vacation homes and time shares, thusincurring long-term debt payments. This preretirementlifestyle creep often reduces fundsavailable for a comfortable retirement.
3. Create a retirement budget. Better understandyour cash flow needs. This willhelp allow you to retire in the lifestyle you imagine.What expenses will be eliminated once youretire (eg, commuting, business attire, meals out,etc)? What additional expenses will you incurwhen no longer being at your job occupies mostof your day? Will health and life insurance premiumscost more since your employer may nolonger contribute part of the premium? Will yoube working during retirement at another full-orpart-time job? Will you start a business andbecome self-employed?
If you plan to move to another area or statewhen you retire and move away from your childrenand grandchildren, realize you will haveadditional travel expenses for you and yourspouse to visit your family.
4. Adjust your paperwork. If you plan tomove to another state, revising your will,trust, or durable power of attorney with a lawyerfrom the state of your new residence will be necessary.If you and/or your spouse are non-US citizens,there is no unlimited marital deduction forthe surviving noncitizen spouse. Any inheritancein excess of $100,000 would be subject to federalestate taxes. Consult an attorney ifthis situation applies.
5. Retire in stages. This may bean option worthy of serious consideration.In addition to the financialbenefits of working, there may be psychologicalbenefits for doctors aswell—such as the satisfaction of handlingchallenges, overcoming obstacles,and being part of a rewarding,high-energy team. Wouldn't you ratherwork 1 to 3 years longer in your currentjob than try to find another jobseveral years after retirement when youdiscover you don't have enoughmoney? Rather than going straightfrom being a full-time employee to afull-time retiree, you may want to considerworking part time. Each additionalyear you work is 1 year less you will needto support yourself from retirement assets.
6. Appreciate pension benefits. To find thecomparable value of your pension, multiplyyour monthly pension income by 12 to get yourannual pension income. Then, assuming a 5%annual return, divide your annual pensionincome by 0.05. This figure represents theapproximate comparable value of your pension.
For example, if you receive a $2500 monthlypension, that translates to $30,000 in annualpension income ($30,000 ÷ 0.05 = $600,000).This figure means that if you did not have thispension income, you would need investments ofapproximately $600,000 to generate the equivalentof $2500 in monthly income.
Don't Work Forever
7. Get healthy; get in shape. If you areoverweight, rarely exercise, do not have acomplete annual checkup, and live an unhealthylifestyle, your time enjoying retirement yearscould be cut shorter than you anticipated.Steven G. Vernon, author of, writes, "Many ofthe most expensive illnesses thatdevelop in your later years resultfrom a lifetime of bad habits. Definitely,it's not too late to change."
Rather than wait until you retire before joininga wellness program and changing yourhabits, you should consider starting right now sothat you will have more energy to enjoy retirement.Plus, your improved fitness and overallwellness will boost your self-esteem. If you andyour spouse get healthy and get in shape together,both of you will look and feel better, and continuethis program during retirement.
8. Realize that cosigning notes for friends and family can be an issue. Being alender should be a last resort. If there is a defaultto a note you have cosigned, then you owe themoney. Why expose yourself to this added riskjust before getting ready for retirement? You honestlydo not need this potential hassle. Just say no.If you are being pressured, show this article asbackup to anyone asking you to cosign their loan.
9. Maintain growth in your retirement nest egg. Many investors mistakenlybelieve that they have to shift their portfolio intofixed income or bonds just before and duringretirement. If you are uncomfortable with theups and downs of the stock market and feelbonds are a safe alternative, remember this:Bond values may also go up and down oppositeinterest rate changes. I suggest that, in retirement,your portfolio should contain a mixture ofgrowth (ie, equities) and income (ie, fixed-incomebonds) so that it has more stability whileoffering growth to protect your purchasingpower. What should your mixture be? Thisdepends on your cash flow needs, risk tolerance,risk capacity, life span, and investment objectives.Don't forget that you may be retired for 20to 30+ years. Inflation may be the greatest threatto your financial well-being.
10. Obtain long- term care insurance. Accordingto a study by the Agency for HealthCare Policy and Research, nearly 1 in 2Americans will need long-term care insurance. Ifyou are insurable and have a nest egg you do notwant to see depleted to pay for long-term carefor you and your spouse, think of long-term careinsurance as portfolio or nest egg insurance.
Steven C. Camp , a financial planner based in
Fort Lauderdale, Fla, is a Wharton graduate and
author of 3 personal finance books, including
MONEY Rx for Physicians (Trunkey Publishing;
$14.95). He welcomes questions or
comments at 954-565-8608 or firstname.lastname@example.org.