It’s a sign of our troubled economic times. As American Medical News reports, many retired physicians, who thought they had their finances in order, are now re-entering the workforce to recoup their losses after the recent market meltdown.
If you’re retired or nearing retirement, you undoubtedly took a big hit in the past year. But if you’re younger, you have a longer time horizon in which to make up losses and put your financial house back in order. But where to start? Should you lower your debt? Take on more locum tenens work? Change your investments?
You Need a Plan
My first recommendation is to create a personal retirement plan working with a trusted financial advisor. Don’t be daunted by the thought of working with an advisor (ideally, a certified financial planner) or the planning itself, because it’s fundamentally a three-step process. If you and your advisor follow these steps, you’ll be far ahead of most Americans in terms of your preparedness.
The first step is determine a savings goal for retirement. That means figuring out much money you are you going to need to live well, however you define that, when you stop working. To do that you need to assess your financial needs for retirement and, in essence, project a budget for the future. You will need to estimate all of your potential sources of income (social security, pensions, investments, etc) and all of your potential expenses (healthcare, housing, travel, etc).
To help with this type of goal setting, an online retirement planning calculator is a surprisingly easy and informative tool that can be a great starting point.
Charting your Path
Once you’ve determined your retirement goal, step two is to figure out if you’re on a realistic path to reach that goal. That path is different for different people and there are a variety of factors to review and consider. What is your current and anticipated future income? Is your current spending in check? Are you maximizing retirement plans, such as 401Ks and IRAs? Are you diversifying your investments to mitigate risk?
Working with your advisor, it’s a fairly straight forward process to take your retirement goal, evaluate your current status toward your goal, and then to put a plan in place to ensure that you meet the goal.
The final step is one of annual review and assessment. Your retirement plan is like a business plan it needs to be constantly updated and re-evaluated to ensure that it’s still sound. During an annual meeting with your advisor, you can revise your plan to accommodate unanticipated life changes, like disability or job loss, or more positively, a financial windfall, like an inheritance.
If you don’t currently work with a financial advisor, this search tool can help you find a certified financial planner in your area. I’ll also devote future blog posts to financial planning.
