Physicians, much like lawyers and business leaders, face different financial needs as they progress through their career. From finishing medical school to joining a practice, having years of productivity and ultimately retiring, each phase presents its own set of unique financial needs and challenges. However, a common thread is evident through each phase; it’s never too early to start planning for your financial future to help ensure long-term success.
Strategizing Debt and Saving for Your Future
Although six years of medical school tuition is an investment with good return over the long-term, many recent graduates find themselves battling sky-high student loans. Thus, it’s important to have a strategy in place for tackling debt post-graduation. Your financial advisor can ensure that your financial strategy takes into account the debt that you must pay down, while allowing you to meet your other short-term financial needs, positioning you for long-term financial growth.
As you are establishing your career, it is also important to think ahead to your future and start saving for retirement. One way to do this is to take advantage of the retirement contribution program and benefits made available through your practice.
Everyone’s risk tolerance and budgetary needs are different, so work with your financial advisor to find the most appropriate way for you to pay down debt, and the right asset allocation to help you invest for the future. Of course, asset allocation does not assure a profit or protect against loss in declining markets. Remember, investment products are not FDIC-insured, not bank guaranteed and may lose money.
Building Your Career – and Financial Security
For physicians focused on building their practice, personal time can be hard to come by. But paying close attention to your finances throughout your career is critical to achieving your long-term goals, and a financial advisor can help you stay focused and on-track. Indeed, according to the January 2011 Merrill Lynch Affluent Insights Survey (MLAIS), when asked the number one piece of long-term saving and investing advice they would give their 30-year-old-self, 34 percent of affluent Philadelphians recommended working with a financial advisor or working with one earlier in life.
The highly demanding life of a physician leaves little time to think about the importance of a financial portfolio and ways to balance expenses with other financial obligations. While furthering your career, you may also be raising a young family, saving for a child’s education, looking to buy a second home, and traveling. In order to plan properly, it’s important to incorporate all of these expenses into your overall financial strategy.
As with tending to your personal finances, it is also important to create a balanced financial strategy for your practice. You need to consider how to balance the budget in order to support the medical associates who have joined your group, all the while keeping in mind the long-term plans for the practice.
Creating a budget and setting financial goals, for both your personal and professional life, can help you prioritize your financial needs and set a foundation for your financial future. Working together with a professional who understands your financial concerns and priorities, and who can help guide your overall financial strategy, will allow you to focus on your career aspirations.
Planning for a Transition
Transitioning out of the practice can be intimidating and emotional for physicians – but the earlier you plan, the smoother the path can be. Consider your options a few years before you are ready to pass the baton – who will take the reins? Passing your practice to trusted younger physicians can help you feel that your legacy will be in good hands. Consider how involved you will be in the practice during your last years practicing and how you would like to the transition to occur. There is no need for an abrupt exit; the transition into retirement can be a gradual process that takes place over time. With retirement on the horizon, creating a strategy that best meets the needs of your practice as well as of your personal finances will allow you to gracefully transition into your future.
Retirement Your Way
According to the MLAIS, 88 percent of Philadelphia’s affluent believe their retirement will differ from that of their parents. In fact, more than half plan to continue working during what would normally be considered their retirement years, and 30 percent plan to relocate to another city.
This suggests that for many, “retirement” may be an active time, full of adventure, education – possibly even a second career. And this requires careful planning in terms of finances. Put a strategy in place and start putting money away for retirement early. As you get deeper into your career, set specific goals for investing – consider how much you’ll need to live the lifestyle you want, and what your personal goals will be during these years. In order to live the retirement life you have dreamed of, it’s important to plan early.
In addition to planning ahead in order to support your lifestyle in retirement, it’s important to consider unforeseen expenses that may arise when developing your financial strategy. For example, as a physician you spend your career focusing on healthcare for others, but it is also important to consider your own healthcare needs during retirement. According to the U.S. Department of Health and Human Services, 70 percent of people older than 65 will eventually need some sort of long-term care. In order to be prepared, your financial advisor can help you understand the options available to maximize your payments during retirement.
No matter what phase of your career you are in, it’s never too late to start planning for the next step. Working closely with a financial advisor as you transition through each stage of your career can help you develop a sound financial roadmap for your future, both professionally and personally, allowing you to reap the benefits of your hard work over the years.
Peter A. Rohr is a Managing Director-Investments and Private Wealth Advisor with the Private Banking and Investment Group at Merrill Lynch which operates through Merrill Lynch, Pierce, Fenner & Smith, Incorporated, a registered broker-dealer and Member SIPC. He can be reached in Philadelphia at (215) 587-4731 or firstname.lastname@example.org.