Identifying likely scenarios veterinarians encounter in financial retirement planning, and addressing the best tools and strategies to handle these financial retirement planning scenarios for the best possible outcome. Looking forward and considering family planning and life expenses to choose best financial plan for the future for veterinarians.
2. Contact Information
Mark J. McGaunn, CPA/PFS, CFP®
Managing Member
McGaunn & Schwadron, CPA’s, LLC
75 2nd, Avenue, Suite 425
Needham Heights, MA 02494-2897
main (781) 489-6651
direct (781) 348-9227
e-fax (781) 479-5985
e-mail mark@mcgaunnschwadron.com
web: www.mcgaunnschwadron.com.com
4. What is Retirement?
• Different interpretation to any person
• Changed idea from 5 years ago even
• Retirement meant “easy street”
• Not so sure after 2008
• So don’t look back
5. Charles Schwab Real Life
Retirement Survey 11/2/2009
• 52% getting more involved in retirement
planning-increased self-reliance
• 48% of Gen Y (48 percent) and 53% Gen
X have increased 401(k) contributions.
• Among 40% of Older Boomers and Gen Y,
plan to postpone their retirement date.
• 47% of workers aged 65 and older are
prepared to work during retirement.
Older Boomers (1945-1954); Younger Boomers (1955-1964)
Gen X (1965-1974) and Gen Y (post1975).
6. Associates Contemplating
Ownership
Gen Y consider finances more important
than:
1. taking steps to protect environment,
2. improve their physical health and nutrition
3. strengthening bonds with family and
friends.
7. On Cusp of Gen Y
• Just graduated from veterinary school
• May have student and car loans to pay
• Considering marriage or starting a family.
Key = manage outflows since inflows fixed.
Effectively manage your debt while
developing some basic savings habits.
8. Scared By Debt
• Recent UC Davis Study-Average veterinary
school graduate debt is $110,691 in 2009.
• PhD level researchers w/ > $250,000 debt.
• Veterinarians are not alone.
• Ensure your school loans are consolidated.
• May reduce interest rate with no hassle
managing multiple loans.
9. Save Now & Save Often
1. Need financial “consulting” over planning-general
framework.
2. Watch your spending. Use Quicken or Mint.com.
3. Investigate 401(k) plans and save an affordable
amount each pay period. Or start IRA or ROTH IRA
account.
4. Watch your lifestyle. You should enjoy life
moderately.
5. Non-practice owning veterinarians might prioritize
their savings goals as: (1) house; (2) children's
college education; (3) retirement.
10. Skills to Learn
• Negotiating employment
contracts,
• understanding taxes,
evaluating benefit packages,
• choosing insurance plans,
• managing debt,
• developing good saving and
spending habits,
• investing for the long-term
More
elements of
sound
financial
planning for
a new
associate
veterinarian!!!
11. New Associate Allocation?
High Risk High Return
70% Stocks/30% Bonds
10% S&P 500
10% Small Cap
10% REIT
10% Int’l Large Cap
0% Int’l Small Cap
10% Emerging Mkts
10% Precious Metals
30% Short Term Bonds
Source: William Bernstein
12. New Practice Owners
• Maybe most important point of career.
• Create your own practice, or buy into an
existing veterinary hospital,
• Perfect time to get serious about planning.
• Earnings may also be tempered by the
debt load of the practice buy-in or
acquisition.
• Must still manage expenses cautiously.
13. Focus on Protection
• Periodically review your all insurance
plans to ensure you have the most
appropriate coverage for your own
situation (life, disability, umbrella).
• While maybe provided by practice,
analyze your coverage and compare that
to your specific needs.
• Have estate planning in order
14. Education Plans
Private school or college? Or both?
• IRC Section 529 Plans
• IRC Section 2503(c) trusts
• Coverdell ESA IRA
can be an effective means of secure
funding for education.
15. Investment Philosophy
• Level of risk are you comfortable with?
• How aggressive do the investments need
to be to meet your goals?
• What tax implications are in play?
• What is your time horizon before
retirement?
• Are you saving for multiple goals?
16. Sample New Practice Owners
80% Stock/20% Bonds
25% Total US Stocks
25% S&P 500 Index
15% For. Dev. Equity
5% Emerging Markets
5% Real Estate
20% Cash
Source: Ben Stein Model Portfolio
17. Owners in Mid-stream
Worried Practice Owners!
1. 61% not letting recession change plans for
children's college education
2. 47% say college plans are a higher priority
than retirement savings @ 41%.
2009 survey by Country Financial and Rasmussen Reports, LLC.
18. More Data
• Marks 1st time in 3 years majority of
parents putting college before retirement.
• 50% of men more likely to put kid’s
education ahead of retirement (women
38%)
• Always borrow for college not retirement!!!
• 67% kids have no clue true college cost
19. Tips for College
What to remember:
• Be well-diversified
portfolio.
• Short accumulation
window
• Shorter distribution years
• Invest at proper risk level
for child’s age.
• Many college investment
methods offer age-based
models.
21. 50 year-old practice owner
Makes a $16,500 annual 401(k) contribution for 12 years until
retirement Still has potentially $342,000 at retirement
B
22. Same 50 year-old practice owner
Contributes max. $16,500 annual 401(k) contribution
for 12 years with $5,500 catch-up contribution plus a
corporate match of up to $32,500. Potential $1.13 million
at retirement.
