#59: 5 Key Characteristics of Physicians Well-Prepared for Retirement

Foreign welcome to the Passive Income MD Podcast where we talk about creating your ideal life through multiple streams of income. I'm your host, Peter Kim. If you enjoy hearing about this stuff, make sure to hit subscribe so I can bring it to you every week. Now let's get on with the show. Hey everyone, this week we're going to talk about retirement. We've talked about it in, you know, prior weeks. It's definitely a hot topic among physicians, especially with 2020 and everything that's happened in the past year and change. People have been thinking about their futures, thinking about their financial stability and where medicine will be headed. And so I know many of you are probably listening to this and thinking about retirement. I mean, if you haven't thought about it before, I'm sure it's top of mind now. And the ama, they as an organization, they have multiple arms to it. They have a arm of the AMA called AMA Insurance and they have some financial advisors and things like that. They put out a survey every couple years and a report that talks all about retirement and how physicians are prepared for it and take different surveys. And the last one that they actually did was 2018. They usually do it every two years, but I'm sure last year they were a bit occupied with other things. But I still think there are a lot of interesting things that we can pull out of this report. And I just wanted to summarize it real quick for you and mention some of the key things that I thought were important to note. The one in 2016 actually talked about the five key characteristics of physicians that are well prepared for retirement. And I think it's something that we could all learn from and hopefully there's some take home points for them. So let's dive into it. You know, I think most of us at least have thought about retirement. I mean, at least like, hey, am I going to put some money away in a retirement account? Many of you have started to create other streams of income, which I think is amazing. You've let me know and invest in real estate to figure that all out. Either way, I think that many of us probably feel like, hey, I might be a little bit unprepared for it or I'm not quite ready. Maybe you don't know if you're on pace for it or not. And so feeling that confidence is absolutely important as you go through this process. Otherwise it can be a source of stress. And I don't think that retirement should be seen as necessarily something that's stressful. I think to me, what's more stressful for me, I guess, in a way, is that making sure that I take advantage of all the time and the health and the opportunities that are available to me now. It's not stress, it's just a focus of mine. And that's the way I also see retirement. And I think that's the way many of us should see retirement. It's another stage of our lives. And again, it's not a black or white, I'm done in retirement. I think that gradual retirement is the way to go. You know, drop your hours as you go till you find that sustainable point. But hopefully it's not a big source of stress. So how do you become confident that you're on pace for it? You're confident that you're doing the right things to prepare yourself for that moment whenever it comes again, I think that this past year or so was a nice warning shot for us. Maybe a little bit of a stress test for many of us to think about, you know, whether we're on pace or not, whether we have options, whether we're set financially, whether we have enough financial education, you know, these kind of things to make sure we're on the right path. In any case, according to that report, here are the five most important characteristics of physicians that are feel well prepared for retirement. So, number one, they have a good knowledge base about personal finance. I think this one's an obvious one. I mean, as doctors, we. We are always seeking to increase our knowledge base when it comes to our particular field or subject matter. I mean, we went through med school, and even after that, we continue our learning by looking at journals, we participate in conferences and events. We have CME events to just make sure that we're up to date with all our knowledge. And we're so good at making sure we have that fundamental base of knowledge to perform well when it comes time to treating patients. And we all know it takes a bunch of dedication and effort, but unfortunately, many of us don't actually put any effort into increasing our financial knowledge. But if you're listening to this, you're not part of that group. So just want to let you know that if you are listening to these podcasts and doing it, you are in that group of small group of physicians that are actually, you know, taking matters into their own hands. So congratulations. And the thing is that, you know, if you want to be prepared for retirement, you just have to know what you're doing. You have to look into personal finance. All the resources are there available for you now. Books, podcasts, courses, and you know, many of those that we've recommended on our sites, they're all out there if you need it. But just knowing that you have a good knowledge base will set you on the right footing. That's number one. Number two, they carry less debt. And I think when they mean debt, they mean particularly consumer debt. Credit cards, home mortgages, car loans, home equity loans. Now this probably seems pretty obvious to many people, but it's a huge point. I mean, we also have student loan debt. You know, having all this debt can be very burdensome. It can be a lot of stress on your mind, especially the consumer type stuff, the credit cards that eat away at you. Now making sure that you carry less of that type of debt is an important thing to focus on. And you know, I don't think this means debt in terms of the, you know, like debts for rental properties or anything that you have debt on that actually helps you increase income or increases your asset value. That kind of debt can be very useful as a tool. But the other type of debt, like the consumer debt, can be a big drag. And so carrying less of that is, is an important factor. Number three, the max out tax advantage retirement accounts annually, the 401k, the 403b, the Roth. You know, these kind of retirement accounts are again tools for us to use, tools to increase our nest eggs, to put away money in a tax advantage way. Now whether you decide to max those out or not, that's a personal decision. I mean, I think they're good for the majority of people and the reason I think they're good for the majority of people, it forces you to save, it makes you put money away and be intentional about setting yourselves up for success. Now as you