Avoid These Common Retirement Mistakes

Psychiatric TimesVol 38, Issue 6

Are you properly planning for retirement?




Many physicians falsely believe that retirement planning will be easy because they are high-income earners. However, high income does not guarantee smart money management, and even physicians aren’t immune to making financial missteps. To ensure financial health, physicians should avoid these common retirement planning mistakes.

Waiting to start planning. Medical school and residency may prevent physicians from entering their earning years until their mid-30s. As such, clinicians have less time to accumulate savings, and savings have less time in the market to compound. Unfortunately, for many young residents, socking away for retirement tends to take a back seat to purchasing a home, starting a family, or simply not having to live frugally. In order to counteract getting a late start, physicians will need to increase their savings rate and begin funding their retirement savings as soon as possible.

Not saving enough. Because physicians are high earners, they usually enjoy a higher standard of living that they would like to maintain in retirement. In order to live a comparable lifestyle over an extended retirement period, physicians need to find ways to accelerate their savings. Although it is commonly recommended that the average person saves 10% of their income, physicians need to save closer to (if not higher than) 20%.

Accessing funds before retirement. The purpose of retirement planning is to accumulate adequate resources to fund your life, post career, without running out of money, not to fund short-term goals, such as buying a house or sending a child to college. Sometimes tunnel vision conquers willpower, however, and people borrow from their 401k fund. Not only does this postpone savings goals, but it also brings a potential tax burden and penalty fees. 

Ignoring health care costs. Even physicians are susceptible to underestimating the escalating cost of health care. The rate of increase of health care costs has long surpassed the average annual increase in Americans’ income. According to a March 2019 study published in the Journal of the American Medical Association, health care spending in the United States was $3.5 trillion, or about $11,000 per person, in 2017. By 2027, these costs are expected to reach $6 trillion, or $17,000 per person.

Lacking estate planning documents. Physicians, like many people, may not be vigilant about preparing personal estate planning documents. Pertinent documents include your financial powers of attorney, medical directives to be used while you are alive, and a will to make your wishes known for the disposition of your estate after your death. In the absence of these documents, your family could be exposed to making tough medical decisions on your behalf, a lengthy probate process, and costly attorney fees, all of which could be significantly injurious to their financial well-being.

Not working with a financial adviser. Saving for retirement is one of the most important and difficult financial decisions people face. With retirement periods extending alongside rising life expectancies, the ability to accumulate adequate resources to provide yourself with a financial cushion no matter how long you live is becoming increasingly challenging. A trusted advisor can point you in the right direction—not only from a financial perspective, but from a personal one.

Ms Andrews is a principal and cofounder of Atlanta Financial Associates. She specializes in working with physicians and executives in the health care industry.

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