Do You Need a 10-Year Plan?

December 22, 2016
DMD Staff

The short answer is, yes, you do. Here’s a check list you can follow to start getting your 10-year plan in order.

If you’re like me, you have trouble planning beyond the next 10 minutes, much less the next 10 days. The idea of taking your planning out 10 years may seem, at best, overwhelming. But this type of projection is particularly important if you’re entering the later stages of your dental career, because the decisions you make now will have a big impact on how and when you retire.

Why are these 10 years so crucial? For one, if you’re like most dentists, the 10 years before retirement are likely to be among the 10 highest-earning years you have. That fact, coupled with increased maximum savings amounts allowed as you approach retirement, mean a greater possibility for building that nest egg.

Let’s take a look at a quick checklist you can use as your 10-year planning guide.

· Save as much as you can. Now is the time to max out on your individual retirement accounts and consider supplemental accounts such as Roth IRAs. Although the 2017 limits for individual retirement accounts will not increase from 2016 levels, if you’re over the age of 50, you can put an additional $6,000 away. (See this page for full contribution limits for 2017.)

· Keep updated on the state of Social Security. Your children are unlikely to be so lucky, but if you’re planning to retire within the next 10 years, chances are very good that Social Security will still be solvent and an important contributor to your retirement income. The key when considering Social Security benefits, however, is to make sure you’re not relying on it as the sole—or even primary—provider of retirement income. Those days will never return.

· On that note, now is a great time to look at the entirety of your personal assets and see how they fit into your overall retirement picture. Although it’s unlikely for most, you may have a pension that will still be around. Has your home, which you once considered a primary source of income, appreciated or depreciated in value? Has that inheritance you were counting on evaporated? Have your health care costs suddenly begun to take a bigger-than-expected bite out of your savings? Work with your advisor to consider the bigger picture.

· Identify certain key dates and times. As you near retirement, there are certain government requirements you need to be aware of, such as required minimum distributions and the age at which you will be eligible to receive full Social Security benefits. Those key dates should be part of your larger plan. Also, if you work for a large employer such as a health system, consider whether your company might offer incentives for early retirement. This could play a large role in your decision to retire sooner than expected, but you can only do that if you start thinking and planning ahead.

· Picture your ideal retirement, and have the necessary conversations with your partner or family about what that may look like. Now is the perfect time to think through what you expect out of your retirement and how much income you’ll likely need to make that image a reality. If you don’t have enough saved to be able to do everything you’ve always wanted to do, you’ll have to consider difficult choices, such as which activities you’ll be willing to forego, or whether you’d be willing to work longer than expected.

· Have a Plan B. Even the best-laid plans sometimes go awry. As meticulous as your planning may be, if it all goes according to that plan, you’ve missed out on your true calling: fortune teller. Have some idea what action you’d take if something unexpected bit you.

· Consider non-pecuniary factors. Income in retirement is essential, but it isn’t everything. Make sure you’ve fully thought through issues such as staying active, establishing a new community of friends, where you’ll live and why, and how you’ll adjust to not caring for patients on a regular basis. Sometimes, the most difficult adjustments to retirement aren’t financial in nature at all.

Not every item on this checklist needs to be fully solved for prior to entering the final stages of your retirement planning. But you’ll want to have at least considered all of them, particularly while you are still working and can more easily make adjustments to the plan. Time is still on your side.

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