know, I do max out some of these retirement accounts and, but it is not the priority for me. The priority for me is creating assets that will create cash flow for me. So I don't need these retirement accounts. But I think it's a nice thing to have. It's a great way to diversify and it's a great way to take advantage of some of the tax benefits that the government allows. Just so many of you know, there are ways to invest and put away money into your 401k and still invest in real estate if you'd like to. There are just many different options for you. But the key is that they are putting money away in a tax advantaged manner. And I think that's absolutely important. Number four, they have estate plans in place. And by estate plans we're talking about living Trusts, wills, medical power of attorneys, end of life directives and things like that. I mean, thinking about the future, thinking about your estate and what will happen to you afterwards will take a lot of stress off your mind, you know, especially if something happens to you, you know, that things will get taken care of. Now, people have always asked about whether you need a living trust or is it just a will? I think that's important for you to talk to an estate lawyer about. But in most cases, a living trust is a very practical and good thing to have because it helps your family members avoid probate in the future, which can be costly, it can be time intensive, and it just lays things out very clearly in terms of your state and succession and where things go from there. The last thing you want to do is have court decide your family's future and where assets go and how to split those things up. You'd actually probably want to figure out what those things are before you pass and be very intentional about it. I also think that having these things in place before, it's very empowering. I mean, you know, you don't want to think that it could be morbid in a way, if you start thinking about what's going to happen to me in my end of my life. But I find it empowering. I've worked hard to set up my future for, you know, the future for my family, and I want to make sure it goes to the right place. And. And it's a way of being intentional about that and setting these things up. And in a way, it's kind of a celebration also of how hard you've worked and how hard you've been intentional about setting things up for your future generations. And so that's definitely something that's very important for you to do. I recommend everybody go out and make sure your estate plans are in place and you're all set up for that. Number five, I like this one. They plan to retire sooner. It's just all about having a game plan. Like having a game plan for early retirement. It really dramatically increases your chances that it will happen. Now, it doesn't mean that you have to retire early. And I know many physicians who have reached the point of financial independence. They actually don't retire completely. They just cut down their work and find a place that's sustainable for them. Uh, they find a level of work that is fulfilling for them, and they're able to work because they want to and not because they have to financially. And so I think that if you can plan for that and have that 10 year plan, no matter how old you are, that you'll be better set up that way if you do end up wanting to be in medicine longer, 15, 20, 30 years, I mean, you're only in better shape by having planned for retiring early. Also, as you know, the economy goes through a lot of ups and downs. You have to weather the storms and you've got to be flexible. And having this retirement plan, these assets in place that will create that cash flow for you in, you know, in the future, you can't really go wrong with that, in my opinion. I mean, those are the five things that they mentioned that, you know, are the five characteristics for physicians that are well prepared for retirement. Like when I look at the newer report, they don't quite talk about some of those things, but they did talk about some advice from some physicians that have retired successfully. And I just wanted to mention one of these before I end this podcast episode. I really like this quote and I want to read it for you. It's all about health and wealth. If you have those two things, then you can enjoy life and do the things you want to do. And I think that's key because many of us just focus on our wealth when it comes to retirement. We got to hit that number. We got to do this and hit it at that age. But, but also realize that your health has to be there as well too. So there's a book that I have been reading called Die with Zero. I'll probably do a full podcast just on that book itself. But, you know, there's an intersection there where your wealth continues to increase over time, but your health continues to decline over time. So let's make sure that, you know, we find that optimal place where our wealth is at a good point and our health is at a good point, where we can actually truly enjoy life and take advantage of that opportunity to and that time in our lives. You know, most optimally for me, I actually feel like that point is now. Like I'm in my close to my mid-40s and I feel like obviously I'm seeing signs of my health declining, but I also have seen signs, you know, obviously that my wealth has increased. And so I think this might be an optimal time for me to take advantage of what I have and making sure that I have both health and wealth to enjoy life. And that's why I started cutting back on my time now. You know, even if it does maybe in some ways create a little bit uncertainty about, you know, maybe will I have X amount when I'm 60 to 65 that to me that doesn't matter as much. I wanna enjoy this time now. You know statistically they show that your wealth continues to increase over time because you got those investments in place. So I'm not gonna worry so much and stress about that time then. I know it'll be there when I need it, but my health may not necessarily be there. So for those that are thinking about retirement and early retirement, make sure to think about those two factors as well, health and wealth. And make sure that you are finding ways to take advantage when you're at a good place for both. Enjoy the show. Let me know by dropping a review in the podcast app you're listening to us in. And if you haven't already, make sure to hit subscribe. Are you part of our community yet? Join thousands of physicians who are also on this journey to creating their ideal lives and through multiple streams of income. You can join us on our Facebook group Passive Income Docs, and you can always learn more at our website, passive incomemd.com thanks again for allowing me to be a part of your journey. See you next time.