Why everything you learned about retirement is probably wrong

October 20, 2019
Most doctors I speak with are pretty good at managing their day-to-day personal and practices finances. They live within their means, know their practice metrics and dutifully put aside whatever their accountant tells them to into their retirement accounts. But almost always when I ask about having a plan to save for retirement, I get blank stares.

If you’re not sure how much you should be saving for retirement, you’re not alone. And really, it’s not your fault.

We learn most of our personal financial values from prior generations. But the rules our parents and grandparents followed are no longer relevant in 2019. Consider this: in 1950, the average life expectancy for men was 65.6 years old (women lived on average to 71). The average length of retirement: 8 years.

The ramifications of this are stark. Typically, if you only have 8 years left to live, you’re not in a physical condition to travel the world or play golf every day. In a nutshell, it used to be that you worked until retirement, then shortly after, you died.

Today, life expectancy for men in the US is 76 years old. But that’s an average— financial planners expect healthy individuals to live much longer, usually assuming at least one spouse in a married couple lives to age 100. And who knows what medical technology will yield in the next decade? That means if a doctor retires at 67, their assets need to last 33 years, not 8. That’s quite a gap to fill.

Also important to note are cultural differences. It’s far less common for parents to live with their children as they age. Companies used to take responsibility for their employees retirements via pension plans, which is almost unheard of now. Not to mention retirement isn’t a death sentence anymore—it’s a party, complete with travel, housing and lifestyle expectations previous generations didn’t plan for.

Long story short: you need more money and it needs to last longer. So where do you start?

One prevalent misconception I see is that following government guidelines will provide for an eventual retirement. Maximizing your SEP, Simple or 401k can be a good tax strategy, but the government didn’t come up with these numbers as a guide to retirement; it’s simply the maximum they’ll allow you not to pay taxes on this year.

And social security? Even if it’s around in its current form at your retirement, the maximum benefit in 2019 is around $45,000 per year—not exactly travel-the-world, buy-a-lake-house, send-your-grandkids-to-college kind of money.

Planning for your golden years is a moving target and will change with life circumstances, but make sure your strategy is based on today’s mortality rates and expectations instead of your parents'. When I work with clients, we generate a savings number based on several methods of forecasting, then update annually. Whether you’re 3 or 30 years from your anticipated retirement, make sure your savings plan is doing what it should today, not when you’re ready to leave optometry!

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