Recent market volatility might have some doctors worried — especially those who are nearing retirement. But if you’ve done everything right, says one financial advisor for physicians, your retirement plan should be correction-proof as you near the close of your career.
W. Ben Utley, Certified Financial Planner and President of Physician Family Financial Advisors, says there are several things that a good financial advisor will do to keep your nest egg secure as you near retirement. They include establishing a “bond tent” in your investment portfolio, advising you on your insurance needs, eliminating debt, and managing costs.
The bond tent
When asked what should be a top priority for doctors in the last few years of their careers should do, Utley said the following:
“They should not be investing 100 percent in stocks, that’s for sure.”
It seems obvious, but many doctors have no idea how they’re invested. A bond tent will build in an added layer of security for doctors nearing retirement, Utley says. The bond tent model gradually moves your investments from historically less stable equities (stocks) toward historically more stable bonds as you approach your retirement date.
Once you reach the retirement date, the model begins to gradually reverse itself, shifting toward stocks to generate late-retirement income.
Life and disability insurance
The remaining ⅔ of Utley’s approach deal with controlling costs. Life insurance is one that doctors nearing retirement easily can bring to heel.
Think about it like this: If you’ve done everything right throughout your career, then you’ve amassed a substantial amount of wealth. If you were to die, does your family really need a life insurance payout?
“I can’t think of any reason for a rank-and-file doctor to have life insurance at the end of their career,” Utley says.
Canceling disability insurance is also a consideration.
“If you’re dead certain that you’re going to retire and you have enough money, you might want to consider canceling disability insurance. Know that this is a risky proposition, though,” Utley says. This is only an option if you’re 100 percent sure you no longer want to practice and you’ve amassed enough wealth that you no longer need to work.
Eliminating debt
The last thing any doctor should be bringing into retirement is debt.
“Ideally, you go into retirement debt free,” Utley says. If you’re living on your portfolio, your income may be variable. “But your mortgage shows up every month and demands the same amount of money.”
This goes for all outstanding debts: med school loans, credit cards, auto loans. Aggressively pay them down, Utley says.
Even if you own your home, you might want to consider selling it.
“If you live in a high-tax state, you might want to think about moving,” Utley says.
Look at it like this: If you move to a state where taxes are 11 percent lower, and you have a $4 million portfolio, you give yourself a $440,000 raise just by moving. That’s not nothing.
