Aug 5, 2025
On Track for Retirement at 65? A Family Doctor's Financial Check-Up
For many professionals, especially those in demanding fields like medicine, the idea of retirement can feel like a distant dream, or at best, an abstract concept. Years are spent focusing on career advancement, family, and daily responsibilities, often leaving personal financial planning on the back burner.
On Track for Retirement at 65? A Family Doctor's Financial Check-Up
For many professionals, especially those in demanding fields like medicine, the idea of retirement can feel like a distant dream, or at best, an abstract concept. Years are spent focusing on career advancement, family, and daily responsibilities, often leaving personal financial planning on the back burner.
Today, we're taking a look at "Dr. Sarah" (a hypothetical client based on real-world scenarios) – a 60-year-old single family care physician with adult children. She's been incredibly diligent, but with retirement at age 65 looming, she's asking the crucial question: "Am I on track to maintain my quality of life in retirement, and even add a little extra joy?"
Let's dive into her current situation, assess where she stands, and explore strategic moves that can enhance her retirement readiness.
Dr. Sarah's Current Financial Snapshot (Age 60) Resides in Albany, New York
Here's a look at Dr. Sarah's finances as she approaches her final working years:
Income & Expenses:
Annual Salary: $247,040 source: Bureau of Labor Statistics (May 2023).
Annual Expenses: $129,500 (This breaks down to $8,000/month for living expenses + $33,500/year for housing, including property taxes, insurance, and maintenance. Her home is paid off, so no mortgage payments!)
Income Taxes (Estimated 2025):
Federal Income Tax: $37,481
NY State Income Tax: $11,380
Federal FICA (Social Security & Medicare): $14,924
Current Savings Strategy: Dr. Sarah is a fantastic saver, maximizing several key accounts:
403(b) (Employer Retirement Plan): $34,750 (maxing out her contribution)
Roth IRA: $8,000 (maxing out her contribution)
HSA (Health Savings Account): $5,300 (maxing out her contribution)
Taxable Brokerage Account: $5,706 (contributing leftover funds here)
Total Annual Savings: $53,756
Current Investment Portfolio & Assets: Dr. Sarah has built a significant nest egg:
Total Invested Assets: $2,978,735
403(b): $2,578,212
Taxable Brokerage Account: $332,078
Roth IRA: $3,387
HSA: $27,358 (This amount is primarily cash, not invested, which we'll address!)
Home Value: $700,000 (paid off)
Current Asset Allocation: Her investment portfolio is currently a fairly standard 60% stocks / 40% bonds.
Is Dr. Sarah on Track to Retire Comfortably at 65?
Based on these numbers, the projection is a resounding YES!
Dr. Sarah is in a position to maintain her current standard of living in retirement, even with the significant costs associated with her paid-off home (taxes, insurance, maintenance equaling $33,500 annually). She could comfortably continue her $8,000/month in living expenses, with these costs adjusted for inflation.
But here's the exciting part: She's not just on track to maintain; she's in a position to elevate her retirement experience. Based on modeling assumptions, Dr. Sarah appears to have the capacity to allocate up to $25,000 annually for discretionary spending, such as family travel, assuming average market returns and consistent spending. Her traditional 60/40 stock to bond portfolio is a solid foundation that has contributed to her impressive wealth accumulation.
Optimizing for an Even Stronger, More Flexible Retirement
While Dr. Sarah is doing many things exceptionally well, there are always opportunities for refinement to enhance tax efficiency, mitigate risks, and potentially create even more flexibility.
Optimize 403(b) Contributions for Employer Match:
If her employer doesn’t offer a "true-up" match (where they match contributions annually, not just per pay period), we might recommend adjusting her 403(b) contributions. Instead of front-loading and maxing out early in the year, she could spread contributions throughout the year, ensuring she receives the maximum possible employer match by contributing through December. This is free money left on the table if the true-up isn't in place!
Invest Her HSA Funds:
Her HSA has a good balance, but a significant portion is currently held in cash. HSAs are triple-tax-advantaged (tax-deductible contributions, tax-free growth, tax-free withdrawals for qualified medical expenses) and can act as a powerful retirement savings vehicle, especially for healthcare costs. We would recommend investing the bulk of these funds (beyond an immediate emergency healthcare reserve) to allow them to grow tax-free over the next 5+ years.
Enhance Investment Efficiency (Asset Location):
This strategy is about placing different types of investments into specific account types to maximize tax benefits.
