Some Retirement Statistics and Questions for Physicians

Transitioning to the End of Your Medical Career

 BY DR. DAVID EDWARD MARCINKO MBA CMP®

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With the PP-ACA, increased compliance regulations and higher tax rates impending from the Biden administration – not to mention the corona pandemic, venture capital based healthcare corporations and telehealth – physicians are more concerned about their retirement and retirement planning than ever before; and with good reason. After payroll taxes, dividend taxes, limited itemized deductions, the new 3.8% surtax on net investment income and an extra 0.9% Medicare tax, for every dollar earned by a high earning physician, almost 50 cents can go to taxes!

Introduction

Retirement planning is not about cherry picking the best stocks, ETFs or mutual funds or how to beat the short term fluctuations in the market. It’s a disciplined long term strategy based on scientific evidence and a prudent process. You increase the probability of success by following this process and monitoring on a regular basis to make sure you are on track.

General Surveys

According to a survey from the Employee Benefit Research Institute [EBRI] and Greenwald & Associates; nearly half of workers without a retirement plan were not at all confident in their financial security, compared to 11 percent for those who participated in a plan, according to the 2014 Retirement Confidence Survey (RCS).

In addition, 35 percent of workers have not saved any money for retirement, while only 57 percent are actively saving for retirement. Thirty-six percent of workers said the total value of their savings and investments—not including the value of their home and defined benefit plan—was less than $1,000, up from 29 percent in the 2013 survey. But, when adjusted for those without a formal retirement plan, 73 percent have saved less than $1,000.

Debt is also a concern, with 20 percent of workers saying they have a major problem with debt. Thirty-eight percent indicate they have a minor problem with debt. And, only 44 percent of workers said they or their spouse have tried to calculate how much money they’ll need to save for retirement. But, those who have done the calculation tend to save more.

The biggest shift in the 24 years has been the number of workers who plan to work later in life. In 1991, 84 percent of workers indicated they plan to retire by age 65, versus only 9 percent who planned to work until at least age 70. In 2014, 50 percent plan on retiring by age 65; with 22 percent planning to work until they reach 70.

Physician Statistics

Now, compare and contrast the above to these statistics according to a 2018 survey of physicians on financial preparedness by American Medical Association [AMA] Insurance. The statistics are still alarming:

  • The top personal financial concern for all physicians is having enough money to retire.
  • Only 6% of physicians consider themselves ahead of schedule in retirement preparedness.
  • Nearly half feel they were behind
  • 41% of physicians average less than $500,000 in retirement savings.
  • Nearly 70% of physicians don’t have a long term care plan.
  • Only half of US physicians have a completed estate plan including an updated will and Medical directives.

Retired MD Doctor Retirement Gift Idea Retiring - Doctor ...

Thoughts to Ponder

And so, to help make your golden years comfortable and worry free, here are ten important retirement questions for all physicians to consider:

  1. How much money do you need to retire?
  2. What is your retirement cash flow?
  3. What is your retirement vision?
  4. How to stay on retirement track?
  5. How to maximize retirement plan contributions such as 401(k) or 403(b)?
  6. How to maximize retirement income from retirement plans?
  7. What are some other retirement plan savings options?
  8. What is your retirement plan and investing style?
  9. What is the role of social security in retirement planning?
  10. How to integrate retirement with estate planning?

The opinion of a competent Certified Medical Planner® can assist.

ASSESSMENT: Your thoughts, comments and input are appreciated.

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Our team combines a cross-section of skill-sets including public and population health, financial operations, business intelligence, and data science.

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Consider Taxes Before Retiring Abroad

Physicians Considering Retirement in Another Country?

By Rick Kahler CFP®

One way for a retiring doctor to stretch a retirement nest egg is to relocate your retirement nest. Finding a place with a lower cost of living can include considering retirement in another country.

International Living

According to International Living, Panama is one of the best options for Americans looking for affordable living costs, good medical services, and an appealing climate. Costa Rica, Mexico, and Belize are also good possibilities.

Before you pack your sunhat and flip-flops and head for a low-cost retirement haven like Panama, however, take a look at all the factors affecting your retirement income and expenses. One of those is taxes.

