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In the, 25+ years I have been helping doctors and dentists with their financial planning, I can’t help but notice their lack of interest in retirement planning. They usually do the basics, however rarely are they actively seeking ways to secure a better, and earlier, retirement. Why is this?
This does not constitute advice and advice should be sought in all instances before acting on it.
Retirement planning is essential – more than ever before
As a financial adviser, you would no doubt expect me to say this. However, it’s true. Let’s take the facts of the matter.
The population of the country is growing, and ageing. So firstly, longer life spans are creating a greater need to secure more income to use in later life.
Secondly, the entire pension system is under serious stress, due to poor returns from low or negative interest rates. Take Tata Steelworks as an example, their pension fund is in deficit by £700 million! In addition, the Pension Protection Fund is expecting approximately 600 more pension funds to falter over the next ten years.
So there’s couple of fairly poignant facts to support the greater need for retirement planning.
Of course, this situation has come around somewhat accidentally.
However it is highly likely that the most affluent generation to date, is set to run out of money during their retirement.
Why then, do doctors & dentists leave their retirement to chance?
One reason seems to be that they are relying on one of two things, or both.
One is that they are counting on selling their dental or medical practice one day, and either reaping a lump sum reward for their years of hard work, or, they will keep a financial interest in the practice whilst handing over the reigns to a younger counter-part, a loyal associate perhaps. What about the non-practice owners though?
Second is that they are relying on a small, or modest, buy-to-let portfolio to generate enough income to be able to live a comfortable and happy requirement. This is possible, for those property investors, however, with growing costs associated with owning rental property, profits in this area are dwindling. New tax legislation is certain to eat up some rental profits, so where does this leave doctors and dentists that were guaranteeing on this extra income?
What would your retirement “nest-egg” look like?
Planning and diversity are key to securing a retirement with financial freedom
So if pensions can’t be wholly relied on, and neither can property, what are you supposed to do?
Well, as with most things financial, diversity is key to a bright future.
Pensions and ISA’s still play a significant part in retirement planning for doctors and dentists. However, their performance needs to be tracked.
Image credit to: www.tradingacademy.com
Property investment can still play an integral part in a retirement plan too, however, added costs and tighter borrowing regulations also need to be factored into your overall objectives. There may be options for you to live off the capital equity through retirement, i.e. sell your properties along the way to generate cash lump sums, instead of assuming buy-to-let is the only way.
There are options, and if you are open minded and willing to focus on your short, medium and long-term goals, then more often than not, there can be a successful outcome.
Want to retire at 55? Why not? Just make sure you have a retirement plan in place that will support you and your loved ones, so you don’t run out of money at a time of life when it is infinitely more difficult to generate wealth.
Read more of Darren’s monthly features on topical financial and investment issues:
- June 2016 – What my client’s are asking about Brexit
- May 2016 – Bank of “Mum and Dad” – how to keep your money safe
- April 2016 – Financial planning for the 21st century family
Need help with retirement planning? Speak to Darren
Dental & Medical Financial Services are specialists in helping doctors and dentists to mature a retirement plan to meet their financial goals, as well as the desired age of retirement. Call to speak with Darren.
Tel: 01403 780 770