17 Dec Retirement Planning for Doctors
What is your retirement age?
Retirement is considered a right of passage for most professionals, but so many things seem to stand between older doctors and a life of leisure. At the top of the list are loyalty to patients, practice ownership obligations, low super balances and workforce shortages.
Yet most doctors long to put their feet up and enjoy the fruits of their labor. Instead some work at full throttle until they burn out. Semi-retirement may be a better strategy. Doctors who wind back their work hours slowly will ultimately earn more money, pay less tax, help more patients, and have more time to enjoy their lives. Some changes to your business structure and finances may be involved, so the sooner you start plotting a course toward semi-retirement, the better off you’ll be.
Studies and my personal experience suggests that doctors should start to cut back their work hours at around age 55. At this age, the kids have usually moved out and doctors have acquired a reasonable level of assets. You may also start to become more aware of your own mortality around this time and find you tire more easily when working long shifts.
There is no reason a doctor in good health cannot work right through to age 75, earning a high income in a tax-efficient way. I believe many doctors identify so closely with their work personas that staying in the workforce in a reduced capacity can be better for your mental and physical health. If you have built up a reasonable amount of wealth, you can afford to work 4 days a week and attend to your bucket list, whatever it might be.
Retirement for Doctors
If you work in the medical profession, it’s fair to assume that a large chunk of your day will be spent looking after your patients. Problem is, it doesn’t leave you with much time at all to deal with your own financial affairs, whether individually or as a business.
And if you’re not taking care of your finances now, then it will be harder to achieve a secure future for yourself, your family or your medical practice. But that’s where we can help!
There is no doubt that superannuation should be high on your agenda. Below is a non-exhaustive list of issues that may apply.
- You may have a few different super funds that would ideally be consolidated.
- Your investment option in super may need to be changed, as you should shift the focus from capital growth to income generation, so you can fund your retirement living expenses.
- It may be time to start a (transition to retirement) pension, to minimize the taxes within your super fund.
- You may have commercial property (your practice premise) outside of superannuation, now you can consider moving this into superannuation.
Replacing your income
The focus for doctors nearing retirement needs to turn to replacing regular income. Some of the issues may include:
- If you have investment properties, then find out the net return on those. You can even consider selling if income from any of these properties is quiet low compared to the market.
- What sort of pension will you draw from super?
- Do you know how much income you will require?
Estate and Succession Planning
By this retirement age, you may have adult children and even grandchildren. So, this is the right time for you to updated your estate planning? Are you concerned about leaving a large estate to them that may be at risk?
You should review your entire estate plan, including your superannuation and family trust succession planning.
Have you given some thought as to how you will exit your practice? Is it possible to put in place a succession plan with a well-regarded colleague, to ensure a smooth transition of your patient files and perhaps also staff? Can you groom someone to become your successor?
Having Multiple Entities
Medical professionals often have multiple personal entities (trusts, companies, SMSFs, etc.) and business structures (service trusts, etc.), set up for tax purposes or asset protection.
This complicates not only the personal estate plan, but may also require that attention be paid to the succession objectives of potential business partners.
Wills only deal with assets held in personal names; however, medical professionals would generally hold significant assets in trusts or through companies (for tax and asset protection purposes), and self-managed super funds.
Financial assistance to children and grandchildren
You may want to assist your children financially, rather than leaving them a large estate.
- Think of the best way to go about doing this, to ensure your funds do not end up in the wrong hands.
- How much can you afford to leave for your children?
- How can you help your children to buy a house?
- How can you fund your grandchildren’s school fees?
Superannuation Preservation Age
A doctor who has reached preservation age, usually age 55, and has stopped working can access their super as a lump sum. This amount will be taxed, with a 15% rebate under age 60, and is tax free after age 60. Preservation is a restriction that prevents a member from accessing superannuation benefits until retirement or until satisfying a condition of release. At age 65 super benefits can be accessed tax-free at any time without stopping work.
Preservation age depends on your date of birth and the position is tabulated here:
If you have superannuation benefits and are age 60 and have not started a pension you should contact iAdvice on (03) 8658 8875 for advice on what to do next with your retirement plans.
How Should Doctors Retire?
If you want to postpone your retirement for a few more years then you must follow the preventive strategies
- Have an annual check-up with your doctor and act on the advice given.
- Do not be tempted to self-medicate.
- Exercise regularly.
- Avoid smoking and use alcohol in moderation.
- Monitor your nutrition and avoid obesity.
- Learn how to switch off and relax when away from work.
- Plan your leave and avoid a stressful build-up of work.
But if you believe that you should retire in the coming years then follow the steps mentioned here:
- Formulate a retirement financial plan in the early retirement stage of your career.
- Do not over extend yourself financially as this can affect your demeanour, personality and work performance.
- Try succession planning. Your appointment in a public hospital may have some statutory limitations but your private practice will not. Stand back, reflect and plan to ease back and pass clients on to the next generation.
- Don’t assume you will know when the right time is to stop – listen to your colleagues and family.
By now you should have accumulated significant wealth, although you may still be short of your dream retirement. It is not too late to optimise your affairs and make the most of the strategies available to you at this stage of your career. Happily, an impoverished old age is rarely encountered by a doctor. It’s the nature of the job: a high, stable, scalable, insurable and long income that virtually guarantees a comfortable lifestyle and a contented old age. This, coupled with intelligence and prescience, means most doctors are quite comfortable by retirement time, and enjoy a pleasant retirement.
iAdvice want to help doctors retire. If you are contemplating retirement, please make an appointment with our adviser to discuss your retirement and how to get the best out of it.
This site contains a variety of copyright material. Some of this is the intellectual property of individuals (as named), some is owned by the IAdvice Pty Ltd itself. Some material is owned by others (clearly indicated) and yet other material is in the public domain. Except for material which is unambiguously and unarguably in the public domain, only material owned by the IAdvice Pty Ltd and so indicated, may be copied, provided that textual and graphical content are not altered and that the source is acknowledged. The IAdvice Pty Ltd reserves the right to revoke that permission at any time. Permission is not given for any commercial use or sale of this material.
No other material anywhere on this website may be copied (except as legally allowed for private use and study) or further disseminated without the express and written permission of the legal holder of that copyright.
Copyright © IAdvice Pty Ltd
While the IAdvice Pty Ltd has attempted to make the information on this server as accurate as possible, the information on this Web server is for personal and/or educational use only and is provided in good faith without any express or implied warranty. This information is not advice and you should seek the advice of a professional who can take your personal circumstances into account and offer you personal advice. There is no guarantee given as to the accuracy or currency of any individual item on the website. The IAdvice Pty Ltd does not accept responsibility for any loss or damage occasioned by use of the information contained on the website nor from any access to the iadvice server. While the IAdvice will make every effort to ensure the availability and integrity of its resources, it cannot guarantee that these will always be available, and/or free of any defects, including viruses. Users should take this into account when accessing the resources. All access and use is at the risk of the user.
The IAdvice Pty Ltd has provided hypertext links to a number of other web sites as a service to users of this Web server. This service does not mean that the IAdvice Pty Ltd endorses those sites or material on them in any way. The IAdvice Pty Ltd is not responsible for the use of a hypertext link for which a commercial charge applies. Individual users are responsible for any charges that their use may inc