Taxes

Moving out of the country does not mean your tax bill to the US government or your current state will decrease. Short of giving up your US passport, there is nothing you can do to escape paying US taxes on your income, even if you don’t live in the US. We are one of two countries worldwide—the other is Eritrea—that taxes our citizens based on both residence and citizenship.

You might assume, however, that moving out of the country would end your liability for state income taxes. That isn’t always the case. Some states still want to tax your income even though you don’t live there. According to Vincenzo Villamena in a December 2018 article for International Living magazine titled “How to Minimize Your State Tax Bill as an Expat,” it’s especially problematic if you end up returning to your old address in the state and start filing an income tax return. Eventually, he says, “the state will see the gap” and may require you to pay taxes on the missing years.

You have nothing to worry about if you live in one of the seven states with no income tax: South Dakota, Wyoming, Nevada, Washington, Texas, Florida, and Alaska. Tennessee and New Hampshire aren’t bad, either, as they don’t tax your earnings but they do tax your investment income. Most other states will let you off the hook if you submit evidence that your residence is in another country and you haven’t lived in the state for a while.

Then there are the states that won’t let go of their former residents easily. Those are California, Virginia, New Mexico, South Carolina, North Carolina, Massachusetts, and Maryland. Assuming that when you leave you will be coming back, they require that you continue to pay state tax on your income.

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Solutions?

The solution to this issue takes a little financial planning and some extra time. The best way to escape paying taxes to a state you no longer live in is to move to a state with no income tax first before relocating abroad. You must prove to your old state that you have left and have no intention of ever coming back.

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This means moving for real—cutting as many ties to your old state as possible and establishing as many as possible in your new state. You will want to sell your home, close bank accounts, cancel any mailing addresses, change healthcare providers and health insurance companies (including Medicare), be sure no dependents remain in the state, and register to vote and get a driver’s license in the new state. As a final good-bye you will want to notify the tax authorities that you are filing a final tax return for your last year that you lived in the state.

Assessment

In case you need a good state from which to launch your leap into expat status, consider South Dakota. Not only would my income tax-free home state let you go easily, it would welcome you back if you should decide to return to the US.

Your thoughts are appreciatedBook of Month

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Talking about Retirement to Doctors with Caution!

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Instead … Talk Revenue Generation

By Vicki Rackner MD

vicki

As a financial advisor, wealth manager, stock-broker or financial planner, do you want to engage more doctor prospects?

Well, think twice about approaching them with educational content about retirement.

So, in this video presentation, I explain how and why this is not your best hook.

Assessment

Instead, talk to them about revenue generation.

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pension

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 https://www.youtube.com/watch?v=vyZ3cI9PKQA

ABOUT

Vicki Rackner MD is an author, speaker and consultant who offers a bridge between the world of medicine and the world of business. She helps businesses acquire physician clients, and she helps physicians run more successful practices. Contact her at (425) 451-3777

Conclusion

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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What You Should Know About 401(k) Loans

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Lon JeffriesBy Lon Jefferies MBA CFP®

According to 401k.org, about 20% of Americans eligible for a 401k loan have one, and the average outstanding loan balance is $7,600. As 401k loans are an option for many, it is a good idea to familiarize yourself with the pros and cons of this financial tool.

Additionally, be aware that not all 401(k) plans allow employees to borrow from their accounts. Check with your H.R. department before you even begin to consider a loan.

The Rules

The maximum loan amount allowed is restricted to the lesser of half the vested account balance or $50,000. While interest rates vary by plan, the most common rate is the prime rate plus one percent (prime is currently 3.25%). Unless lent funds are used to purchase a home, most 401k loans must be fully repaid within five years.

The Advantages:

  • Loans are not subject to income tax or early withdrawal penalties (unless the loan defaults).
  • Loans are convenient. There is no credit check or long application process.
  • Loans have low interest rates. Most 401k loans are cheaper than rates charged by credit cards and second mortgages.
  • Interest paid on the loan is paid to yourself, not a bank or other lender.

