The practice of medicine tends to be an all-consuming endeavor. Physicians today, more than at any time in the past, are feeling burned out due to demands for greater productivity in light of falling reimbursement rates, as well as patient advocacy issues with insurers.
It is therefore not surprising that physicians are heading for the exits in increasing numbers. I‘ve asked our retired physician clients for advice on what they would advise their colleagues who may be considering retirement.
There were three common cash flow facts that emerged from our conversations. I would like to share them with you now:
- Know Your Expenses Before You Retire– Many physicians have no idea what their monthly expenses are, and typically tell us that they don’t have a budget. When estimating a budget they typically leave out income taxes or lifestyle costs that are reimbursed by their practice. Having a solid grasp on your expenses prior to retiring can offer reassurance that retirement is affordable, or may provide valuable feedback about the need to work a bit longer.
- You Will Not Spend Less In Retirement– The literature I was trained on as a financial planner assumed that retirees would pay fewer taxes and spend less during retirement. Therefore we were to assume that retirees could live on 70% of their pre-retirement income. My physician clients apparently are unfamiliar with this research. Not only do their expenses not decline during retirement, for many of them expenses actually increased! With the likelihood of maintaining dual residences, travel to grandchildren spread across the country, and increased international travel, it’s no wonder physicians typically do not see a decline in spending during retirement.
- Your Health Care Expenses Will Increase During Retirement– As one of my more pragmatic physician retirees reminded me “you are born to die.” It’s a fact of life that as we age, things tend to break down. Insurance may cover catastrophic costs, however, out of pocket co-pays, transportation and dental expenses, plus long-term care costs tend to come out of your pocket.
For many, physicians retirement can be an escape from burnout, rather than the end of a satisfying career. If you are feeling the pressure to get out sooner rather than later, these three cash flow facts may give you a more realistic perspective on your plans to retire.