24. Owners Nearing Retirement
1. Picture your retirement
2. Evaluate your expenses
3. Identify your sources of income
4. Know employer plan options
5. Other potential income sources
6. Prepare your portfolio
7. Countdown to retirement checklists
25. Major Issue-Health Care
• Employee Benefit Research Institute study notes that a
65 year old man who retires in 2009 will need between
$68,000 and $173,000 (females $98,000 and $242,000)
in current savings to have a 50% probability of covering
out of pocket health premiums and non-covered medical
expenses, or between $134,000 and $378,000 ((females
$164,000 and $450,000) in current savings to have a
90% probability of covering those same expenses.
26. • The range variability is due to whether
former employers subsidize healthcare
insurance and if the retiree maintains
Medigap and part D Medicare coverage.
Male to female disparities generally arise
from females having longer life
expectancies.
27. Income & Spending Plan
• Financial services industry prefers
investors strive for an 80% replacement
rate of pre-retirement income is required
• Is that realistic?
• Start thinking about how much you’re
going to spend from your investments
each year.
30. Journal of Occupational
Health Psychology 9/09
• Older people who hold temporary or part-
time jobs after retirement enjoy better
physical and mental health than those who
stop working entirely(31% better, 17%
fewer major diseases)
• Those continuing to work in original field
have better mental health than those who
change fields, according to the study
31. Postponing Retirement
• 36% due to poor economy
• 28% due to stock market losses
• 24% making sure have enough money
• 9% due to cost of living more than planned
• 3% still want to keep working
Source: Employee Benefit Research Institute and Mathew Greenwald
& Associates, Inc., 1994–2009 Retirement Confidence Surveys.
32. • A National Association of Personal
Financial Advisors presentation in July
2009 updated older research to now state
that a 5.2% to 5.5% rate of withdrawal
from retirement savings could be
sustained for 40 years of retirement if
certain equity allocations and other rules
were followed.
33. Anticipate Shortfall?
• Trim your spending. Rein in your budget by looking at
your day-to-day spending. Buy a less expensive car,
dine out less often, and take fewer, less $$ vacations.
• Redefine the term “retired”. 7 in 10 Americans ages 45-
74 say they plan to work in retirement or never retire,
according to AARP. By working a few more years, you
can save more, collect medical and insurance benefits
through your employer, and help improve your finances
just by working part-time.
• Downsize your home-less expensive one, rent an
apartment, or move to a more affordable community.
• Buy an income annuity. Add-on features may be
expensive though.
34. • Investments
• Review your investment strategy. In these
years before you retire, it’s important to
determine whether your portfolio will be
large enough to support your needs
throughout retirement. Your asset
allocation depends on several factors,
including your investment objective, time
horizon, risk tolerance, and personal
situation.
35. • If you already have a balanced mix of stocks, bonds, and
cash investments, and your financial advisor has been
helping you adjust this mix through the years, you may
not need to change your portfolio when you retire. Many
retirees feel they have to switch their portfolios to a very
conservative asset mix, emphasizing bonds and money
market securities, to help to generate current income
and protect their assets from decline. But such a strategy
also limits the potential for the assets to grow and keep
pace with inflation. Because you could live for 30 or
more years in retirement, your advisor will probably
suggest that you keep at least a portion of your
investment portfolio in stocks for long-term growth.
36. A Better Retirement
Worker Responses to Prepare?
• 81% reducing expenses
• 43% changing investment model
• 38% working more
• 25% saving more
• 25% sought help from financial professional
Source: Employee Benefit Research Institute and Mathew Greenwald
& Associates, Inc., 1994–2009 Retirement Confidence Surveys.
37. Simplify Your Portfolio
• Consolidating assets with 1 institution
• Easier to manage portfolio
• Reduces overall documents you receive.
• Eases transition if you die or become
incapacitated, especially for executors and
trustees who need to administer assets.
38. Owners Nearing Retirement
Asset Allocation For 60%
Stocks/40% Bonds
6% S&P 500
6% US Large Value
6% US Small
6% US Small Value
6% REIT
12% Int’l Dev. (Pac /Eur)
12% Int’l Value
6% Emerging Markets
20% Inter. Term Bonds
12% Short Term Bonds
8% (TIPS)
Source: Paul Merriman at FundAdvice)
39. Gold Watch in 5 Years?
• Discuss retirement plans with spouse.
• Prepare a realistic retirement budget.
• Review current employer pension & benefits.
• Determine add’l health care & LTC needs.
• Compare projected income with expenses.
40. More Last Minute Maneuvers
• Assess the portfolio adequacy
• Increase retirement plan contributions and
taxable account savings, if necessary.
• Pay off employer retirement plan loans.
• Review your preparations at least annually
and adjust as necessary.
• Make catch-up contributions to your
employer-sponsored plan or IRA.
42. Contact Information
Mark J. McGaunn, CPA/PFS, CFP®
Managing Member
McGaunn & Schwadron, CPA’s, LLC
75 2nd, Avenue, Suite 425
Needham Heights, MA 02494-2897
main (781) 489-6651
direct (781) 348-9227
e-fax (781) 479-5985
e-mail mark@mcgaunnschwadron.com
web: www.mcgaunnschwadron.com.com