The Disadvantages:

  • Borrowed money will not be invested in the market so potential investment gains will be forfeited. Click here for a calculator illustrating what a loan will eventually cost in interest and lost investment return.
  • Borrowed funds will be taxed twice! Borrowers earn wages, pay taxes on those wages, and use those after-tax funds to repay the loan. During retirement, the retiree will again pay taxes on withdrawn funds. Consider an investor who is in the 25% federal tax bracket – being tax twice would be extremely expensive.
  • Investors with a 401k loan ultimately contribute less to their retirement plan because a portion of new contributions will go towards paying off the loan.
  • If you cease working with your current employer, your entire loan is usually due within 60 days. If you can’t repay the loan, it is considered defaulted and you will be taxed on the outstanding amount and subject to a 10% early withdrawal penalty if you are under age 59½.Generally, I feel that a 401(k) loan should be considered only if it’s essential and all other financial resources have been exhausted.

    Loans

    Assessment

    However, there are instances when a 401(k) loan can be a fantastic solution. For instance, I have a client who expects to receive an inheritance within the next few months. This client would like to purchase a new home immediately and needs funds for a down payment. It makes sense for this client to borrow from his 401(k) plan in order to cover the initial cost of the home loan and repay the loan in full once the inheritance is received. This enables this individual to borrow funds inexpensively but then not forfeit the great benefits provided by his retirement plan.

Conclusion

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Doctors Shouldn’t Wait Till Retirement To Act On Travel Dreams

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By Rick Kahler MS CFP® ChFC CCIM www.KahlerFinancial.com

What’s at the top of your retirement bucket list? If you are like most folks that I help prepare for retirement, travel is high on that list.  As I’ve grown older, my views on retirement travel have changed. I used to buy into the dream of retirement as the “Golden Years.” I thought of it as the time in life when people are free to do what they want, when they want, with whom they want.

Working with older clients has taught me that my younger views of the glory of retirement were a bit naïve. While certainly some people do experience years of unlimited and unfettered travel, many more don’t find it so easy. Doing “what you want, when you want, with whom you want,” assumes three things we often take for granted: good health, adequate finances, and meaningful relationships.

This seems especially true for command-control type medical professionals.

The Three Legs of Retirement Lifesyle

1. Health. When it comes to travel, good health may not be essential, but it will make your experience more fulfilling and enjoyable. Of course, we aren’t typically in either “good” or “poor” health, but fall somewhere on a continuum. With limited mobility, you may be able to shop at the bazaar in Istanbul, but chances are you won’t hike the Grand Canyon or explore the Acropolis.

Like most things, good health typically requires a conscious intention to create and maintain it. Someone who has a money script of, “When I retire I’ll have the time and money to take better care of myself” may be in for a surprise. Most people who chose not to take care of their health before retirement won’t do so in retirement. As one retired friend said, “If you didn’t have the energy to work out when you were young, you sure won’t have it when you retire!”

What’s even more uncontrollable is the health of those with whom you wish to share your travel adventures. Even if you’ve taken care of yourself, your significant other may be unable to travel. Instead of strolling a beach in the Bahamas, you could end up at home being a caretaker.

2. Money. On average, baby boomers have saved less than $100,000 for retirement. That won’t pay for many around-the-world cruises. If you want to travel after you retire, you need a serious commitment during your working years to live frugally and invest as much as you can. Otherwise, you may end up with just barely enough to cover your basic living expenses.

3. Relationships. If you spend your career working 80-hour weeks, you may accumulate enough assets to fund plenty of retirement travel—but by then you may be traveling alone. Saving for the future is out of balance if it’s done at the expense of enjoying life and close relationships today.

Assessment

By now you may think I’m suggesting you have no better choice than to spend your retirement years at home. Not at all. Here’s one possibility: If travel is one of your dreams, what would happen if you did some of it now? Use your vacation time while you can enjoy yourself. Take that motorcycle trip through Europe or go scuba diving in Belize while you’re in top shape. Do the international travel now when you can better negotiate airports, handle travel delays, and power through jet lag. To save on expenses, plan ahead, use a credit card that awards frequent flyer miles (which you pay off monthly), and use cost-saving options like home swaps and off-season travel.

Then, after you retire, when you need more access to medical care and less demanding travel, you can stay closer to home and enjoy the opportunities in your own back yard.

More: http://www.mississippimedicalnews.com/retirement-and-succession-planning-cms-1524

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Speaker: If you need a moderator or speaker for an upcoming event, Dr. David E. Marcinko; MBA – Publisher-in-Chief of the Medical Executive-Post – is available for seminar or speaking engagements. Contact: MarcinkoAdvisors@msn.com

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