We spend a lot of time giving advice on how to look for your first job after training, how to present yourself during an interview, what to look for in a contract, and more. But one thing we haven’t spent much time talking about is retirement plans. After all, you’re just starting your career, why would you start thinking about the end of it? Right?
To be clear, I am not a financial planning professional but I do have some life experiences that may offer a unique perspective on the subject: 1) I am a career guidance expert that works with nephrologists and the business of nephrology; and, 2) I have recently been spending a significant amount of time planning for my own retirement.
I recommend you start by answering a few questions. When do you want to retire? How much cash flow/income will you want to have each year of retirement? How much will you need to save to retire comfortably? What is your risk tolerance for your investments? Do you have a plan to achieve your retirement goal?
Know What Your Options Are
Whether you are joining a private practice or are employed by an academic institution or hospital, they will likely have opportunities for you such as pensions, profit-sharing plans, 401(k), deferred compensation, etc. Many physicians focus their attention on salary and bonus when considering an offer from a prospective employer; however, items such as a 401(k) match program can also add to your earning potential. If your employer doesn’t offer retirement packages, you can establish something for yourself like an IRA, annuities, or general investment accounts.
Determine When You Plan to Retire and How Much You Need
The earlier you want to retire, the more money you will need. Personally, I know when I want to retire so I used the handy-dandy retirement calculator provided by the investment firm managing my 401(k) to figure out how much money I needed. There are many free retirement calculators online you can try and are a great way to take the first step in figuring out your financial goals.
If you would feel more comfortable having someone who is trained in this sort of thing help you, there are professionals out there happy to assist in your planning as well. This could lead into a completely separate blog about how to find the right professional but that really isn’t my expertise. Instead, I would recommend doing some research about the different types of financial planners and how they are compensated. Here is one site that can help you do that: http://guides.wsj.com/personal-finance/managing-your-money/how-to-choose-a-financial-planner/
MGMA data shows the average nephrologist makes about $326K per year later in their career. This is not what you should expect to make right out of fellowship, but what many established physicians make as they progress in their career. When you retire you’ll likely have a little help from Social Security. Crunch the numbers any way you want but that is probably not going to be enough for you and your family to comfortably live off of so you will need to start thinking about how to make up the difference. And, not to be a Debbie Downer, but don’t forget about inflation, taxes, and how long you intend to live.
Develop a Plan and Get Started
In all seriousness, I do highly encourage you to start thinking about your financial future. I recently received a call from a physician that was mid-way in his career and had not started saving for retirement. His practice did not offer savings or investment options. He thought if he relocated to another state that did not have state taxes and a lower cost of living he might be able to save more money and catch up for lost time.
For those wondering what advice I gave him………..I told him to stay put until you have had time to seek out some professional advice and start saving. Typically, changing jobs would result in an income loss for the first two to four years. Relocating to a state with no taxes and lower cost of living might give him slightly more disposable income but saving seemed to be the bigger problem in my opinion. After all, he wasn’t unhappy with his current practice and moving would likely not change his motivation to save. What he needed was financial guidance.
Personal stories like this one are not uncommon. I am not a financial professional but I am someone who believes that financial planning and understanding your options is important. Physicians spend a lot of time training to practice medicine, they should also spend some time planning for what happens after they are done practicing.
Life is short, enjoy every moment but plan ahead.