Bonds in Tax-Deferred Accounts (like her 403(b)): Bonds are generally less tax-efficient than stocks because their interest payments are taxed as ordinary income. Placing them in a tax-deferred account like her 403(b) allows that interest to grow without being taxed until withdrawal in retirement.
Stocks in Roth IRA: Stocks, especially growth stocks, are highly tax-efficient in a Roth IRA because all qualified growth and withdrawals are completely tax-free. This is an incredible benefit.
Growth/Stocks in Taxable Brokerage: While taxable, a brokerage account still offers flexibility and favorable long-term capital gains tax rates. Keeping growth-oriented investments here can be efficient if carefully managed.
Crucial Estate Planning Review:
More often than I would like to see, missing beneficiaries or even an ex-spouse are listed on accounts. This immediately triggers a critical conversation. It's highly likely her wills, healthcare proxies, and powers of attorney haven't been reviewed or updated in years (a very common scenario, especially after adult children). Working with an effective estate attorney is paramount. This helps ensure:
Your Wishes Are Known: Your assets go to precisely whom you intend, in the manner you intend.
Avoid Probate: Keeping assets out of the lengthy, public, and potentially costly probate court system.
Minimize Family Conflict: Clear instructions can prevent disputes among beneficiaries during an already difficult time.
Personal Care During Life: Healthcare proxies and powers of attorney ensure decisions are made according to your wishes if you become incapacitated. I’d rather choose who takes care of me, then hope for the best.
Personal Insurance Review:
Umbrella Insurance: As a physician, Dr. Sarah is acutely aware of professional liability. However, as her personal net worth has grown, so has her need for personal liability protection. An umbrella insurance policy provides additional liability coverage above her homeowner's and auto insurance, protecting her significant assets from unforeseen personal lawsuits. We'd recommend matching her personal liability protection to her net worth.
Disability Policy: Given her strong financial position and proximity to retirement, she likely no longer needs a private disability income policy. This could be a source of savings. However, any free disability benefits offered by her employer should absolutely be retained.
Life Insurance: Same goes for life, if free from her employer. After that we would need to review if life insurance still fits.
Taking Social Security at 70: I have written more on this topic here: Social Security Timing & Taxes. In her case, assuming she started working as an attending in 1995 and earned $135,036; Source: Center for Studying Health System Change (2006). These numbers are important because her SS benefit is based on her best 35 years of work. I assume Dr. Sarah will live to age 90. Below is an illustration of the projected difference between taking Social Security at Full Retirement age (67) and at age 70. Delaying helps Dr. Sarah protect against inflation eating away at her quality of life during her retirement and believe it or not living too long. Social Security has annual cost of living adjustments and pays for life.
What Else is Possible? Retiring Sooner & Strategic Growth
Beyond these optimizations, Dr. Sarah's strong foundation opens up even more exciting possibilities:
Retire Sooner! Given her current trajectory and savings, retiring at age 64, or even potentially earlier, is a very realistic possibility, depending on her exact spending needs and comfort with market fluctuations.
Strategic Portfolio Adjustments: While her 60/40 portfolio is solid, there might be an opportunity to strategically add a little more stock exposure for growth without unduly sacrificing safety. This calculated increase in risk could provide even more potential for wealth accumulation, allowing for greater flexibility, increased spending, or even more significant support for her adult children. On the flip side, given her strong position she may choose a portfolio aimed at being more stable. She might be willing to give up growth potential for a potential steadier return. After all, personal finance is personal.
Navigating Healthcare Before Medicare: Retiring before age 65 means planning for pre-Medicare healthcare expenses. While this can seem like a "big bad wolf," it doesn't have to be terrifying. We'd work with a healthcare expert to carefully map out her options (e.g., COBRA, ACA marketplace plans) and costs. It's important to remember that even with Medicare (post-65), there are still significant out-of-pocket costs, often exceeding $6,000 annually for supplemental policies and prescription drug plans. Proactive planning minimizes the shock.
Early Retirement Tax Opportunities: The early years of retirement, before Social Security benefits begin and other income streams are fully active, often present a unique opportunity to take advantage of lower income years. This is an ideal time for Roth conversions, allowing you to pay taxes on converted amounts when your income is lower, thereby reducing your overall lifetime tax burden.
Long-Term Care Planning: Finally, ensuring coverage for potential long-term care needs (such as planning for two years of potential long-term care expenses) is built into her overall strategy, adding another layer of security.
