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Funding Your Retirement: Finding Your Floor


For many physicians, the most anxiety-inspiring question about retirement is: How much will I need? It's not an easy question to answer, but with some relatively simple math, doctors can compute a pretty good estimate.

For many physicians, the most intimidating part of thinking about retirement is not the loss of purpose that comes with serving others, the need to fill the day, or concerns about long-term health. For many, it comes down to one big one: Will I have enough money to retire comfortably?

It’s a difficult question with no easy answer. Part of the reason it’s difficult is that considering your lifetime savings will necessarily involve pondering your lifetime. How can you estimate whether you have enough to live the rest of your life without contemplating the rest of your life? Intimidating, right?

While there isn’t much you can do about your own impending mortality, one sure-fire way to tackle the fear that you won’t have enough money in retirement is to set a retirement floor. When you retire, you’ll need enough money every year to meet the basic needs—housing, food, any outstanding debts, and monthly bills. Even at current mild rates, inflation may impact how much of a bite each of those components may take out of your income, so be sure to factor that in. Also factor in any increases you may see once you retire, either in the form of Social Security benefits, pension payments, or other income you can expect.

Setting the Floor

Once you have a better idea of your income and your expenses, you can create an overall budget that just gives you a high-level view of where you are. If you have a partner or spouse who is planning to retire at the same time, factor that in as well. During this process, keep in mind not just your own needs, but your desires regarding possible inheritances to your children, charitable causes, and anything else for which you’d like to leave a legacy. Think about what kinds of activities you’ll pursue in retirement, and try to find a realistic estimate for how much those are likely to cost.

Take Stock of Your Stocks

While I used “stocks” for the sake of a pithy subhead, I’m really referring to your overall retirement portfolio, which hopefully does not include only stocks. Your retirement provider includes projections that take into account your current contributions, any rate of growth of your investments, and your projected retirement date. Now, take into account the investment risks inherent in any portfolio, make sure those risks are adequately adjusted as you approach retirement, and consider an emergency fund for life’s little curveballs.

Looking at what you’re currently saving and what you’ll need in retirement, are you on target? There are a lot of factors at play here, obviously, and the task can seem overwhelming. But if you break it down into smaller steps, it will seem less intimidating. And don’t panic if what you’ll need in retirement doesn’t yet equal what you have. You’re still earning, so the opportunity to grow your nest egg is still very much alive.

Get Up Off the Floor

Once your floor has been established, you’re going to want to think about ways to rise above it. If you can afford to do it, consider maxing out your retirement plan contributions. If you’re over the age of 50, the IRS allows “catch-up” contributions that allow you to put more than the traditional maximums aside.

Look into a fixed or variable annuity for additional income. Increase your emergency fund savings. Make sure you’re covered with life insurance and long-term care insurance. Having these safeguards in place won’t entirely ensure that you’ll be covered for all eventualities, but having a safety net under the “retirement floor” will go a long way in taking this from a time of retirement fear to one of great anticipation.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice