7 financial goals every physician must meet before retirement

By Naveed Saleh, MD, MS
Published June 4, 2021

Key Takeaways

There’s likely no “right” way for a physician to retire. Some quit the profession entirely, while others scale back to part-time clinical or volunteer work. As for the ideal retirement age, according to a survey conducted by the AMA Insurance Agency, physicians who retire between 60 and 65 years are happiest. These physicians are also the most likely to be ahead of the curve in a financial sense.

When do physicians typically retire? According to the survey, doctor retirement breaks down as follows: 12% retire before 60 years of age; 29% between 60-65; 31% between 65-70; 13% between 71-74; and 14% after age 75.

One thing for sure: If you’re planning on retiring any time soon, it’s important to prepare. Here are some goals you should meet before hanging up your white coat, according to certified financial planners who we interviewed.

Rid yourself of debt

Before retirement, you should ideally be debt-free, according to Lauren Gadkowski Lindsay, CFP, of Beacon Financial Planning.

“Credit cards are the most insidious debt, as they usually have the highest interest rates,” she advised. “Next I would consider car loans because although the interest rate is usually lower, a car is a depreciating asset and physicians tend to have expensive cars. As we know, medical school loans can be very large so ensuring those are paid off is a good goal to have as well. If you plan to stay in your home for retirement, I like to have the mortgage paid off as well. However, many people choose to downsize and relocate after retirement so this may allow physicians to pay off mortgages when they move to a smaller, less-expensive property.”  

Get your affairs straight

According to Lindsay, estate-planning documents should not be left on the back burner. “When you retire, you generally roll over 403B and 457 plans to an IRA Rollover to consolidate. This is a good opportunity to ensure that your documents are in order, including beneficiary forms, but especially your will, and powers of attorney,” she said.

Keep busy

Being a physician is an exhilarating profession, thus it’s important that when you retire from seeing patients you retire to a rich lifestyle filled with friends, family, and hobbies.

“Since physicians work long hours, many don't have time to develop hobbies or pastimes and in retirement feel a bit lost because for so many decades, their job has been all-consuming,” said Lindsay. “I find that having something that gets people out of bed each day helps a lot. This is true for all retirees but most critical for physicians. The people who seem to do the best have some sort of volunteer position where they are valued and where people count on them. This could be helping to run free clinics or volunteering with animal shelters or any other charity they feel passionate about.”

Consider the future

Retirement requires planning not only for the near future but the more distant future as well, according to Lewis J. Altfest, PhD, CFP, CFA, CPA, PFS, at Altfest Personal Wealth Management.

The first thing to consider is downsizing. “If you think you will be moving from a high-cost metropolitan area to a lower-cost abode, take that into account in your projections. If you expect to ultimately move to an assisted living facility, know that the overall cost of living can be 50% lower in some places than others,” he said.

“Think about establishing someone younger to be of assistance as you age. You may want to give them a Power of Attorney, but be careful and make sure you can trust them with your finances,” he added.

Keep your spouse apprised 

Altfest stressed the importance of keeping your spouse abreast of your financial affairs before retiring. “If you are the financial decision-maker in your household, educate your spouse on how to do so. You never know when physical or mental problems may arise. If your spouse is the financial person, get more knowledgeable yourself. An outside financial advisor can help.”

Make sure that you have saved enough

Before heading for the greener pastures of retirement, it’s imperative to amass a lot of, well, green. Due to the length and cost of education and training, doctors often work late into their careers before fulfilling their financial potential. Thus, many physicians don't start saving in a meaningful way until they are in their 40s, which means they are playing a game of catch-up

“A physician must ensure they have amassed enough wealth to fund their desired lifestyle in retirement with a high projected probability of success. For most physicians, this means having 16 to 25 times desired annual before-tax retirement spending accumulated before retiring,” said Anthony Watson, CFA, CFP, of Thrive Retirement Specialists

“The exact amount depends on several factors, including asset allocation, risk profile, and willingness and ability to be flexible in their level of retirement spending,” he added.

To learn more about saving, check out How much should doctors save at every life stage to retire on MDLinx.

Hedge against investment risk

Watson highlighted the importance of anticipating risk before retirement.

“Under the financial goal category of risk management, a physician should transition their investment portfolio to a maximally diversified portfolio of low-cost index funds,” he said. “There is less time to recover from mistakes now, so concentrated risk bets should be avoided. It can be hard giving up that Tesla, Apple, or whatever, but a large permanent drop in a single security that represents a material portion of your portfolio can cause irreparable damage to the sustainability of your retirement plan once you retire.”

He concluded, “General Motors was once the largest company in the US, and no one would have thought bankruptcy was possible, but it was. Enron looked like an excellent investment until the accounting scandal. Company-specific risk gets diversified away in maximally diversified index funds.”

Finally, if you are thinking about hanging up your white coat sooner than later, read Early retirement tips every doctor should know on MDLinx.

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