Key Assumptions:
Inflation
Health Care: 5%
Social Security COLA: 2.5%
General Inflation: 2.5%
Tax inflation: 2.5%
Investments
60/40 portfolio: 8.2% annual return
Source RightCapital
Dr. Sarah’s case illustrates how thoughtful planning, strategic adjustments, and regular financial check-ins can transform a strong retirement outlook into an even more confident and flexible future. While every situation is unique, many physicians share similar concerns about timing, taxes, and healthcare as they approach retirement.
If you're within five to ten years of your target retirement age, now is the time to ensure your plan reflects your goals, lifestyle, and potential risks. A comprehensive financial review can uncover opportunities you may not have considered, whether that's retiring a bit earlier, traveling more, or simply having greater peace of mind.
This is a hypothetical case study presented for illustrative purposes only. It does not represent an actual client and is not intended to guarantee results or outcomes. All financial decisions should be based on your unique situation, objectives.
The information in this blog is the opinion of Nathan Tomkiewicz and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through Tomkiewicz Wealth Management, LLC, an investment adviser registered with the State of New York.
Read more
Experts Planning Family
I want to share a personal experience. This story isn’t unique to my family, though it is about my family.
Could Physicians in High-Tax States See Relief with a Revived SALT Deduction?
For physicians living in high-tax states like New York, Massachusetts, California, Illinois, and New Jersey, the $10,000 SALT (State and Local Tax) deduction cap introduced by the 2017 Tax Cuts and Jobs Act has limited the benefit of itemizing deductions for years.
When is the best time to take Social Security and how is it taxed?
Much anticipation has surrounded Social Security and whether or not it is taxable under the “Big Beautiful Bill.” Contrary to what you may have heard, the “BBB” did not address the taxation of Social Security on the Federal level.
Aug 5, 2025
On Track for Retirement at 65? A Family Doctor's Financial Check-Up
For many professionals, especially those in demanding fields like medicine, the idea of retirement can feel like a distant dream, or at best, an abstract concept. Years are spent focusing on career advancement, family, and daily responsibilities, often leaving personal financial planning on the back burner.
On Track for Retirement at 65? A Family Doctor's Financial Check-Up
For many professionals, especially those in demanding fields like medicine, the idea of retirement can feel like a distant dream, or at best, an abstract concept. Years are spent focusing on career advancement, family, and daily responsibilities, often leaving personal financial planning on the back burner.
Today, we're taking a look at "Dr. Sarah" (a hypothetical client based on real-world scenarios) – a 60-year-old single family care physician with adult children. She's been incredibly diligent, but with retirement at age 65 looming, she's asking the crucial question: "Am I on track to maintain my quality of life in retirement, and even add a little extra joy?"
Let's dive into her current situation, assess where she stands, and explore strategic moves that can enhance her retirement readiness.
Dr. Sarah's Current Financial Snapshot (Age 60) Resides in Albany, New York
Here's a look at Dr. Sarah's finances as she approaches her final working years:
Income & Expenses:
Annual Salary: $247,040 source: Bureau of Labor Statistics (May 2023).
Annual Expenses: $129,500 (This breaks down to $8,000/month for living expenses + $33,500/year for housing, including property taxes, insurance, and maintenance. Her home is paid off, so no mortgage payments!)
Income Taxes (Estimated 2025):
Federal Income Tax: $37,481
NY State Income Tax: $11,380
Federal FICA (Social Security & Medicare): $14,924
Current Savings Strategy: Dr. Sarah is a fantastic saver, maximizing several key accounts:
403(b) (Employer Retirement Plan): $34,750 (maxing out her contribution)
Roth IRA: $8,000 (maxing out her contribution)
HSA (Health Savings Account): $5,300 (maxing out her contribution)
Taxable Brokerage Account: $5,706 (contributing leftover funds here)
Total Annual Savings: $53,756
Current Investment Portfolio & Assets: Dr. Sarah has built a significant nest egg:
Total Invested Assets: $2,978,735
403(b): $2,578,212
Taxable Brokerage Account: $332,078
Roth IRA: $3,387
HSA: $27,358 (This amount is primarily cash, not invested, which we'll address!)
Home Value: $700,000 (paid off)
Current Asset Allocation: Her investment portfolio is currently a fairly standard 60% stocks / 40% bonds.
Is Dr. Sarah on Track to Retire Comfortably at 65?
