Planning for retirement is not a one-time event. It is a multistep process that continues to evolve as you, your circumstances, and some external factors change. Most of us understand that we need to have a savings plan in place in order to enjoy our retirement years, but is it really that simple?
For many dentists and physicians, retirement planning can be both a dream and a nightmare. You may look forward to the day where you and your partner spend your days traveling, reading, gardening, and enjoy time with friends and family. However, others only think about how far behind they are in saving for retirement, and every day you get closer, the doubt grows larger. Instead of making plans that bring you joy, you end up questioning every spending decision.
Just keep in mind the longer you wait to prepare, the more ground you will have to make up. Creating a plan for your golden year starts with knowing your retirement goals and what it will take to achieve them.
There are many questions people forget to ask themselves no matter their career when planning for the future.
Anyone who plans on retiring at some point (and we hope everyone does) needs a retirement savings strategy. There is a multitude of savings and investment options for your retirement. Do you know how your own savings and investments are allocated between IRSs, taxable accounts, or tax-free accounts?
You may also need to invest in a diversified portfolio of investments held outside of a qualified retirement plan. A typical portfolio may include stocks, bonds, mutual funds, and/or real estate.
While investments and savings are essential to a retirement plan, many people tend to focus on these options and lose sight that they are only a part of a retirement strategy. There are other elements (included below) that are wise to consider.
Have you spent time understanding how much money you need to retire? Part of the equation in planning for retirement is your life expectancy. At this time, the average life expectancy in the U.S. is 78.7 years, but there are many factors, including family history, that will affect yours.
There is a significant difference between calculating the financial needs for 10-20 years and 30-40 years of retirement. Taking into account how long you will live should better prepare you to save funds accordingly.
As a high-income earner, you may not have even considered how social security can be important to your retirement plan. In general, the longer you wait to file (up to age 70), means a higher monthly benefit. Of course, no one approach fits everyone. Each person’s finances, birth dates, relative ages, anticipated longevity, and earnings records all play a part. Your decisions around social security have the potential to vary by hundreds of thousands of dollars depending on the action you take.
Start to think about what age you plan to retire. If your age is less than full retirement age, be sure to understand how that may affect your future social security benefits.
How accurate is your awareness of what it takes to maintain your standard of living? You can separate the majority of your expenses into two buckets:
Insight into this breakdown of lifestyle expenses and planning for the short term and the long term is crucial in planning for retirement. As you age, your lifestyle may change; thus, your expenditures in your 60s may look very different than your financial needs when you are in your 80s. Often you will encounter increased healthcare costs and fewer expenses around travel.
Knowing how you want to spend your golden years will help guide you in creating a budget that will last throughout your retirement. With the proper planning, you can determine how extravagant or frugal your retirement is.
Inflation is the rate at which the value of money is falling, and consequently, the general level of prices for goods and services is rising.
Inflation is the reason why a dollar today is worth more than a dollar will be worth in the future.
With inflation occurring slowly and typically over a long time, it can quite easily go without notice. Therefore, it can be an under-appreciated risk to your future retirement income. One of the best ways to mitigate this risk is by investing your assets wisely.
As you age, it is possible you may experience health issues and unplanned medical expenses. It is crucial to plan for your future medical needs regardless of your health today. You may want to start by considering a few questions:
Answering these questions can assist you in creating a more informed budget to prepared for unforeseen medical costs.
It is never too soon to start preparing for your golden years. By starting now, you will get the ball rolling to protect your financial future. As a hardworking doctor who spent many years in school and training and then taking care of people, you deserve to enjoy life after retirement. Regardless of how much you earn, do not underestimate the importance of retirement planning
At Spaugh Dameron Tenny, we specialize in helping physicians and dentists create personalized retirement plans that meet their financial goals. Connect with our dedicated team of financial advisors to get started today!
Shane Tenny is the managing partner of Spaugh Dameron Tenny. Along with hosting the Prosperous Doc® podcast, Shane has a true passion for behavioral finance, helping clients and audiences understand how to develop successful strategies based on their unique temperaments. An accomplished and highly engaging speaker, Shane is regularly interviewed for television and podcasts, is actively involved in the Financial Planning Association®, and contributes to industry advisory boards.
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