FINANCIAL PROBLEM SOLVED!

"I'll never be able to retire!"

Problem

I'm a 43-year-old solo FP making about $120,000 a year. My income has been stagnant for seven years. With malpractice insurance and other overhead constantly rising while reimbursements continue to decline, I doubt that I'll earn more anytime soon.

My tax-deferred retirement account is now worth $120,000, about half what it was two years ago, so my adviser recently switched my portfolio from large-cap to small- and mid-cap funds to help me make up the lost ground. I owned a home for 10 years but sold it for what I paid for it.

At this rate, I'll never be able to retire. Do I have any options, other than to keep doing triathlons—which I love—to stay healthy so I can work until I'm 80?

Solution

The first thing to consider is whether solo practice is really best for you. Sharing expenses and services with another physician could create opportunities to lower your individual costs and increase the amount you take home.

Moreover, if you have little interest in business, you may not be making the best or most cost-efficient decisions. Are you or your staffers adept at negotiating insurance contracts, collecting copays and other payments on a timely basis, getting the best price on supplies, and managing cash flow? I've seen solo practitioners who are practically running charity operations because these tasks are handled so poorly.

If this sounds like your situation, consider whether you should work for a group or hospital where you wouldn't have the business operation concerns.

Regarding your investments, I'm concerned that you've made some major strategy shifts and opted for higher risk. It's not smart to play "catch-up" with your portfolio, and I don't recommend putting all your money into mid- and small-cap equities. As our economy and markets recover, large-cap stocks are likely to realize considerable gains. You'll miss out on the rebound if you ignore large-caps now.

I suggest that you start with an overall portfolio allocation of 50 percent stocks and 50 percent bonds. Then, in 10 years, shift 10 percent from stocks into bonds. Do the same a decade later, so that by the time you retire your allocation is near 30 percent stock and 70 percent bonds. You should have roughly equal portions of large-, mid-, and small-cap stocks.

I also encourage you to view retirement differently. People who enjoy their work don't retire, they just slow down. If you love triathlons, you might consider opening a retail store for runners. Find a partner who could run the store full time now and allow you to work occasionally. When you decide to stop practicing medicine, this store could help fund your retirement. A client of mine in a similar position opened a bookstore with a partner. At first the doctor worked some evenings and weekends, and he gradually closed his medical practice as the bookstore became self-sufficient.

It also sounds like you could benefit from having a full financial plan prepared, rather than making decisions piecemeal. If you opt to work part time after "retirement," for example, this would affect your portfolio allocation and investment strategy. A planner can devise a strategy that will cover all the bases.

This issue's problem solver is Craig E. Carnick (craig@wealthadvisory.com) of Carnick & Company, in Colorado Springs, CO. Financial Problem Solved! is edited by Senior Editor Leslie Kane.

Do you have a question you'd like a financial adviser to address? Please submit it via e-mail to Solved@medec.com, or by regular mail to Medical Economics, 5 Paragon Drive, Montvale, NJ 07645. ATTN: Financial Problem Solved! If we select your query, we'll address it in an upcoming issue. Your name will not be used.

Craig Carnick. Financial Problem Solved!.

Medical Economics

2003;6:73.