Based on these numbers, the projection is a resounding YES!
Dr. Sarah is in a position to maintain her current standard of living in retirement, even with the significant costs associated with her paid-off home (taxes, insurance, maintenance equaling $33,500 annually). She could comfortably continue her $8,000/month in living expenses, with these costs adjusted for inflation.
But here's the exciting part: She's not just on track to maintain; she's in a position to elevate her retirement experience. Based on modeling assumptions, Dr. Sarah appears to have the capacity to allocate up to $25,000 annually for discretionary spending, such as family travel, assuming average market returns and consistent spending. Her traditional 60/40 stock to bond portfolio is a solid foundation that has contributed to her impressive wealth accumulation.
Optimizing for an Even Stronger, More Flexible Retirement
While Dr. Sarah is doing many things exceptionally well, there are always opportunities for refinement to enhance tax efficiency, mitigate risks, and potentially create even more flexibility.
Optimize 403(b) Contributions for Employer Match:
If her employer doesn’t offer a "true-up" match (where they match contributions annually, not just per pay period), we might recommend adjusting her 403(b) contributions. Instead of front-loading and maxing out early in the year, she could spread contributions throughout the year, ensuring she receives the maximum possible employer match by contributing through December. This is free money left on the table if the true-up isn't in place!
Invest Her HSA Funds:
Her HSA has a good balance, but a significant portion is currently held in cash. HSAs are triple-tax-advantaged (tax-deductible contributions, tax-free growth, tax-free withdrawals for qualified medical expenses) and can act as a powerful retirement savings vehicle, especially for healthcare costs. We would recommend investing the bulk of these funds (beyond an immediate emergency healthcare reserve) to allow them to grow tax-free over the next 5+ years.
Enhance Investment Efficiency (Asset Location):
This strategy is about placing different types of investments into specific account types to maximize tax benefits.
Bonds in Tax-Deferred Accounts (like her 403(b)): Bonds are generally less tax-efficient than stocks because their interest payments are taxed as ordinary income. Placing them in a tax-deferred account like her 403(b) allows that interest to grow without being taxed until withdrawal in retirement.
Stocks in Roth IRA: Stocks, especially growth stocks, are highly tax-efficient in a Roth IRA because all qualified growth and withdrawals are completely tax-free. This is an incredible benefit.
Growth/Stocks in Taxable Brokerage: While taxable, a brokerage account still offers flexibility and favorable long-term capital gains tax rates. Keeping growth-oriented investments here can be efficient if carefully managed.
Crucial Estate Planning Review:
More often than I would like to see, missing beneficiaries or even an ex-spouse are listed on accounts. This immediately triggers a critical conversation. It's highly likely her wills, healthcare proxies, and powers of attorney haven't been reviewed or updated in years (a very common scenario, especially after adult children). Working with an effective estate attorney is paramount. This helps ensure:
Your Wishes Are Known: Your assets go to precisely whom you intend, in the manner you intend.
Avoid Probate: Keeping assets out of the lengthy, public, and potentially costly probate court system.
Minimize Family Conflict: Clear instructions can prevent disputes among beneficiaries during an already difficult time.
Personal Care During Life: Healthcare proxies and powers of attorney ensure decisions are made according to your wishes if you become incapacitated. I’d rather choose who takes care of me, then hope for the best.
Personal Insurance Review:
Umbrella Insurance: As a physician, Dr. Sarah is acutely aware of professional liability. However, as her personal net worth has grown, so has her need for personal liability protection. An umbrella insurance policy provides additional liability coverage above her homeowner's and auto insurance, protecting her significant assets from unforeseen personal lawsuits. We'd recommend matching her personal liability protection to her net worth.
Disability Policy: Given her strong financial position and proximity to retirement, she likely no longer needs a private disability income policy. This could be a source of savings. However, any free disability benefits offered by her employer should absolutely be retained.
Life Insurance: Same goes for life, if free from her employer. After that we would need to review if life insurance still fits.
Taking Social Security at 70: I have written more on this topic here: Social Security Timing & Taxes. In her case, assuming she started working as an attending in 1995 and earned $135,036; Source: Center for Studying Health System Change (2006). These numbers are important because her SS benefit is based on her best 35 years of work. I assume Dr. Sarah will live to age 90. Below is an illustration of the projected difference between taking Social Security at Full Retirement age (67) and at age 70. Delaying helps Dr. Sarah protect against inflation eating away at her quality of life during her retirement and believe it or not living too long. Social Security has annual cost of living adjustments and pays for life.
