Four Steps Towards a Successful Retirement

April 28, 2011

It's never too early to start thinking about retirement or too soon to discuss it with your financial advisor. Spending your days on the golf course may seem like a long way off, but thoughtful planning can help get you there.

Let's take a walk through putting together a successful retirement plan. Here's a simplified overview of necessary considerations. My real recommendation is a thorough dialogue with your financial advisor with routine follow up meetings to make sure you stay on your desired path.

Step one: Identify what retirement means to you

Planning on volunteering, consulting your partners, or sailing around the world? Decide what kind of retirement you desire, so you can identify what financial steps you need to take to afford it.

Many physicians choose to pursue other professional careers after retiring from practicing. Working part-time or as your own boss are significant inputs to your retirement plan. A modest retirement goal combined with continued income may free up the stress of savings requirements.

Rest and relaxation with the sun in your face requires more preparation. How much do you need for the trips, the vacation home, etc.?

Step two: Set a savings goal

Regardless of how you save for retirement, stick to a monthly, quarterly, and yearly savings goal. It'll help you stay on track and prevent you from overspending.

Rather than striving towards your final savings requirement, set incremental, achievable goals to lead you to retirement.

What to do with that savings is dependent on your current career stage and risk tolerance. A stock-heavy portfolio is more appropriate for a twenty-something physician with time to ride out fluctuations in the market. Most financial advisors recommend putting ¾ of your portfolio in stocks and stock funds as long as your retirement is at least 20 years away.

Hoping to retire earlier than that? Bonds or other investment vehicles may be more suitable to your needs. In any case, I always recommend speaking with a financial professional about long and short-term investment goals.

Step three: Know the macroeconomic trends

Be mindful of macroeconomic trends in taxes, healthcare policy, and insurance. They may have significant implications for your finances and your retirement plan.

This can be the most important discussion point for your financial advisor. Inflation, future medical costs, and other difficult to predict financial expenditures should be brought up with a professional who knows your unique situation.

Step four: Prepare for the inevitable

Make end of life preparations part of your retirement plan. Estate planning, living and dying wills, trusts, and life insurance should all be considered.

Your will and estate plans should be in place to avoid unnecessary taxes.

Funeral expenses for traditional burials run in excess of $10,000. With lawyer fees and potential medical expenses, that cost could easily escalate to $25,000. So, having a small face value life insurance policy ($25,000 for example) to handle immediate liquidity needs at end of life is a good idea. They're free from federal income tax, turnaround in just days, and can be processed with claim forms from a licensed funeral director rather than waiting for a death certificate.

Setting aside money in a trust or a payable on death account at the bank is another option, but sometimes these require certified death certificates to access. Death certificates can sometimes take a month to obtain.

If you don't have a financial advisor and are interested in speaking with one in your area, contact Mike Hegwood. He's the Assistant Vice President of Physicians Financial Partners, an arm of the AMA Insurance Agency dedicated to matching physicians with local financial professionals. You can reach him at 1-800-458-5736, ext. 5247, or at

Also, check out CNN's Ultimate Guide to Retirement. It's fairly exhaustive, and may hold the answers to many of your questions.

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