Before you choose your last day of practice, know what it sets in motion.
Three to five years before retirement, some physicians may have accumulated substantial wealth, while others may still be strengthening their retirement savings. The question is no longer simply whether you have saved enough. It is whether the decisions surrounding your departure from medicine have been identified early enough to evaluate them while you still have choices.
For some physicians, retirement happens on a particular date. For others, it begins gradually—reducing call, cutting clinical days, leaving an administrative role, or shifting to teaching, consulting, or other professional work.
Either way, the timing matters.
A departure date can affect compensation, vesting, deferred compensation, pension benefits, healthcare, malpractice coverage, and taxes. At the same time, employment income that has funded your lifestyle for decades may be replaced by several different sources of retirement income.
Knowing what you own isn’t the same as knowing what happens to it when you leave.
A useful place to start is with a working retirement date and one question:
If you planned to retire three years from today, what decisions should already be underway?
Start With a Working Retirement Date
Your retirement date does not have to be final. It needs to be specific enough to plan against.
Then work backward.
What happens to compensation if you leave in June rather than December? Does a pension calculation change? Is deferred compensation triggered or distributed on a particular schedule? Are there vesting dates or other employer benefits worth understanding before you make an irrevocable decision?
For physicians considering a gradual transition, another question becomes important: what changes if you reduce your clinical schedule before leaving altogether?
Reducing hours or call can affect more than your paycheck. Depending on your employer and agreements, it may affect benefit eligibility, retirement-plan contributions, pension accrual, malpractice coverage, or other provisions.
That doesn’t necessarily mean you should change your plans. It means you should know the consequences before you do.
Understand What Your Employer Plans Actually Say
Physicians often reach this stage with several employer-related plans accumulated over a long career: a 401(k) or 403(b), a 457 plan, pension or cash-balance benefit, and sometimes nonqualified deferred compensation.
The account balances are only part of the story.
The provisions governing those benefits can matter just as much: vesting, distribution elections, separation-from-service rules, pension calculations, retiree healthcare, and what happens when employment ends.
Employment agreements and malpractice coverage deserve attention as well. Depending on how and where you practice, leaving may create questions about tail coverage or other post-employment obligations.
The goal isn’t for you to become an expert in every provision. It is to identify which provisions could affect your decisions and get the necessary answers before your departure date makes some choices irreversible.
Look at the Years Before and After Retirement as One Planning Period
Retirement can change the pattern of household income quickly.
A physician may move from a high salary to some combination of pension income, deferred compensation, Social Security, and portfolio withdrawals. Those sources may not all begin at the same time.
That creates an important planning window.
Taxable income in the first several years after retirement may look very different from taxable income during peak earning years. Roth conversions, charitable giving, realization of investment gains, and the timing of other income may deserve consideration across several years rather than one tax return at a time.
The same is true of retirement distributions.
The more important question is not simply which account to draw from first. It is how withdrawals, taxes, investment strategy, and future required distributions work together over time.
The more important question is whether anyone has modeled how they interact across the years surrounding your retirement.
Your Portfolio May Have More Than One Job
During your career, your employment income may have supported most of your lifestyle while your investment portfolio continued to accumulate.
Retirement changes that relationship.
Some assets may now need to provide regular spending. Others may provide liquidity for larger expenses or protect against having to sell investments during a difficult market. Still others may ultimately be intended for family, charitable, or legacy purposes rather than your own retirement spending.
That makes the transition to retirement an appropriate time to reconsider how the portfolio is structured—not simply whether its expected return is high enough.
What happens if markets decline shortly before or after you retire? How much liquidity should be available? Which assets are intended to support spending, and which have a longer horizon?
Your investment strategy and retirement strategy should work as one.
Coordinate Your Timeline With Your Spouse or Partner
For a household, there may be more than one retirement timeline.
A spouse or partner may retire before you, continue working after you leave medicine, or reach Medicare eligibility in a different year. One person’s employer coverage may currently insure the other. Pension or Social Security decisions may begin at different times.
Those differences can affect household income, healthcare, and taxes.
This is also an appropriate time to consider how involved each person is in the family’s financial life. If one person has historically handled most financial decisions, retirement can be a useful point to make sure both understand the plan, the important relationships, and where essential information is located.
The objective isn’t to make both people equally interested in financial planning. It is to make sure the plan can function if either person eventually needs to rely on it.
