Physician retirement planning is essential for ensuring that the future you've always envisioned becomes a reality. Practicing medicine can be exceptionally rewarding, holistically fulfilling, and...utterly exhausting. So when you're ready to hang up your stethoscope and move into the next phase of life—whether it’s traveling the world, spending time with family, or embarking on extreme fly fishing—it's critical to take the right steps today to prepare. Proactive planning is key to achieving your ideal retirement.
Your plan for retirement should include much more than simply saving. To help you confidently do just that, the team at the MB Group have outlined a few tips physicians can use to plan for retirement. Continue reading to learn more about:
Most physicians typically retire between the ages of 60 and 65, although some choose to continue practicing beyond that. The amount of money physicians retire with can vary significantly, often depending on factors like specialty, years of practice, and savings habits. On average, many physicians aim to have retirement savings in the multimillion-dollar range to maintain their desired standard of living.
Fortunately, physicians have numerous options for building their retirement nest egg, including 401(k) and 403(b) plans, traditional and Roth IRAs, investment portfolios, and even specialized retirement accounts designed for high-income earners. With careful planning and the right financial strategies, physicians can secure a comfortable and fulfilling retirement.
Physicians should be saving diligently throughout their careers to ensure a comfortable retirement, typically aiming to set aside 15-20% of their annual income. Given their often delayed start in high-earning years due to extended schooling and training, it’s crucial to maximize savings opportunities as soon as possible.
Financial experts often recommend that physicians have savings equal to at least 3-6 times their annual salary by age 50 and continue to grow their retirement accounts to reach a goal of at least 8-12 times their annual income by retirement. Contributing to tax-advantaged retirement accounts, diversifying investments, and consulting with a financial advisor can help physicians stay on track to meet these savings targets. By prioritizing their financial future early, physicians can ensure financial stability and peace of mind in retirement.
The 4% rule is a widely used guideline in retirement planning, including for physicians, to help determine a sustainable withdrawal rate from retirement savings. According to this rule, retirees can withdraw 4% of their total retirement savings in the first year of retirement and then adjust that amount annually for inflation.
For physicians, who often accumulate substantial savings to support their accustomed standard of living, the 4% rule serves as a helpful benchmark to ensure their funds last through a potentially long retirement. However, individual circumstances such as healthcare costs, investment performance, and lifestyle goals can impact the rule’s effectiveness. Physicians should work closely with a financial advisor to personalize their withdrawal strategy and ensure they maintain financial security throughout retirement.
Here are seven retirement savings account options for physicians:
Taxable investments can be an important component of a physician’s overall financial strategy, complementing tax-advantaged retirement accounts. These investments are funded with after-tax dollars, and any earnings—such as interest, dividends, or capital gains—are subject to taxes in the year they are realized.
Despite the tax implications, taxable investment accounts offer flexibility and liquidity, making them useful for goals beyond retirement, such as:
Examples of taxable investments include:
Physicians can also take advantage of strategies like tax-loss harvesting, where investment losses are used to offset gains and minimize their tax burden. A well-balanced approach that includes both taxable and tax-advantaged accounts can help physicians achieve long-term financial stability and greater control over their investments.
Read More: Tax Loss Harvesting for High-Net-Worth Individuals
Physicians looking to maximize their taxable investment accounts and overall financial strategy can employ a variety of techniques to enhance returns and minimize tax liabilities. Here are some useful tips:
By implementing these strategies, physicians can maximize the potential of their taxable investment accounts, manage their tax burden, and work toward a more secure financial future.
Read More: Tax Deductions for Physicians
There isn't a one-size-fits-all solution when it comes to the best retirement plan for doctors. The ideal retirement strategy depends on various individual factors, such as your current financial situation, long-term goals, tax considerations, and practice structure. Some physicians may benefit more from maximizing contributions to 401(k) or 403(b) plans, while others might find greater value in setting up a Cash Balance Plan or investing in a combination of taxable and tax-advantaged accounts.
Given the complexity and the need for tailored strategies, it's crucial to partner with a tax and financial advisor who can evaluate your unique needs and guide you in creating a comprehensive retirement plan that works best for you.
Undoubtedly, one of the most important steps you can take to plan for retirement is to partner with an experienced tax and accounting professional. In addition to changing tax laws, there are a number of factors that should all be monitored and considered. Most physicians simply do not have enough time to perform their life's work and plan for the future they have always envisioned. Fortunately, you're not alone.
At the MB Group, we are a team of experienced CPAs, financial advisors, and retirement planning specialists. We offer decades of experience helping doctors, physicians, and medical professionals achieve their goals. We will work closely with you to take a holistic view of your future and ensure you understand the steps you need to take today to walk into the retirement you deserve.
Contact the MB Group today to take the first step in your retirement planning journey. Or if you already have a plan, the team at MB Group can offer you a second opinion and pressure test your strategy for your goals.
Read More: How High Net Worth Individuals Can Plan for Retirement