CPM Spring 2020 - 23

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Do you have a long-term financial plan?

With the day-to-day routine of caring for
patients and managing documentation and
schedules, sometimes your own long-term
financial planning can fall to the wayside.

Savvy Planning
As a physician, you are probably contributing to a retirement account, which
is an important step in planning for your
financial future.
However, there are many other variables to
consider to help you successfully achieve your
goals for retirement, including the following:
*P
 ositioning your investments in different types of investments and strategies
to receive the best tax advantages.
*U
 pdating your risk level regularly
via the allocation of your investments,
based on how many years you have
until you retire and to make certain
the investment risk is closely aligned
to your long-term goals and anticipated
spending in retirement.
*P
 lanning for longevity - many of us
are living well into our '90s.
*L
 eaving a legacy to family and/or
philanthropic causes.
Unfortunately, many people are not
achieving their goals for retirement savings. According to a 2018 Vanguard study,
Americans ages 45 to 54 had an average
401(k) balance of $129,051. Those who
were age 55 to 64 had an average balance
of $190,505. To live a comfortable life
in retirement, those figures are not likely
to support you for what may be decades
to come.
Missing the Goal
There are several reasons why many of us
may not hit our retirement goals:
The risk level in your investment portfolio
is out of balance based on your age, time
horizon until retirement, and your personal
long-term retirement goals. When younger,
your investment risk profile should generally
be a higher level of risk, and it will decrease
as you get closer to retirement. Too often,

younger professionals are not taking enough
risk in their investment accounts to help
them achieve higher returns while they are
younger and have many years to work and
rebound if the markets become volatile.

status and divorce can result in the loss of
significant assets, which means you may
need to take a hard look at your goals and
adjust your lifestyle and approach to saving
and investing moving forward.

The investment approach is not aligned
with your long-term financial and retirement goals. We all have goals, and everyone
is different. While one person may dream of
traveling the world in retirement, another
may care deeply about supporting charitable
organizations in their local area. Knowing
what you want to achieve will help guide
your investment approach. An experienced
and credentialed financial advisor and
planner can help you set the right plans
in motion to reach your goals.

Higher education savings
This may sound surprising, because
we all want to provide for our children,
but sometimes you may be so focused on
funding a higher education savings plan
that you are possibly jeopardizing your
future retirement plans. A balance is key!

Lack of disability coverage to protect you
from a loss of earnings. You never know
when something unexpected may happen,
and encountering medical problems that
preclude you from working can affect the
amount of earnings you're bringing in year
to year, which will also set you back from
achieving your retirement savings goals.
If you own your own medical practice or
are a sole practitioner, you may not have
business overhead and interruption insurance. Adding this to your business finances
may allow you to keep your office open in
the event you become ill or disabled on a
temporary basis. This allows the practice
to continue to pay the rent, employees and
potentially hire a temporary physician to
cover your patients while you mend and
come off of disability.
Lack of a diversified investment portfolio.
It can be tempting to take on additional
risk based on market timing bets or having
concentrated allocations. However, this kind
of investing can alter long-term performance
over the course of many years.
It may be uncomfortable to think about,
but an unexpected life event, such as the
death of the primary wage earner without
proper life insurance coverage, can have a
negative impact to your (and your family's)
financial plan. Also, changes in marital

The good news is with the right awareness
and planning, these are all situations that
can be avoided. As we're moving into the
first year of a new decade, and it's already
had some unexpected developments, now
is a good time to make sure you're on the
right track, with clear long-term goals
and a customized strategy to reach them.
Planning Early and Often
As you begin to walk through a financial
plan or review the one you already have,
there are several items you should consider
to help you better prepare for retirement:
Save as early as possible. It's likely you're
already saving for retirement, but confirm
you're taking advantage of employer matches
in retirement accounts, increasing the
savings percentage of your income as often
as possible, etc.
When you receive a promotion or a raise,
try to increase your savings for retirement
with the change in income level. A regular
habit of this can make a significant difference over the long-term.
Track your spending habits. Increase
your awareness of both discretionary
and non-discretionary expenses and take
ownership to monitor this on an ongoing
basis. Awareness will help you make wise
decisions, which will affect your future!
If it's an available option, consider a
Health Savings Account (HSA) plan.
Dollars invested into an HSA are pre-tax,
Continued on page 24

Central PA Medicine Spring 2020 23
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CPM Spring 2020

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