Begin Healthcare Planning Before Employment Coverage Ends
Healthcare decisions should not begin with your final paycheck.
A physician retiring before age 65 may need to bridge the period between employer coverage and Medicare. A physician working beyond 65 faces a different set of enrollment and coordination decisions.
Medicare enrollment, employer coverage, and Health Savings Account contributions also operate under different rules and timelines. If a spouse or partner is a different age or remains employed, the household may have two separate healthcare transitions to coordinate.
Healthcare therefore belongs on the retirement timeline well before the retirement date itself.
The objective is not simply to enroll in Medicare. It is to understand how healthcare timing interacts with employment, taxes, cash flow, and the rest of the retirement plan.
Prepare the People Who May Eventually Rely on the Plan
Financial preparation for retirement extends beyond investments, benefits and taxes.
If someone else eventually needed to manage part of your financial life, would that person know what exists, where important information is located, and whom to contact?
If family members, friends or others have been named as trustees, executors, agents or other fiduciaries, do they understand the responsibilities they may eventually assume?
Estate documents should also be revisited periodically to determine whether they still reflect your intentions, particularly when retirement coincides with changes in wealth, family responsibilities, charitable goals, or where you expect to live.
These conversations are easier to have before they become necessary.
You Shouldn’t Have to Coordinate All of This Yourself
The complexity isn’t that any one of these decisions is impossible to solve.
It is that they overlap.
A departure date may change a benefit. That benefit may change taxable income. The tax result may affect when you want to recognize other income. Healthcare may depend on when you or a spouse leaves employment. Those decisions may change how much the portfolio needs to provide and when.
Looking at each issue separately can miss those connections.
You should not have to sort through all of this on your own. The role of an advisory team should be to identify what matters, obtain the necessary answers, test the decisions that could materially change the outcome, coordinate the appropriate expertise, and make sure those answers are reflected in your family’s financial plan.
Good planning should leave you with less to manage, not a longer retirement to-do list.
What Should Be Underway Three to Five Years Before Retirement?
Not everything needs to be completed three years before you leave medicine.
Some decisions need action. Some need modeling. Some simply need clarification. Others can wait.
A useful retirement plan should make those distinctions clear.
By the time you reach your final year of practice, you should not be discovering for the first time how your deferred compensation works, whether reducing your schedule affected a benefit, how you and your spouse will obtain healthcare, or where the first several years of retirement spending will come from.
Those are questions that can often be addressed earlier, while more options remain available.
Planning Doesn’t Stop on Your Last Day
Your retirement date is an important planning milestone, but it is not the finish line.
After employment income ends, the plan continues to evolve. Investment withdrawals begin or change. Tax opportunities may emerge. Medicare premiums can be affected by prior income. Social Security and pension decisions may still be ahead. Required distributions eventually enter the picture. Family, charitable and estate priorities can change.
The work shifts from preparing for retirement to managing the financial life retirement creates.
A Useful Place to Begin
If retirement may be three to five years away, you don’t need to solve everything today.
Start by identifying your working retirement date, what that date sets in motion, which decisions should already be underway, which assumptions should be tested, and what has more time.
From there, a one-page action plan can organize the areas that deserve attention and the questions that should be answered through the financial, investment, tax, healthcare, and estate-planning process.
The objective is not simply to arrive at retirement with enough assets.
It is to arrive knowing that the decisions surrounding your retirement have been anticipated, tested, and coordinated.
If you plan to retire in the next several years, do you know what decisions should already be underway?
If you’re not completely sure, consider getting a confidential second opinion. Schedule a time to connect with our team using the form below. To learn more about our wealth planning solutions for medical professionals, click here.
Important Disclosure: Beacon Pointe Advisors, LLC (“Beacon Pointe”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a particular level of skill or training. Beacon Pointe does not provide legal or tax advice. This material is provided for general informational and educational purposes only and is not intended as individualized investment, tax, legal, accounting, insurance, healthcare, or employment advice. The considerations discussed may not apply to every individual and depend on personal circumstances, applicable law, and the terms of relevant employment, ownership, compensation, benefit, insurance, and estate-planning documents. You should consult the appropriate legal, tax, insurance, healthcare, and other professional advisers before taking action. Investing involves risk, including the possible loss of principal. Beacon Pointe is not responsible for errors or omissions in materials accessed through links to third-party websites and does not necessarily approve or endorse the information provided in those materials.