Few physicians dream of early retirement. In fact, most physicians don't plan on retire until age 68, while Americans in other professions retire around 63, according to Medical Economics. This is partly because doctors often begin their careers later due to the additional education and training the field requires.
Many clinicians are fortunate enough to love their work and have a hard time leaving it behind. But if you're considering retiring early, a few financial planning tips can help streamline the process.
Why Retire Early From Practicing Medicine?
Healthcare has been increasingly driven by high volumes and waning reimbursements over the past decade. While this paradigm is transitioning to a system of quality-based reimbursement, the amount of documentation, coupled with the fact that schedules haven't yet slowed down, is contributing to physician burnout.
Even though doctors generally enjoy taking care of their patients, sometimes for decades, the administrative burdens of private practice can take a toll on career satisfaction. Other physicians retire early for personal reasons, such as a health problem or a scarcity of family time.
How Much Money Do You Need to Retire Early?
The earlier you would like to retire, the more aggressive you need to be with savings and investments. Since physicians generally start saving for the future after paying down medical school loans, they need to pay special attention to retirement funds early in their careers.
The Idaho Medical Association Financial Services recommends that doctors begin saving about 15 percent of their income by age 25. By 40, physicians should have three times their annual salary in savings, and eight to ten times their annual salary by their mid-fifties.
If you haven't spoken with a financial advisor, start by using an online retirement calculator from a reliable source such as AARP. By considering your salary, savings, expected pensions and your Social Security, you can learn how close you are to being financially ready for early retirement.
Be cautious when using online calculators, however. Most assume that you will require 85 percent of your current income in retirement. As the Wall Street Physician states, physician income is generally a good bit higher than what the average person brings in. Retired doctors can usually live comfortably off as little as 50 percent.
Transitioning Your Private Practice to New Ownership
If you've nurtured your private practice into a thriving business and want to sell it, you need to adequately prepare your business for the sale. This includes everything from making sure your financial statements are in order to documenting every employee's job descriptions and duties.
Get a good valuation from a business with experience valuing medical practices. If you own the building, consider selling the property separately from the practice or leasing it for income.
If you decide to sell, your staff and patients need advance notice so they can consider whether they want to stay with the new owner. One of the most rewarding aspects of working in medicine is building relationships with patients over the years. Lifetime patients can feel abandoned if a physician leaves unannounced, and losing these patients can impact the practice's future health. Your clientele will be reassured to hear from you that the next owner was chosen personally and is someone you trust.
How To Know If You're Truly Ready
It turns out not everyone is happy with early retirement. The American Medical Association reports that 8 percent of physicians who retired before 60 were dissatisfied with their decision.
Whatever retirement age you choose, there are ways to ease this transition. Consider working part-time, volunteering or pursuing teaching opportunities. Try living on the budget that you will have after retirement, and talk to colleagues who retired early about their experience. Resources like White Coat Investor also provide helpful tips on how to make this transition.
If you do plan to work until 70, remember that life can sometimes bring surprises. The key to successful retirement at any age is being prepared.
