Whether you are on the verge of retirement, sailing along mid-career or just starting a practice, it is important to think ahead and plan for your future. For many reasons, including lengthy training, high student loan payments and the time commitment required to build and manage a practice, psychologists often get a late start on retirement planning.
Yet, a little preparation goes a long way. The following information will help you begin to plan for a financially secure future.
A good place to start is to determine if you would like to:
You should also consider other plans such as travel, whether you will downsize your home and if you will relocate geographically.
An evaluation of your current finances will help you plan for what you will need in the future.
Although calculations can be done manually, the use of personal financial software such as Quicken or Money may facilitate the process.
Based on your vision for retirement, work with a professional financial planner to decide how much money you will need to set aside and which investment vehicles are best for you. Consider factors such as:
Create a customized plan that you are comfortable with and that will help you maintain a lifestyle consistent with your retirement plans. Put concrete steps in place to reach your goals and stick with your plan over time.
It is not unusual for ideas about the future to change over time. Additionally, unanticipated life circumstances may require you to change your course. Review your retirement plan with your financial advisor every year or two and revise it as necessary to help you reach your goals.
Read a book or two about retirement planning and explore a few financial websites such as CNN Money and MSN Money. You don’t have to be an expert (that’s what your financial advisor is for), but you should have a basic understanding of retirement planning and your various options. Having a general knowledge base will facilitate productive discussions with your financial advisor and increase your comfort level with the process.
There are a variety of choices, such as a 401(k), Keogh plan, IRA or SIMPLE plan. Each type of investment vehicle has different advantages and disadvantages with regard to eligibility, financial risk, return, access to funds and taxes. Some are better suited to certain legal models of practice. Consult with your financial advisor to determine which option is best for you.
When you retire, you may have other sources of income in addition to your retirement savings. Be sure to consider Social Security benefits, revenue from part-time practice and income from other investments when you create your retirement plan. You can request a Social Security Statement that estimates your future Social Security benefits.
Life has a way of throwing us an occasional wrench and this remains the case during retirement. Build yourself a financial buffer that is quickly and easily accessible, so you are more readily able to meet needs such as unexpected home repairs or medical expenses if they arise.
When it comes to your future, investing for retirement is not the only financial matter you should consider. Talk to your financial advisor about protecting your assets and those of your loved ones by preparing appropriate wills and trusts and purchasing health, disability and life insurance. You may also want to consider private long-term care insurance if you anticipate expenses that will not be adequately covered by government sources such as Medicare or any supplementary health insurance you carry.
Since malpractice charges can be filed even after treatment ends, it is also essential to make sure you will be covered in terms of professional liability. Before you retire, check your policy and consult with your liability insurance provider about appropriate and sufficient coverage.
Thinking about the financial aspects of retirement can be overwhelming, so many people put it off. David Ballard, PsyD, MBA, the APA Practice Directorate’s assistant executive director for corporate relations and business strategy suggests the following five tips to get started:
Protect yourself and your family with appropriate insurance.