Retirement Planning for Veterinary Professionals
Will you be able to retire?Yes, if you start planning now with this simple—but not easy—process.
Unfortunately, there is no simple “one size fits all” answer to this question. For example, will your debt obligations (eg, mortgage, credit card debt, car and student loans) be eliminated at retirement? Will your kids be self-sustaining? Will you need to care for an aging parent, grandparent, or special needs child? How much will your retirement lifestyle cost? How much will you spend on healthcare? How much money will be coming in? How long will you live?
Related Article: Personal Financial Tips for the Veterinary Team
Figure out what you have, what you want, how to get what you want with what you have, and close any gaps.
Although “rules of thumb” are consistently clumsy, Fidelity Investments claims that if 8 times the desired annual income can be accumulated, a retiree can be in fair shape.1 So, if $50,000 in annual retirement income is desired, $400,000 should be accumulated. Conventional wisdom also holds that at least 75% of current income will need to be replaced in retirement; however, if you are debt-free, with modest needs and wants, you may get by on far less.
The best solution? Estimate monthly expenses (yes, that means a budget!) and then gauge monthly income. The retirement planning process, although not always easy, is simple and straightforward:
1. Estimate future sources of income2. Estimate future expenses and/or uses of income3. Subtract #2 from #1
If you do not like what you see, you should consider how to increase your income and/or decrease expenses.
Related Article: Personal Finance: Are You Really Prepared For the Future?
PERSONAL REVENUE
For most Americans, Social Security will play a big role; the Economic Policy Institute claims Social Security retirement benefits provide the majority of income for about 60% of the retiring population.2 So, those approaching retirement should check their expected Social Security benefits.
Deciding when to begin collecting Social Security benefits could be one of the most important retirement-income decisions you will make. Although you can claim Social Security at age 62, most experts recommend waiting until your full retirement age (66–67, depending on your birth date) or even to age 70 if possible, because waiting permanently increases your monthly benefit.
Likewise, couples need to maximize their amount of Social Security income to ensure a surviving spouse is not left penniless, because the survivor of a 65-year-old couple is more than 70% likely to reach age 85, according to the Society of Actuaries.3 There are hundreds of different claiming strategies, and getting this wrong could easily cost you or your spouse more than $100,000 (see Social Security Strategy Resources).
BE PREPARED
Veterinary professionals in private practice should consider the following tips:
Consistently live below your means
Own a veterinary practice
Own the practice building as well as the land
Grow the value of the practice (have it valued periodically)
Do not sell the practice until absolutely necessary
Adopt a small-business retirement plan, such as a 401(k) or SIMPLE IRA, and contribute the maximum amount allowable every year
Contribute to an IRA annually
Aggressively build liquid assets (eg, stocks, bonds, cash)
Work longer
Upon retirement, sell the practice, but not the real estate
Retire debt-free
Carefully consider the myriad of Social Security options and strategies available
Enroll in Medicare at age 65
Consider long-term care insurance.
BOTTOM LINE
Figure out what you have, what you want, how to get what you want with what you have, and close any gaps. And don’t forget to live happily ever after!