The sweet taste of retirement
Aug 01, 2006
Wood says that with the ease of setting up retirement plans these days, the affordability, and the tax laws encouraging participation, there's no good reason to ignore your financial future. Here, Wood outlines key problems he sees most often with practitioners' retirement plans—and gives advice for making your financial plan work for you.
Lack of diversification
Wood prefers to see a healthy mix of liquid and illiquid investments. Liquid assets include stocks, bonds, cash, checking, money market funds, and CDs. Illiquid funds include investments in land, building, home, equipment, and goodwill, for starters.
"I've seen practice owners hold 95 percent of their assets in illiquid investments, as many small business owners do," he says. In this case, if an unavoidable or unpredictable event raises the need for cash, you're out of luck. Another problem with counting on the business for retirement income is that sometimes, as doctors age, they don't work quite as hard and the practice value declines—just as they're wanting to sell, Wood says.
Lack of company retirement plans
According to the "Economic Report on Veterinarians and Veterinary Practices," released by the AVMA in 2005, 12 percent of private practice associates receive profit-sharing benefits, and 15 percent have a pension plan. (These numbers rise to 22 percent and 25 percent, respectively, for private practice owners.) Compare that with results from an Employee Benefit Research Institute (EBRI) study on employee benefits and retirement plans, published in EBRI Issue Brief No. 289, January 2006: As of 2003, 67 percent of wage and salary workers ages 16 and older work for an employer or union that sponsors a retirement plan, and 51 percent of workers took advantage of those plans.