Financial and retirement planning is never static. Unfortunately, you can’t simply ‘set it and forget it.’ Your options and strategies change with age, earning power, risk tolerance, retirement expectations and more.

Our Surgeon’s Economic Life Cycle is an ongoing series of articles exploring some of the financial needs and planning priorities as they change throughout a surgeon’s career. We are not offering investment advice but rather a snapshot of phases in the surgeon’s economic life cycle that may stimulate conversations with your financial professional(s).

In this article, we are looking at the baby boomers (those born between 1946 and 1964) — a generation of that some say either won’t (or can’t) retire. A PwC Employee Financial Wellness Survey estimates that almost half of boomers are financially unprepared for retirement. At the same time, others wish to remain active and either don’t want to retire or prefer to transition more slowly into retirement.

A Medscape study reports that a third of physicians are in the 50 to 64 age bracket and a quarter of those over 65 have a net worth of less than $1 million. Of course, retirement savings are only a part of an individual’s net worth, so it’s fair to conclude that many Baby Boomer physicians are not well prepared for retirement.

For surgeons who do not have the means to retire comfortably, perhaps it’s partially due to many of them being reluctant to plan for retirement. While a minority of surgeons over 70 are still working, 40% of them do not have a retirement plan.

Despite boomers’ tendency toward a delayed retirement, enough surgeons are retired or nearing retirement that we can examine some of the critical considerations as their financial planning transitions into money (and wealth) management. Specifically, the focus shifts to maintaining financial security by:

• Generating income
• Controlling spending
• Protecting assets from taxation and risks

Management Strategy #1: Generate Income

As surprising as it may seem, managing your money in retirement actually may be more complicated than preparing for retirement. You are now faced with overseeing several different income streams, optimizing your asset withdrawal strategy and carefully balancing investment options between earning power and limiting risk.

Every individual’s situation is different and dependent on available assets, wealth accumulation and how much the retiree expects to spend. If you don’t have a financial advisor, now may be the time to find. You can begin preparing for your initial consultation by:

• Identifying and itemizing a comprehensive list of all your assets and revenue streams — including savings, investments, passive income, retirement accounts, insurance and annuities, pension, Social Security, as well as any income from inheritance or trusts.
• Next, calculate how much income you can expect on a monthly and annual basis — today and in the future. For example, if you’ve deferred Social Security or withdrawals from your retirement accounts, your income may later change.
• Finally, carefully estimate your income requirements. For example, how much do you need to meet your basic monthly expenses? How much do you want to have on hand for emergencies, travel or special occasions?

As you and your advisor formulate a strategy for managing your money, you may want to discuss how best to allocate your income. You can earmark money to meet your immediate, future and long-term expenses. Doing so helps guide you to invest the money in buckets to ensure it is available when you anticipate needing it.

The money in your “immediate” bucket, for example, needs to be in cash or funds that are relatively stable and easily liquidated. On the other hand, you may decide to be more aggressive about how you invest money in your “long-term” bucket. Although equities, index funds and real-estate investment trusts (REITs) carry a higher risk, they may also serve as a hedge against inflation.

Management Strategy #2: Control Spending

Did you know that during the first few years of retirement, you may be more at risk of running through your money and jeopardizing your long-term security?

For the first time — after years of education and a busy career — you have more time for travel and hobbies. And with the kids likely out of school and, hopefully, financially independent, you may be tempted to start depleting your nest egg. Before doing so, discuss with your financial advisor how much you can afford to spend each year and develop a budget.

One option your advisor may suggest is the 4% rule. While not without risk, the goal is to help prevent you from running out of money by limiting your annual withdrawal to 4% of your retirement portfolio, adjusting only for inflation.

Management Strategy #3: Protect Assets from Taxation and Risks

Careful investment strategies and a smart withdrawal plan may help protect against long-term inflation risks. On the other hand, taxes may still jeopardize your retirement security — particularly if you’ve taken advantage of your peak earning years to max out your tax-deferred contributions.

As such, most experts suggest that you minimize your tax burden by withdrawing funds from taxable accounts first. When you do so, you’ll pay taxes on investment interest and dividends and capital gains on the assets you withdraw.

For many people, it’s a good idea to hold off on withdrawals from tax-deferred accounts, such as IRAs and 401(k)s, as long as possible. At the age of 72, however, you will have to take the minimum required distribution from these accounts. Of course, before making decisions about how to withdraw your money, consider consulting with a tax attorney or financial advisor to navigate the specifics of your situation.

Taxes are not the only thing that can take a bite out of your savings. We do not live in a risk-free world. To avoid unexpected financial outlays, it’s a good idea to make sure you have insurance coverage not only for potential damage to your home or automobile but also for other risks that you may face as you age. For instance, you might need long-term care.

When it comes to managing your money in retirement, we have only explored the tip of the iceberg. It may be time to consider how you are going to generate income, control spending within your budget and protect your assets from taxation, inflation and other risks. If you are closing in on retirement, you may still have time to make a few strategic financial decisions.