A retirement guide for radiologists, to help you make sense of all your options.
There’s been talk in recent years about fluctuations in your annual salary-some years have been better than others. But, one constant has remained. Regardless of the dollar amount, regardless of where you are in your career, you should have been saving money for the day you flip the switch from practicing radiologist to retiree.
Setting money aside for your Golden Years isn’t always easy, industry financial experts say, but if you follow some tried-and-true tactics, you can create a comfortable nest egg that will allow you and your family to continue your lifestyle after you’re no longer reading studies.
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The best way to safeguard your financial future, says Greg Wikelius, financial planner with Chicago’s North Star Resource Group, is to create a personalized financial plan. Your vision of retirement likely doesn’t look like your colleagues’, so you shouldn’t expect your financial strategy to either.
“Make sure you have a true financial plan. Sit down and calculate how much you’ll need to save monthly or annually to be able to retire at 55, 60, or 65,” he says. “Define your goals. You can’t create a clear strategy if you don’t know where you’re headed. Only then, can you figure out what you need to do and how to get there.”
Even if you didn’t start planning for your retirement from your first day of residency, it’s never too late to start setting aside some money. Never saving anything puts you in a position to work far longer than you want to.
Designing your plan
There are a nearly infinite number of ways to design a plan that will fulfill your needs. But, with so many options, the most important thing you can do is secure sound financial guidance. That planning will be critical, says P.J. Thacker, MD, a Mayo Clinic pediatric thoracic radiologist who published a study in the Journal of the American College of Radiology about radiologist financial planning.
“I recommend radiologists work with an independent certified financial planner. New radiologists should meet with the planner at least four times annually during their early years in practice,” he says. “Once you’ve designed your plan, stick with it through thick and thin.”
Choosing the right insurance
Disability insurance: This type of insurance might not readily come to mind when you’re creating your financial plan, but it’s definitely something to make sure you have as part of your portfolio, said Tyler Weber, chief administrative and financial officer for Northwest Imaging in Montana.
“People talk about life insurance and malpractice insurance, but the one that’s the most important to your profitability is disability insurance,” he says. “The number 1 asset a radiologist has is his or her ability to reach exams. Going through all that training is an investment that should be protected, so disability insurance is probably the best dollar spent for a radiologist coming into practice.”
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Wikelius agrees. He recommends securing a policy that would provide enough coverage to pay out at least $5,000 per month.
Life insurance: Don’t ignore the need for life insurance, especially if you have a family and children. Overall, every $1 million of coverage translates into roughly $40,000 to $50,000 of annual income. If invested with a roughly 5-percent return, a life insurance policy could provide 25 years of income.
401K/403B: Although it’s misleading to think you can amass enough retirement saving simply by maxing out your 401K or 403B, you should still do so, Wikelius said. As of 2018, the annual maximum you can contribute to a 401K, 403B, 457, or Thrift Savings Plan is $18,500. Funneling this money into an account means if you earn $500,000 annually, you’ll only be taxed on $481,500.
Profit Sharing: Profit sharing mimics a 401K or 403B, except your practice makes the contributions instead of you. Overall, the maximum annual contribution allowed is $55,000. Although it’s not profit sharing, Weber says, if your practice offers investment opportunities-such as buying into an imaging center-you should consider participating as the long term value will likely grow over time.
Stock Market: If you opt to invest in stocks, be sure you are properly diversified, Wikelius says, with a good mix of stocks and bonds, international and domestic stocks, and small, medium, and large companies. Resist the temptation to sell off your stocks during times of great market fluctuation, he said. You only lose money when you sell off your stock when its value falls. In addition, pivot away from high risk stocks the closer you get to retirement age. If an economic downturn hits when you’re at the end of your career, you could lose a significant portion of your nest egg, pushing your retirement age back by several years.
What to Avoid
A significant part of a successful financial plan is knowing what not to do, Thacker says. Side-stepping the pitfalls that accompany financial mistakes can help save your retirement in the long run.
House: The biggest mistake radiologists make, Thacker says, is buying too much house and having no money left after paying the mortgage.
“I tell people it’s a good rule to look at your salary after taxes, and 25 percent of that should be able to pay for your mortgage, home owner’s insurance, and upkeep,” he says. “That will give you a good gauge of what you can afford unless you have mountains of debt.”
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Luxury Items: Although it can be tempting, try to control how much you spend on luxury items-expensive cars, boats, etc., Weber says. Not only do many of these items drop in value over time, but they also decrease the amount of money you have available to put aside for retirement.
Even property investments can whittle away at your retirement savings. Unless you intend to sell or rent additional houses, he says, they don’t count as investments that contribute to your overall income.
Creating a financial plan doesn’t mean you can “set it and forget it,” Wikelius says. You should treat the plan as a living strategy that you evaluate periodically to see if anything needs to be updated.
“The financial plan is something you should be looking at annually to make sure that, if anything has changed in your life, you are making the appropriate alterations to the strategy,” he says. “You don’t want to micromanage and make changes too frequently based on short-term conditions, but you do want to make sure your goals and priorities match up with your strategy.”
For example, if you have a child and don’t already have life insurance, consider adding it. Or, if you have more high-risk stocks, switch to more conservative options or low-cost index funds the closer you get to retirement.
Ultimately, Thacker says, set yourself up for retirement success as early as possible. To make it easy, establish automatic drafts that transfer money monthly directly into your retirement accounts so you’re never tempted to apply the funds elsewhere.
“Get a savings and debt management plan, and follow it religiously. Don’t waiver. Set it up appropriately, and be sure to have a little bit of fun money,” he said. “Put into your savings, pay down your debt, and have enough to have a good life.”