Darren Scott-Guinness: Keeping doctors and dentists informed with the latest economic and investment news.
Some doctors and dentists choose to slowly slope off from working, cutting a day a week each year or so, until they are fully retired. Others just cut the rope and jump headfirst, from 5+ working days to zero. Which option is best for you personally, is a question that only you will know the answer to. However, from a financial perspective, there may be some considerations to factor.
The options – taking the plunge v gradual slope
Leaving finances aside, taking the plunge from being a busy healthcare professional, where you only have one or two days per week, plus a handful of holidays each year, to fully relax, to having seven days a week of free time, can be tough for some people to adjust to.
That is why many doctors and dentists choose the gradual retirement route, slowly allowing themselves more days off, so that then work doesn’t seem like a chore in later years, and the reigns of responsibility, particularly for practice owners, can be passed down slowly to associates or to a successor, whilst keeping some form of hand in the business.
Of course, some do embrace immediate retirement, and never look back, however, some also meet retirement with ill health due to not taking the brakes-off soon enough.
At the end of the day, it is a very personal decision and depends largely on your lifestyle, health, level of responsibility in your role and appetite for working.
Planning the road ahead
The key a successful retirement, either way, is planning.
This applies particularly for immediate retirement where your income stream cuts to zero from a certain date, but also for gradual retirement to a lesser degree. Two things to ensure:
1 – Plan what you will do with your time. Clearly some of the detail will evolve, but it helps to have an idea.
2 – Plan your finances. This includes what you need to live comfortably and be able to achieve your dreams, as laid out in Point 1. For example, if you want to travel, it needs to be budgeted for.
The fundamentals for retirement planning remain the same. It is a case of working out how much income is needed, what expenses it needs to cover and the sources this income will come from.
Working with a financial adviser will help keep your retirement plan on track. They will also keep up-to-date with legislation that affects retirement planning and advise you accordingly of the best course of action.
Less working hours with the same income
This is an option that suits many doctors and dentists and with the new pension rules this has been made very possible. Now many healthcare professionals are cutting their hours, drawing their pension, to match their previous income.
With an NHS pension is depends which scheme you are in – the 2015 pension allows you to draw part of your pension without retiring, the 1995 pension does not allow this flexibility.
There needs to be some careful calculations here to ensure that your pension pot will last your retirement, or that part of it is reinvested to create more income of a different nature.
How much is “enough” to fully retire?
With gradual retirement, the focus doesn’t have to be fully on finances. It can be based on simply the desire for a change in the pace of life.
With immediate retirement though there needs to be enough retirement income to cover everything. How much income is typically a difficult question for people to answer at the start of the retirement planning process, and often it changes regularly.
This is why at Dental & Medical Financial Services we understand that retirement plans are always evolving, so will conduct regular reviews to meet changing expectations.
The retirement planning exercise will balance outgoings with incomings and if there is a deficit work out the best way to meet this over the remaining years, or, if there is an excess, well, this is a very good problem to have, as it realises new opportunities.
Dental & Medical Financial Services are specialists in retirement planning for doctors and dentists. We can help you make a plan for retirement – the sooner in life you start, generally, the better the results.
Tel: 01403 780 770