The physician’ roadmap to secure and healthy retirement

I talk to physicians every day and know that retirement is a sensitive subject. For many physicians retiring is an extremely personal decision. And it is not an easy choice to make. You must take into account a wide range of financial, professional, and individual factors before you make the final call.

Retirement will change your lifestyle dramatically. Your salary and healthcare benefits will be different. You might experience an unexpected change of pace. You may lose touch with colleagues and friends. At the same time, you can travel and do things that matter most to you. Your stress level will go down, and you will spend more time with your family and loved ones.

I compiled a list of suggestions that will help you prepare on your journey to retirement. Don’t wait until the last moment. Get ahead of the curve so that you can take the financial stress out of your retirement plans.

Take advantage of your employee benefits

The first step to a happy retirement is knowing your employee benefits inside and out. Most public and private healthcare systems offer competitive physician retirement benefits packages with a wide range of perks, including pension, 401k match, profit sharing, healthcare coverage, life insurance, disability insurance, and loan repayment. Some employers even offer an early retirement option at 55.

These benefit packages vary significantly from one employer to the next. Take some time to learn and understand your options. Ask your colleagues and attend benefit seminars. If retirement is your priority, consider an employer that will give you the best shot in achieving this goal.

Pay off your student loans

The US student debt has skyrocketed to $1.6 trillion. Seventy-five percent of medical students graduated in their class of 2018 with student debt. The average loan per student is $196,520. It’s not uncommon that some physician couples owe over half a million dollars in student debt.

A crucial step in your journey to a happy retirement is paying off ALL YOUR DEBT, including student loans, credit cards, and mortgage. It might seem like an uphill battle, but it’s not impossible.

There are several options you can consider when tackling your student loans – loan forgiveness, loan consolidation, refinancing with lower interest rates, and income-driven repayment. Find out what is the best option for you and get started.

Maximize your physician retirement savings

Some physicians are fortunate to have an employer who offers a pension plan. Others need to save aggressively for their own retirement. In many cases, a corporate pension and social security may not be enough to cover all your essential expenses after you retire.

One way to cover the gap is through your personal retirement savings. Most employers nowadays offer either a 401k, a 403b, or a 457-retirement plan. When you join your physician retirement plan, you can save up to $19,500 per year as of 2020. If you are 50 or older, you can save an additional $6,500 for a total of $26,000 per year. An additional benefit to you is that these contributions are tax-deductible and will lower your tax bill. Many employers also offer a match that can further boost your retirement savings.

Have an emergency fund

You need an emergency fund. Keep at least six months’ worth of essential living expenses in cash or a savings account. This emergency fund will serve you as a buffer in case of sudden and unexpected life events.

Secure your healthcare coverage

One of the main challenges, when planning your retirement, is healthcare coverage. Depending on your employer, some doctors have excellent medical and dental benefits. In some cases, these benefits are completely free or heavily subsidized by your employer.  In order to attract talent, some hospitals offer free lifetime healthcare if you commit to working for them for a certain number of years.

Do not underestimate healthcare costs. According to estimates, a 65-year old couple retiring in 2020 can expect to spend $290,000 in health care and medical expenses throughout retirement. For single retirees, the health care cost could reach $150,000 for women and $140,000 for men.

Consider working per diem

If you are short of retirement savings or bored of staying at home, you may consider working per diem or locum tenens. You can work on an hourly basis at your own pace. The extra work will boost your retirement income and will keep your knowledge up to date.

Create a budget

You must adhere to a budget before and after you retire. Before retirement, you need to pay off your debt and save for retirement aggressively. Depending on your earnings, these payments can cut through your family budget. You may have to make some tough choices to avoid or delay large purchases and curb discretionary spending.

Once you retire, your income may go down. True, you don’t have to drive to work, but some of your expenses might still be the same.

Have a plan

A happy retirement comes with a good plan. It may require some self-discovery but ultimately will lead to finding a purpose and fulfilling your life dreams. You can travel and volunteer. Write a book. Teach. Learn a new hobby or language. Find out what makes you happy outside of your daily routine and make the most out of your free time.

The bottom line

Physician retirement is an achievable goal that requires a great deal of planning and some personal sacrifice. If you want to retire one day, you need to start planning now. Don’t leave some of the most critical decisions for the final stretch of your career.

Your family can be a big influencer for your decision to retire.  You might have a partner who wants to stay active. Perhaps, you have children who are going to college. Every family is different, and every situation is unique. Be proactive, plan ahead, do the number crunching, and find what makes the most sense to you.

About Stoyan Panayotov

I am a fee-only financial advisor and the founder of Babylon Wealth Management. As fiduciary advisors, we provide bespoke wealth management and personalized financial planning to busy families in the Bay Area and nationally. Many of our clients are tech workers, physicians, business owners, professionals preparing for retirement and young families looking to build financial independence.

I started Babylon Wealth Management to help young families and successful professionals build, grow and preserve their wealth. Being a fee-only financial advisor, I never earn sales commissions or sell investment products. Furthermore, I am committed to acting in my clients’ best interest by providing trusted advice and bespoke wealth management solutions. I enjoy helping clients develop robust and personalized long-term financial plans to achieve their personal and financial goals.

After completing a bachelor’s degree in Accounting at Varna University of Economics in Bulgaria, at the age of 23, I moved to New York City to pursue a Master of Business Administration at Pace University. I was fortunate enough to have a full merit-based scholarship and finished graduate school with no student loans. Upon completing grad school, I joined the ranks on Wall Street for nearly two years. I specialized in risk management and option strategies for equity and fixed income products for Deutsche Bank and Wells Fargo. In 2006 I obtained a highly recognized CFA designation.

Living in New York without family support was a life-changing experience for me. II arrived at JFK Airport on August 24, 2002. I stayed in a hostel for two weeks and later moved in with three of my fellow Bulgarian students into a one-bedroom apartment in the Bronx. There was a time in life when all I owned was $200, just enough to pay for the next month’s rent. Many times, I contemplated returning to Bulgaria, but somehow, I always pushed through life’s adversities. I’ve learned to appreciate each moment, big or small, that life presents. These challenges have helped me develop strength and flexibility, which supports my practice as a financial advisor.

View All Posts