Introduction
Retirement planning can be uniquely challenging for physicians in Canada. Balancing years of service to a demanding practice with the complexities of financial planning means that retiring as a doctor often requires more careful consideration compared to other professions.
Julie Seberras, Senior Manager of Wealth Planning Support at TD Wealth, notes, “For physicians, the qualitative factors around what retirement looks like can be just as important as the quantitative ones.”
Here are six key retirement questions every physician should consider:
1. Do You Know What Your Ideal Retirement Looks Like?
Retirement for doctors isn’t always a clean break. Many physicians gradually transition by working part-time or taking on locum assignments. Others have specific goals, such as traveling or spending more time on hobbies. Defining your post-retirement vision can help shape your financial and lifestyle plans.
Tip: Start imagining what life could look like after stepping away from full-time practice.
2. Do You Know Your "Magic Retirement Number"?
Understanding how much money you need to maintain your desired lifestyle is crucial. Physicians, unlike many other professionals, often lack a formal pension plan. This means they rely heavily on personal savings.
Tip: Begin saving early, establish a plan, and track your progress regularly to ensure you meet your goals.
3. Are You Maximizing Your Savings?
Physicians often start their careers later due to lengthy training periods and may carry significant debt. As a result, many only begin to save in earnest in their 40s.
If you’re incorporated, deciding between paying yourself a salary or dividends can impact your contributions to the Canada Pension Plan (CPP) and RRSPs.
Tip: Fully utilize RRSPs and Tax-Free Savings Accounts (TFSAs) to optimize your retirement savings and reduce tax exposure.
4. Do You Know Where Your Retirement Income Will Come From?
Physicians typically draw retirement income from various sources, such as:
- Government Benefits: CPP and Old Age Security (OAS).
- Registered Accounts: RRSPs and their converted form, RRIFs.
- Corporate Savings: Many doctors accumulate savings within their Medicine Professional Corporation, which transitions into a holding company during retirement.
Strategizing how to withdraw funds from these accounts can help minimize taxes while maximizing benefits.
Tip: Consult a financial expert to develop a tax-efficient drawdown strategy.
5. How Might Your Insurance Needs Change?
As you retire, your need for certain types of insurance—such as disability or critical illness coverage—may diminish, while other needs may emerge.
Tip: Review and update your insurance coverage to reflect your new circumstances and priorities.
6. Have You Started Estate Planning?
Estate planning is critical for physicians, given their often-complex financial situations. A well-structured plan includes a Will, Powers of Attorney, and strategies for minimizing estate taxes.
Tip: Consider updating your estate plan during major life transitions, including retirement. Don’t forget to include any charitable goals you may have.
Final Thoughts
Retirement planning for physicians is a nuanced process that balances personal goals with professional realities. From defining what your ideal retirement looks like to maximizing savings and planning for estate needs, the key is to start early and revisit your plan regularly.
Working with a financial professional who understands the unique challenges of doctors can help ensure your retirement is as fulfilling as your career. By addressing these six considerations, you can create a robust and adaptable plan that meets your long-term needs.
This article is written for educational purposes.
Should you have any inquiries, please do not hesitate to contact us at (905) 836-8755, via email at [email protected], or by visiting our website at www.taxpartners.ca.
Tax Partners has been operational since 1981 and is recognized as one of the leading tax and accounting firms in North America. Contact us today for a FREE initial consultation appointment.
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