Transitioning to Retirement: Phased Retirement and Succession Planning for Physicians

With long work weeks and a passion for helping others, the thought of a traditional retirement may turn some physicians off. However, leaving work behind can be more complicated than people realize, which is why adopting a phased retirement plan can be appealing.

Below, we’re exploring what goes into a phased retirement and some succession planning considerations to keep in mind.

What Phased Retirement Looks Like in Healthcare

Let’s start by understanding phased retirement, as this concept can apply to anyone in any field.

Rather than quit working altogether, a phased retirement allows professionals to gradually ease into retirement by maintaining part-time hours or otherwise reducing their workload steadily over time. Perhaps they work a four-day workweek instead of five or cut their hours from 60 to 30. There is no definitive structure to phased retirement, as everyone will approach it in a way that reflects their needs and desires.

Physicians may opt for part-time practice options or tailor their work hours to address their personal needs better (perhaps they want to use the extra time off traveling, spend more time with family, or pursue other hobbies).

The Benefits of a Phased Retirement for Physicians

It’s not unusual for physicians to maintain a demanding work schedule, typically ranging from 40 to 60 hours (though it’s not unheard of for some doctors to exceed 100 hours per week).

By phasing into retirement, physicians can still maintain professional engagements. Perhaps they’re committed to providing current patients with ongoing care but opt not to accept new ones. Or, they may transition into more of a consulting role within the practice.

The main benefit of phased retirement is the balance it brings to a physician’s clinical practice and personal life. Because their schedule is far less demanding, they can enjoy more family time and personal passions than before.

Assessing Your Readiness for Phased Retirement

Another significant benefit of phasing into retirement is that you’ll still receive a paycheck (albeit for a lesser amount). This enables you to minimize the amount of your savings you’ll need to withdraw and allow your investments to continue compounding for longer.

A phased retirement may also give you more flexibility to choose the right retirement time. If the markets are incredibly volatile or we’re experiencing a period of economic uncertainty, working part-time can give your portfolio time to recover.

When thinking about retiring, two primary considerations are your financial readiness and your well-being.

Financial readiness: Working with your advisor, you’ll need to review your retirement savings and investments to determine if you have enough to support your desired lifestyle in retirement. At the same time, you’ll also want to consider how taking a reduced paycheck will impact your savings goals. Can you still cover your financial obligations with less income? Should you delay your phased retirement until you can close the savings gap? 

Well-being: Retirement is a huge milestone, but it can be more challenging than people realize. Taking a phased approach may help you ease into this next phase of life, as it can be mentally challenging to go from working 60+ hours a week to zero. Take the opportunity to start establishing a new routine, find a social group outside of work, and explore new ways to spend your time (exercise classes, volunteering, consulting, babysitting grandkids, etc.)

Navigating Succession Planning in Medical Practice

One particular challenge for physicians is building and executing a succession plan for their practice. In doing so, you can better ensure a seamless continuation of patient care and pass along any specialized medical knowledge your successor may need.

A phased retirement can help you identify your successor, mentor and train them, and gradually introduce them to your patients. It also allows your successor to shadow your work and ask questions or discuss concerns without feeling rushed or overwhelmed.

Creating a Succession Plan in Medical Practice

Work with your business advisor, financial advisor, and attorney to develop a comprehensive succession plan for your medical practice. 

Together, you can work to:

• Document all patient care procedures.
• Establish clear communication channels with your clients, employees, and successors.
• Evaluate your business structure and determine how that will impact the ownership transition.

Technology Integration in Medical Succession Planning

If you haven’t already switched to a digitized patient record-keeping system, consider doing so before or during the early stages of your phased retirement. Look for physician-focused platforms prioritizing data security and privacy to avoid putting your patient information at risk of a cyberattack or hacking attempt.

During the height of COVID-19, many doctors embraced telehealth and virtual healthcare solutions. Many clients still rely on this type of appointment for ease and convenience. If you aren’t already offering them, you may want to consider integrating them into the practice.

Balancing Professional Legacy and Personal Fulfillment

As a physician, you’re passionate about what you do—and you may not want to stop providing care even in retirement.

Regarding what you may want to pursue in retirement, it’s possible (and encouraged!) to find opportunities that fit your lifestyle and fulfill your desire to continue helping others. For example, you may want to offer virtual appointments that don’t require physical presence at a facility.

Or, you could pursue teaching roles—again, there may be opportunities to do so virtually. Some retirement physicians will contribute articles to publications, assist with research, oversee exams, or provide expert opinions or quotes for journalists. In addition, you may be interested in volunteering for or otherwise involving yourself in local chapters of medical associations. 

Planning for Healthcare and Insurance in Retirement

Once you turn 65, you’ll be eligible for Medicare health insurance. If you can retain workplace coverage during your phased retirement, you may want to weigh your options regarding cost, coverage, and in-network providers.

As you likely know, the older we get, the more susceptible we are to health concerns (both physical and cognitive). When entering retirement, it’ll be essential to review your policy closely and identify potential gaps in coverage (such as long-term care). Work with your advisor or insurance agent to create a protection plan that helps fill in the gaps (whether building on your emergency fund, incorporating additional policies, or another solution).

Personal Finance Considerations for Retired Physicians

As you transition to retirement, you’ll need to better understand your retirement cash flow—money in versus money out. You and your advisor should develop a withdrawal strategy that accounts for your various income sources and their tax treatment.

In addition, you may want to find ways to pay down debt before retirement, which could include:

• Mortgage
• Car payments
• Personal loans
• Credit cards
• Business loans

And finally, now’s the time to save and prepare for unexpected expenses like medical emergencies, home repairs, car repairs, etc. The more you set aside for emergencies, the less you’ll have to pull from your savings and investments—which could impact the longevity of your retirement income.

Are You Preparing for Retirement?

If quitting work “cold turkey” makes you nervous, consider establishing a phased retirement schedule that allows you to ease into retirement over time.

At Partners in Financial Planning, we help medical professionals optimize their wealth before and during the transition to retirement. To learn more about how we can help you prepare your finances and practice for retirement, schedule time to talk with our team today.