“How is this topic of retirement planning relevant to me? I will keep my medical practice going on even beyond the age of 60!”
As a Doctor, you might have this question and feel that you will never retire. So why do retirement planning?
Robert Kiyosaki’s Cash Flow Quadrant
From the diagram, you can see that each of the four quadrants represents a particular set of professionals.
- As an Employee in the “E” quadrant, one looks for safe and secure jobs.
- The Self Employed or Small Business Owner in the “S” quadrant is solo that is they operate by themselves.
- The Business Owner in the “B” quadrant owns a large system and has people who work for the business.
- In the last quadrant “I,” the Investor has a system where money works for them!
Robert Kiyosaki explains that if you are on the left side of the quadrant, you are earning an active income and if you are on the right hand side you are earning a passive income.
Most of the doctors might belong to the “S” quadrant and some, who have opened hospitals, might belong to the “B” quadrant. As a doctor, you are selling your time for money. Imagine a situation when you have to stop working for a long period. What will happen to your income?
Considering these factors, you should aim to move on the right side of the quadrant where either you own a business or create an independent investment portfolio.
When you would like to stop your medical practice and give time to other hobbies, this passive income will come into picture and ensure that you live a good lifestyle.
After keeping the above points in mind, we can talk about the following points:
Stages in a Doctor’s Profession
The following graphic portrays a common path that a doctor goes through in his professional life
From the above graphic, it is clear that the practice moves in a cycle and even if you work post 60, your income may drop substantially.
Another factor that you need to think about is when you opt to take a break in practice and go for specialized education. This break might affect your flow of income.
Decline in practice
You need to plan for an income source post the age of 60 that is not dependent on your practice. This planning will help you to maintain a good lifestyle even when you stop or reduce your medical practice.
Another advantage of good planning is that you can stop your medical practice earlier so that you can concentrate on other activities that interest you!
Lack of retirement benefits
As a doctor, you might not have structured pension plans or retirement benefits like gratuity or Provident Fund as other employees or government employees. In a scenario where you would like to stop your practice early, considering your hectic lifestyles, you have nothing to fall back to for the future unless you do your own financial planning! It is also important to give a thought to the standard of living that you would like to maintain.
Lifestyle expenses
Lifestyle is no more a luxury and has become a necessity. Leading such stressful lives, you might feel like going for the latest movies, eating out as and when possible to spend time with your family, spend quality time with family and friends on foreign tours and vacations.
You have to factor all these expenses when you want to keep up with your lifestyle even after you stop or reduce your practice.
Medical expenses
As professional doctors, you know the best when it comes to the medical advice and related expenses after the age of 50-60. Even if you think that being doctors the cost will not be high for you, still there is no guarantee that it will be zero!
Would you like to be dependent on your children in the future, or would you like to be self-sufficient? This is an important question to consider since we see a rise in nuclear families all around us.
When you look at the above points, you will realize that it is very important to plan for a steady, passive income flow that will help you sustain a good standard of living, and help you carry on other activities that might interest you when you stop your medical practice!
Does that mean you should stop your work? No! Just ensure that after a certain age you achieve a state where you are financially independent, all your liabilities are taken care of, and you are just putting in passion for work.
How to do financial planning for post-retirement?
So, then you would ask, how to go about retirement planning? Here is a process in brief:
- Identify your retirement goals. (The earlier you want to retire, the earlier you should start!)
- Ensure that your goals are realistic, achievable, and feasible. (S.M.A.R.T goals – Specific, Measurable, Attainable, Realistic, and Time-sensitive)
- Quantify the goals with the help of a CFP or professional
- Create a structured investment portfolio
What can we do for you?
As a Certified Financial Planner, we can help you to understand the feasibility of your goals and quantify them. We can also build a system for you to create a structured investment portfolio.
Please feel free to write to us support@nirajnanal.com or contact us
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