I wish I had listened. I started my private practice when I was 30. I was young. I was idealistic. I was healthy. I was optimistic that my practice would be financially successful. And I was very, very busy with a new baby and a new practice.
When someone suggested I start thinking about setting up an account for my retirement, I put it on my list for “later.” Later didn’t come until much, much later when I finally woke up to the fact that unless I prepared for a retirement someday, I’d be working until the day I died.
Actually, even that didn’t scare me much. Several of my role models were women in their 70s and 80s who were sharp as ever and maintaining private practices. It didn’t occur to me at the time that doing so should be a choice, not a necessity.
Eventually, I got it. Eventually I realized that social security income wouldn’t be enough and that just maybe I wouldn’t want to be seeing 30 or more clients a week when I’m 85. But having put it off until “later” meant that contributions had to be bigger if they were going to add up to anything useful. With several kids about to go to college, that was a strain.
If you have already started a retirement program for yourself, you can skip the rest of this article. You obviously are smarter than I was and listened to some good advice. I pass this story on to my younger colleagues who haven’t done so in the hope that it will encourage you to take care of yourself.
Retirement may seem like a long, long way off. But time goes faster than we would like to think. The things you push to the bottom of your to-do list because they can happen “later” are vulnerable to being the things that are too late to do.
Retirement Planning Basics: embrace the fact that you are an employer: A big plus of working for someone else is that that they offer such things as health insurance, paid vacation time, and a retirement account for you. Being in private practice means that you are your own HR department. There is no one but you to make sure you have the “benefits” you need to thrive. Be the enlightened employer that you always wished you had. Create a dream benefit package for your most valued employee – you.
Calculate your retirement needs: Think about when you will want to retire or at least cut back on your work hours. Think about what you hope to do in your senior years. What’s it likely to cost? The website for the American Association of Retired Persons, or AARP has a retirement calculator that will help you determine what you need to save for retirement. Click on “Retirement Planning” in the “Work & Retirement” section.
In addition, calculate what you are likely to receive as social security income. (There’s a calculator on this link). It probably won’t be enough to maintain the style of living you enjoy. If so, figure out what you will need to add in a retirement account to make up the difference.
Take inflation into account. One website that offers an inflation calculator is here
Educate yourself: Local community colleges and adult education programs often offer classes in financial planning. Take advantage of them. You want to be an educated consumer if you decide to work with a financial advisor. If finances excite you, you may decide that an investment project is something you can do yourself.
Consider hiring a Financial Advisor: Financial advisors help people figure out their financial needs and then recommend investments (stocks, bonds, mutual funds, precious metals, etc.) that will help them meet both short term goals (like vacations or a large purchase) and long term goals (like your kids’ educations or your retirement). Some advisors focus on managing investments you make. Some sell specific investment products. Some do both. Find a professional who is more interested in helping you create a diversified portfolio than in selling you certain stocks.
Pay yourself first: When starting out, your cash flow may be limited. Fixed expenses like rent, utilities and insurance eat up a fair share of what you bring in. What’s left for a salary for you may be quite a bit less than you would like or even what you need. None the less, consider what is available for a paycheck after you have paid your bills, including your personal retirement “bill.” Your retirement contribution is one of those fixed expenses.
Even if all you can afford is $10 a week for now, you will be building a savings habit. As your practice becomes more financially stable, increase that contribution to an amount that will compensate for a slow start.
Periodically review: Don’t let your retirement account go on auto-pilot. If you decide to continue to work with a financial advisor, take advantage of those services. If you decide to go it alone and manage your own portfolio, discipline yourself to regular reviews. Your retirement goals may change. The economy will definitely change. You may need to distribute your money differently because of changes in your family’s needs.
You are getting older and closer to retirement every day, whether you want to think about it or not. Start small but keep adding to it on a regular schedule. If you do, your retirement account will be ready when AARP brochures start to appear in your mailbox and the face in the mirror reminds you that maybe it’s time to think about retiring.