Don't work until you die: Automate your retirement savings

By Physician Sense, for MDLinx
Published December 24, 2018

Key Takeaways

Practicing medicine requires you to be focused on the present. The patient in need demands your attention. With all of the strain on your energetic, emotional and intellectual bank account, other life priorities can get short shrift. Unfortunately for doctors, this often includes retirement savings.

Physicians are some of the highest earners in America, and yet many find themselves in the back half of their career with little saved for retirement. The funds needed to live out their golden years often get siphoned by poor or no budgeting, the cost of medical school debt, children’s college costs, and sometimes even divorce.

Even if you set aside very little, the power of compounding interest is on your side. Let’s say you invested $1,000 this year in a retirement account and contributed another $1,000 for each subsequent year for the next decade. Let’s be conservative and project a 4 percent compound interest rate, compounded once annually. That means in 10 years, you could project to have almost $14,000. Not bad, considering you would have invested $10,000.

When it comes to retirement savings, often the best approach is to take a page from late-night infomercials and set it and forget it. The key is making your contributions automatic, eliminating the possibility that you’ll forget or decide not to. Here are your automated options.

Take advantage of your workplace’s retirement account

Most healthcare organizations will offer either a 401 (K), a 403b (if they’re a qualifying tax-exempt organization) or an IRA. If your employer offers any of these options, set up automatic payroll deductions. Contributions to all of these accounts are tax deductible the year that you make them. You pay taxes on the earnings when you make withdrawals later in retirement.

Many employers will even match retirement contributions up to a certain percentage. Your goal should be to contribute the maximum, otherwise you’re essentially leaving free money for your future self on the table.

What if you’re self-employed or your employer doesn’t offer a retirement plan

You can still automate payments to your retirement accounts. Let’s say you have a Roth IRA. Unlike a regular IRA, contributions to a Roth are not tax-deferred. You’ve already paid income tax on this money (or at least you should have, if you’re following the law). That means that when you make retirement withdrawals, you’ll pay no taxes.

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