Brian Knabe, MD, is a former medical physician turned financial advisor at Savant Capital Management, a fee-only wealth management firm. He discusses the smartest moves for spine surgeons at various stages in their careers to ensure an enjoyable retirement.
Q: How has or could healthcare reform impact a surgeon's retirement?
Dr. Brian Knabe: Since I entered the practice of medicine about 20 years ago, I have seen a transformation in the way physicians must look at risk. When I started in practice, any talk of risk management referred to the issue of malpractice. While that is still an important issue, it is only one in a list of many potential risks for today's practicing physician. HIPAA compliance, Americans with Disabilities Act compliance, Medicare recoupment risk, federal agency risks (OSHA, EPA, DEA, and HHS) and self-referral risks, to name a few. (see my blog on this topic — http://medicalexecutivepost.com/2010/07/04/how-physicians-select-risk-management-advisors/
Uncertainty about the effect of healthcare reform is the newest and most significant risk at this time. Struggles over reimbursement, compliance with new regulations (both as an employer and as a practicing physician) and other issues will certainly continue. As we see this unfold over the next few years, having a strong plan for personal finances will be more important than ever. Having a strong foundation will only serve to increase your flexibility and options in the future.
Q: How can young and mid-career spine surgeons begin planning for retirement?
BK: If a surgeon has not yet started to plan for the retirement, the best time to start is now. Small decisions made early in a career have a significant compounding effect over time. These include determining savings rates and optimizing use of qualified retirement plans. Participation in Roth IRA or Roth 401(k) accounts can provide significant tax diversification benefits and tax-free growth over a lifetime, and even for heirs' lifetimes. For young and mid-career physicians, their most valuable asset is their future earning potential. Therefore, maintaining proper levels of disability insurance is imperative. Renewable term life insurance is usually the best way to protect a spouse and children in the event of premature death. Debt management, including student loans, should be optimized as well.
Q: What do surgeons need to know about savings and retirement planning?
BK: I have seen individuals of all income levels be successful — or not — in their savings and retirement planning. The key is to keep the basics in mind — minimize bad debt, live within one's means and save 10 percent to 20 percent of one's income starting early in the working years. Planning early in a career can help to increase the possibilities later by having a solid foundation in place.
Unfortunately I occasionally see physicians who have reached their 50's or 60's and would like to retire in the near future, but they did not plan for it ahead of time. An all too common theme that I hear is that the doctor planned to work "until I couldn't work anymore." Many doctors have that in mind early in their career. Why would they want to stop working in the profession they are so passionate about? However, things tend to change over time — maybe an illness or health condition that limits ability to perform at the same level; frustration with the changing profession (EHRs, ACOs, ACA, or other issues); declining reimbursements; changing life priorities. Working with a fee-only planner, preferably one with a CFP designation, can help a surgeon at any stage to plan for various possibilities, and also to help envision some new possibilities that were not considered previously.
The evolving field of wealth management and planning is growing and changing to meet the needs of our mobile and web-connected population. For example, Savant Capital recently started a service — eSavant Advisor — which provides physicians, regardless of their location, access to a Certified Financial Planner online. This service can provide a full range of planning, investment management, and advisory services from any location. There is no excuse to delay planning!
Q: For surgeons who are at the end of their careers and have already been saving for years, what should they do to begin planning for this transition in the near future?
BK: It is important to recognize that what got you here will not necessarily get you through the next stage of life. A retiring surgeon probably accumulated the resources for retirement through very hard work, long hours and some risk-taking. That risk-taking might have been in the form of building a successful practice, and maybe some risks in the stock market as well.
When the accumulation phase of life ends, it is more important than ever to reassess the role of risk in your portfolio. Income and growth needs must be balanced with preservation needs. A growth portfolio might result in too much volatility during retirement. However, it is important to remember that a portfolio invested too conservatively is prone to another type of risk –— the risk of the portfolio and cash flow not keeping up with inflation. With a potentially long retirement time period, that risk is real and must be considered as well.
Q: How can surgeons maximize the retirement experience?
BK: Moving into retirement can be a stressful change. As life expectancies and health of retirees continues to improve, it is really a transition to another stage of life — one that can easily last 30 or more years. I encourage doctors planning this transition to envision and plan for an active retirement. Those most successful in this transition are the doctors who stay busy with something. It might include part-time work, teaching, volunteering, or becoming involved with a hobby or even a new career. Retirees who are busy with activities, interests, and passions tend to be the happiest. The mental stimulation and challenges are important, and the social connections maintained are invaluable as well.
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