What Else is Possible? Retiring Sooner & Strategic Growth
Beyond these optimizations, Dr. Sarah's strong foundation opens up even more exciting possibilities:
Retire Sooner! Given her current trajectory and savings, retiring at age 64, or even potentially earlier, is a very realistic possibility, depending on her exact spending needs and comfort with market fluctuations.
Strategic Portfolio Adjustments: While her 60/40 portfolio is solid, there might be an opportunity to strategically add a little more stock exposure for growth without unduly sacrificing safety. This calculated increase in risk could provide even more potential for wealth accumulation, allowing for greater flexibility, increased spending, or even more significant support for her adult children. On the flip side, given her strong position she may choose a portfolio aimed at being more stable. She might be willing to give up growth potential for a potential steadier return. After all, personal finance is personal.
Navigating Healthcare Before Medicare: Retiring before age 65 means planning for pre-Medicare healthcare expenses. While this can seem like a "big bad wolf," it doesn't have to be terrifying. We'd work with a healthcare expert to carefully map out her options (e.g., COBRA, ACA marketplace plans) and costs. It's important to remember that even with Medicare (post-65), there are still significant out-of-pocket costs, often exceeding $6,000 annually for supplemental policies and prescription drug plans. Proactive planning minimizes the shock.
Early Retirement Tax Opportunities: The early years of retirement, before Social Security benefits begin and other income streams are fully active, often present a unique opportunity to take advantage of lower income years. This is an ideal time for Roth conversions, allowing you to pay taxes on converted amounts when your income is lower, thereby reducing your overall lifetime tax burden.
Long-Term Care Planning: Finally, ensuring coverage for potential long-term care needs (such as planning for two years of potential long-term care expenses) is built into her overall strategy, adding another layer of security.
Key Assumptions:
Inflation
Health Care: 5%
Social Security COLA: 2.5%
General Inflation: 2.5%
Tax inflation: 2.5%
Investments
60/40 portfolio: 8.2% annual return
Source RightCapital
Dr. Sarah’s case illustrates how thoughtful planning, strategic adjustments, and regular financial check-ins can transform a strong retirement outlook into an even more confident and flexible future. While every situation is unique, many physicians share similar concerns about timing, taxes, and healthcare as they approach retirement.
If you're within five to ten years of your target retirement age, now is the time to ensure your plan reflects your goals, lifestyle, and potential risks. A comprehensive financial review can uncover opportunities you may not have considered, whether that's retiring a bit earlier, traveling more, or simply having greater peace of mind.
This is a hypothetical case study presented for illustrative purposes only. It does not represent an actual client and is not intended to guarantee results or outcomes. All financial decisions should be based on your unique situation, objectives.
The information in this blog is the opinion of Nathan Tomkiewicz and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through Tomkiewicz Wealth Management, LLC, an investment adviser registered with the State of New York.
Read more
Experts Planning Family
I want to share a personal experience. This story isn’t unique to my family, though it is about my family.
Could Physicians in High-Tax States See Relief with a Revived SALT Deduction?
For physicians living in high-tax states like New York, Massachusetts, California, Illinois, and New Jersey, the $10,000 SALT (State and Local Tax) deduction cap introduced by the 2017 Tax Cuts and Jobs Act has limited the benefit of itemizing deductions for years.
When is the best time to take Social Security and how is it taxed?
Much anticipation has surrounded Social Security and whether or not it is taxable under the “Big Beautiful Bill.” Contrary to what you may have heard, the “BBB” did not address the taxation of Social Security on the Federal level.
Aug 5, 2025
On Track for Retirement at 65? A Family Doctor's Financial Check-Up
For many professionals, especially those in demanding fields like medicine, the idea of retirement can feel like a distant dream, or at best, an abstract concept. Years are spent focusing on career advancement, family, and daily responsibilities, often leaving personal financial planning on the back burner.
On Track for Retirement at 65? A Family Doctor's Financial Check-Up
For many professionals, especially those in demanding fields like medicine, the idea of retirement can feel like a distant dream, or at best, an abstract concept. Years are spent focusing on career advancement, family, and daily responsibilities, often leaving personal financial planning on the back burner.
