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5 Questions to Help Physicians Understand if They Are Really Ready for Retirement Thumbnail

5 Questions to Help Physicians Understand if They Are Really Ready for Retirement

By Scott Tschappat

For practicing physicians, the idea of retirement may look different than for the average person. Many healthcare professionals spend decades dedicated to building and serving their practice, which can be all-consuming. It may be hard to picture your golden years, and you may have questions about what it will even look like and how much you need to save.

Whether you’re considering retiring in the next five to 10 years or you’re in the middle of your career and wondering what steps to take for retirement planning, here are 5 questions to think about to guide you in making informed decisions about your financial future.

1. What do you want to do in retirement?

First, we have to define retirement. What is retirement to you? Not working? That only tells you what retirement isn’t, not what it is. What is it that you plan on doing once you stop working? Whether you hope to travel the world, pick up a hobby, or just relax in front of the TV when you’re not caring for the grandkids, the first step in determining your retirement readiness is envisioning what it is you’re looking to do.

2. How much are you currently spending?

The second step in determining if you’re ready to retire is taking stock of your current spending. How are you going to forecast your spending in retirement if you don’t even know what you are spending right now? 

If you aren’t already tracking your spending, look back at your last three months’ worth of credit card and bank statements. Categorize your spending so that you can easily recognize which expenses will follow you into retirement and which will end with your career. Also consider irregular expenses. Are car repairs, vacations, and electronics purchases accurately reflected in your last three months’ spending history? If not, add them in. You need a clear and accurate picture of how much money it takes to fund your current lifestyle so that you can project your retirement needs.

3. How much will retirement cost?

Once you understand what your present lifestyle costs, you can start to calculate what retirement is likely to cost. This is where you combine the answers to the first two questions. What expenses are associated with that idyllic retirement that you dreamed up? Take your current spending habits, subtract any that will disappear when you stop working, and add in any new expenses that you plan on incurring in retirement. Don’t forget to include things that relate more to normal aging than your specific goals, such as healthcare costs. Once you have a realistic idea of how much money you will need in retirement, then you will have a more concrete number against which to measure your retirement readiness.

4. What is the role of your investments going to be?

Now that you know what your financial needs will be in retirement, you need an income strategy to meet those needs. Most retirees need to make some important decisions to optimize their retirement income strategy. Do you have a pension? Do you fully understand the election options for your Social Security benefits?  How much of your retirement income should come from investments versus fixed and reliable sources of income?

Regardless of your overall income strategy, your investments are likely to play a role in meeting your income needs over your lifetime. Are your investments invested in a way that reflects your capacity for market risk in retirement? And are your investments likely to produce a long term rate of return which helps achieve your goals?

In addition to reviewing your account balances and returns, you need to look at the tax status of your savings. You will need to accumulate more in a traditional IRA than you would need to in a Roth IRA because you’ll have to pay taxes on the first and not the second. When you evaluate how much money you need to retire, don’t forget about the effects of taxation on decreasing your assets. 

5. What are the chances that you’ll be able to meet your goals?

None of us has a crystal ball, so there’s no way to know for sure what the future holds. You may have calculated your retirement readiness based on a 5% rate of return, but what if we enter a recession? Or what if your spouse ends up needing long-term care? How will that affect your ability to have the retirement that you’re dreaming about? 

While we tend to think in a linear pattern, life does not work that way. The unexpected will come, both good and bad. Instead of just measuring your readiness by the number you calculated in question #3 based on your investments from question #4, you need to take all possibilities into consideration. You may have enough money according to your calculations, but what are the chances that retirement will actually reflect your calculations?

Creating a Custom Strategy

Thinking about everything that could happen in retirement and planning every move to be financially successful can be tough to wrap your mind around. That’s why we at Acute WealthCare use an approach to create a custom strategy uniquely designed for your specific circumstances and needs as a physician. 

Once we analyze your goals and objectives, we can create a road map and put those steps into action. Wondering if you’re ready for retirement? If you’re looking for an experienced professional to help you get clear on your financial strategy, schedule an introductory phone call to get started!

About Scott

Scott Tschappat is a wealth advisor at Acute WealthCare, an independent, fee-based comprehensive financial services firm with over 20 years of experience. Scott is committed to helping his physician and healthcare worker clients create a financial plan that brings them comfort and dignity. Scott learned the importance of proper financial management and making a plan for the unexpected at a young age when his father passed away suddenly and he watched his mother use the life insurance money wisely to take care of their needs, both present and future. He strives to steward his clients’ money well, as if it were his own mother’s, and help them every step on the journey to their financial future. 

Scott lives in Highlands Ranch, CO, with his wife, Bridget, a school counselor at All Souls Catholic School, and their two daughters, Sarah and Emily. He loves sports and has been lucky enough to coach both of his daughters’ basketball teams. In the spring and summer, you can find Scott getting his hands dirty gardening and enjoying live music at Red Rocks or another local venue. To learn more about Scott, connect with him on LinkedIn. You can also register for his latest webinar on What We Do & How We Help.