How to plan ahead for your retirement

Practice Pointers. By Amy S. Born, AMNews contributor. April 19, 2004.

PRACTICE POINTERS

Answers to questions about the business side of your practice

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Question: I am fast approaching retirement and have amassed some wealth in my company retirement plan, personal savings and have some value in my medical practice. But how do I know if I have accumulated enough wealth to sustain my standard of living during my retirement years?

Answer: Planning for retirement can be a daunting task. Often people fall into traps that prevent them from achieving their retirement objectives. Those traps include procrastination and simply failing to plan. Retirement is a big responsibility; however, it also can be a great opportunity -- an opportunity because the process can provide many options as to how you want to structure your life today and in the future.

Retirement planning can be viewed as a four-step process: Establish your retirement goals; determine where you stand today; calculate your retirement needs and re-evaluate your retirement goals, if necessary; and revisit the entire process periodically.

The first step is establishing your retirement objectives. That is, when do you want to retire and with what lifestyle would you like to retire? The earlier you want to retire, the longer your assets have to last to fund your retirement. For example, a 55-year-old retiring today should expect to live another 25 to 30 years.

Another question to ask yourself is how much of your annual preretirement income should you expect to use during retirement. A rule of thumb would be to expect to need 60% to 90% of your preretirement income. But your individual circumstances might be significantly different from the norm. For example, if you expect to travel a lot during retirement, you may, in fact, spend 100% of your preretirement income.