Market Losses Impact Many Physicians
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July 15, 2002
Physician's Money Digest
By Donald T. Cohen, CPA
Newman + Cohen Financial Management
It seemed like it would be so easy. Retire at age 55 or 60, and have more
free time and the means to enjoy it. For many physician-investors, this dream
vanished along with the billions in stock market gains hat were lost during
the past 2 years.
Many doctors are scrambling to overhaul their retirement plans to ensure that
they will have adequate savings for their golden years, while they come to
the realization that they may not be able to rely on the stock market to bail
them out. Following are 8 bits of financial advice for concerned physician-investors:
- Calculate how much money you will need to comfortably
retire when you choose. This is not a difficult exercise, but it amazes me
how many people have no idea how much they will need.
- Prepare to put more money aside than in the past or accept
that you may have to wait longer to retire. The 20%+ annual growth of the
US stock market in the 1990s was the impetus behind many investors spending
more and saving less, especially for retirement. Put a sensible plan in place
that will help you ensure a comfortable retirement. Use a nominal 7% annual
return in calculating your investment savings goal.
- Don't disregard investments that may have been viewed
as boring or too conservative in the past. Bonds and preferred stock, for
example, represent quality, low-risk options for retirement savings. In addition,
value stocks may lack the pizzazz of the high-flying tech stocks of recent
years, but they are also worth considering.
- Just in case it helps to hear it once more - diversify.
No more than 10% of your retirement investments should be in any single issue.
- Find out if you qualify to invest in a Roth IRA. Since
the proceeds withdrawn from a Roth after retirement are not taxed, this vehicle
is particularly attractive to physicians who retire at a high tax bracket
due to their accumulated wealth.
- Take a close look at other tax-deferred investment options. Annuities and
life-insurance policies are excellent alternatives for growing retirement savings
in a tax-free environment while serving as estate planning tools.
- Take all necessary precautions to protect your retirement
savings from claims or creditors. Laws vary from state to state, but certain
types of investment vehicles are creditor-protected and are effective additions
to most retirement plans.
- Last, but certainly not least, make sure to work with
a knowledgeable group of financial advisors who have experience working with
physicians and understand the best retirement planning options. The lessons
most investors learned during the past 2 years make this more important than
ever before.
Donald T. Cohen, founder and director of Newman and Cohen
Financial Management, has more than 20 years of experience in public accounting,
advanced financial strategies, and business management for physicians and other
high-net-worth individuals. For more information, visit www.newman-cohen.com
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