5 Factors Of Retirement For Physicians
Doctors are a certainly very special breed. They work long hours, get very little sleep, and endure heartbreaking loss. Doctors spend their entire careers helping others and saving lives, therefore; whenever one retires we know they very well earned it. When one retires, what they may not realize is that there are a few things, in addition to the normal pitfalls, that can hamstring their retirement needs. Christensen Law is here to give some advice on what some of these pitfalls are and what doctors should do. Let’s start with an example:
Dr. Hood is 55 years of age with dreams of retiring when he is 65 and switching from practicing medicine to enjoying golf full-time. Will he be able to fulfill his dream? What issues must Dr. Hood consider now to be able to retire in ten years?
Nearly half of practicing physicians are older than 50 and approaching retirement. Unlike most other professionals, physicians should consider additional factors when planning for retirement. These five main factors are:
1. Retirement Number. Has the physician accumulated sufficient liquid savings to reach his or her proverbial retirement “number”? The “number” is the amount of savings a physician needs to maintain a desired standard of living in retirement. The proper time to set up a plan is as early as possible to capture the benefits of compounding in tax deferred accounts. If Dr. Hood does not already have a plan in place, now is the time to set up a comprehensive investment plan to reach that retirement number.
2. Succession Planning. Physicians must consider their practice exit strategy and plan their transition into retirement with the best chance of success for their patients and themselves. Strategies will differ between physicians based upon personal preferences and whether a physician is a solo practitioner or a member of a group of physicians.
3. Asset Protection. Physicians are subject to claims of malpractice and ensuing lawsuits. Asset protection is critically important. Physicians should seek advice from a licensed attorney regarding the proper use of LLCs, PLLCs, family limited partnerships, irrevocable trusts, offshore trusts, etc. These business vehicles are also useful when transferring ownership of a professional practice.
4. Accident Planning. This begins with sufficient malpractice insurance. There are two major types of malpractice coverage: occurrence-based and claims made. Occurrence-based policies protect a physician while the policy is in effect, no matter when the claim is made. Claims-made policies cover only claims made during the term of the policy and require tail coverage when the policy ends. Other insurance considerations include life and disability insurance and an adequate umbrella policy.
5. Tax Considerations. This over-arching factor should be considered concurrently with the previous four factors and requires the advice of a tax savvy CPA and/or attorney. Successful financial planning for life events and retirement requires not only the accumulation of assets, but also the protection of assets earned during the course of a physician’s career.
It is never too early to examine and implement the five factors presented in this article. The physician’s team should consist of a financial advisor for factors one, two, and possibly three and four; an attorney for factors two and three; a licensed insurance broker for factor four; and, a CPA or tax attorney for factor five. It is important for the advisor, attorney and CPA to work together to ensure all recommendations are consistent with the physician’s personal goals and objectives.
If you’re a doctor looking to retire soon, let the lawyers at Christensen Law in OKC help make sure you have everything on order.