The Retirement Myth

Contributed by Greg Stanley

For over 15 years doctors have come to the Whitehall seminars to learn to save for retirement. Although the cost of a new home is substantial, $150,000-$450,000, it pales in comparison to the cost of retirement. Enjoying a non-inflation adjusted income of just $5,000 per month would require income producing capital of about $1,200,000 in tax free municipal bonds at toady’s interest rates. Financial planners are ever-present with their computer ledgers and aggressive investments telling us that if we don’t get serious about saving for retirement, and I mean NOW, we are in real trouble. They, of course, can save us from the horror of an impoverished retirement if we put our trust and our money with them.

To the doctor who has experienced financial setbacks due to managed care, increased competition, or unpaid income taxes, the thought of complete retirement from practice sounds like the ultimate human experience. After 14 years of practicing with too few vacations and too little rest, full retirement sounds like the perfect setting to get caught up on the life and dreams that somehow passed you by. Unfortunately, the reality of retirement is a well kept secret. Full retirement is like death. No one ever comes back to tell us what it’s like. It may be that both departed spirits and retirees try to communicate with us, but we are not in tune with them – departed spirits because they are disembodied, and retirees because no one wants to listen to old geezers talk about the good old days. I feel like my experience consulting with doctors at all stages of financial development, including full retirement, has given me a unique perspective on retirement. I have worked with doctors that have completely retired from practice at ages ranging from 35 to 85 years of age – some with millions dollars in tax-free municipal bonds.

The great truth you may not want to know is that full retirement not only falls short of your dreams, it’s actually worse than any stress, crisis or trauma you ever endured in practice – including managed health care, malpractice suits, or bad tax audits. Having personally observed my young, wealthy, fully-retired clients lives shatter shortly after leaving their practices to live “the good life”, I am convinced that full retirement is not the perfect setting to experience personal fulfillment.

I guess if you think about it, retirement as the end-all existence is the cruelest of all lies because you put off living until the end of your life only to find that working, with all its stress and uncertainty is better than having all the time and money in the world if you have no identity. That is the part most people have trouble visualizing, not having an identity. Let me explain. In our society when someone asks you what you do they are really asking who you are. Yes, our work defines us.

In retirement when someone asks you what you do and you tell them that you used to be a doctor, they will then repeat the question and you will repeat the same answer. Unless you are engaged in a current enterprise of some sort you have no identity, therefore you are not a valid human being capable of validating others with your companionship. Until you have experienced being a nonessential human being you cannot know what full retirement feels like. A large part of the joy of life and practice is not feeling needed but feeling essential in the lives of others.

I have been asked by my clients about when I plan to retire, due to my heavy travel schedule. I would have to answer that question differently today than I would have 10 years ago. Back then I would have agreed that a person cannot work and travel like this indefinitely. After having observed my clients’ experiences with full retirement I can tell you that I will slow down as I age but I will not willingly accept full retirement.

As a consultant I am often approached by my consulting clients to help them determine the value of their practices and the suitability of them selling their practice at retirement. We have found that if they can maintain between 25 percent to 50 percent of their practice, while scaling back their overheads by the same figure, that they are financially better off to continue working the practice at the reduced rate than to sell the practice and try to live off the interest or principle of the practice sale.

When a doctor asks us how much money they will need to completely retire on $12,000 per month and we tell them that the amount approaches $3,000,000, they usually feel depressed and hopeless. I then ask them why they want to retire. They will usually say that practice has become boring or stressful. I have found that it is easier to make practice exciting and interesting than it is to save $3,000,000 over the next 15 years. Are you really willing to live out your remaining practice years depressed and bored so you can wait for retirement Shangri La? Think it over.

The financial dynamics of complete retirement definitely work against the doctor. If you take full retirement from practice at age 55 you have to compensate for inflation by living on about half of the interest your savings would produce. If you are still working just enough to pay your current living expenses, you have let inflation work for you by letting it increase your practice fees thus offsetting the increased cost of living for those years you still had practice income. By doing this, when your health finally forces you to quit, you can begin taking the delayed Social Security payments that you have coming. Because you waited until age 70 or later to take your Social Security payments you not only get 25% more monthly income, you no longer face a social security penalty for having earned income.

When you reach retirement you typically have about 12 percent of your life remaining and it is likely that in spite of your fat-free, sugar-free, cholesterol-free, salt-free diet you are not going to be as spry as you are today. The old comedian, Red Fox used to say “Someday health nuts are going to feel stupid, laying in hospitals dying of nothing”. More important than saving money for retirement, work toward a practice that is fun, interesting and exciting if you want to be rich. Remember, that to be rich without working in your retirement years requires millions of dollars saved that require exaggerated financial sacrifice. If you can still enjoy working in your later years you will be able to live a more balanced life now and a more fulfilled retirement.