Today, we're taking a look at "Dr. Sarah" (a hypothetical client based on real-world scenarios) – a 60-year-old single family care physician with adult children. She's been incredibly diligent, but with retirement at age 65 looming, she's asking the crucial question: "Am I on track to maintain my quality of life in retirement, and even add a little extra joy?"
Let's dive into her current situation, assess where she stands, and explore strategic moves that can enhance her retirement readiness.
Dr. Sarah's Current Financial Snapshot (Age 60) Resides in Albany, New York
Here's a look at Dr. Sarah's finances as she approaches her final working years:
Income & Expenses:
Annual Salary: $247,040 source: Bureau of Labor Statistics (May 2023).
Annual Expenses: $129,500 (This breaks down to $8,000/month for living expenses + $33,500/year for housing, including property taxes, insurance, and maintenance. Her home is paid off, so no mortgage payments!)
Income Taxes (Estimated 2025):
Federal Income Tax: $37,481
NY State Income Tax: $11,380
Federal FICA (Social Security & Medicare): $14,924
Current Savings Strategy: Dr. Sarah is a fantastic saver, maximizing several key accounts:
403(b) (Employer Retirement Plan): $34,750 (maxing out her contribution)
Roth IRA: $8,000 (maxing out her contribution)
HSA (Health Savings Account): $5,300 (maxing out her contribution)
Taxable Brokerage Account: $5,706 (contributing leftover funds here)
Total Annual Savings: $53,756
Current Investment Portfolio & Assets: Dr. Sarah has built a significant nest egg:
Total Invested Assets: $2,978,735
403(b): $2,578,212
Taxable Brokerage Account: $332,078
Roth IRA: $3,387
HSA: $27,358 (This amount is primarily cash, not invested, which we'll address!)
Home Value: $700,000 (paid off)
Current Asset Allocation: Her investment portfolio is currently a fairly standard 60% stocks / 40% bonds.
Is Dr. Sarah on Track to Retire Comfortably at 65?
Based on these numbers, the projection is a resounding YES!
Dr. Sarah is in a position to maintain her current standard of living in retirement, even with the significant costs associated with her paid-off home (taxes, insurance, maintenance equaling $33,500 annually). She could comfortably continue her $8,000/month in living expenses, with these costs adjusted for inflation.
But here's the exciting part: She's not just on track to maintain; she's in a position to elevate her retirement experience. Based on modeling assumptions, Dr. Sarah appears to have the capacity to allocate up to $25,000 annually for discretionary spending, such as family travel, assuming average market returns and consistent spending. Her traditional 60/40 stock to bond portfolio is a solid foundation that has contributed to her impressive wealth accumulation.
Optimizing for an Even Stronger, More Flexible Retirement
While Dr. Sarah is doing many things exceptionally well, there are always opportunities for refinement to enhance tax efficiency, mitigate risks, and potentially create even more flexibility.
Optimize 403(b) Contributions for Employer Match:
If her employer doesn’t offer a "true-up" match (where they match contributions annually, not just per pay period), we might recommend adjusting her 403(b) contributions. Instead of front-loading and maxing out early in the year, she could spread contributions throughout the year, ensuring she receives the maximum possible employer match by contributing through December. This is free money left on the table if the true-up isn't in place!
Invest Her HSA Funds:
Her HSA has a good balance, but a significant portion is currently held in cash. HSAs are triple-tax-advantaged (tax-deductible contributions, tax-free growth, tax-free withdrawals for qualified medical expenses) and can act as a powerful retirement savings vehicle, especially for healthcare costs. We would recommend investing the bulk of these funds (beyond an immediate emergency healthcare reserve) to allow them to grow tax-free over the next 5+ years.
Enhance Investment Efficiency (Asset Location):
This strategy is about placing different types of investments into specific account types to maximize tax benefits.
Bonds in Tax-Deferred Accounts (like her 403(b)): Bonds are generally less tax-efficient than stocks because their interest payments are taxed as ordinary income. Placing them in a tax-deferred account like her 403(b) allows that interest to grow without being taxed until withdrawal in retirement.
Stocks in Roth IRA: Stocks, especially growth stocks, are highly tax-efficient in a Roth IRA because all qualified growth and withdrawals are completely tax-free. This is an incredible benefit.
Growth/Stocks in Taxable Brokerage: While taxable, a brokerage account still offers flexibility and favorable long-term capital gains tax rates. Keeping growth-oriented investments here can be efficient if carefully managed.
Crucial Estate Planning Review:
More often than I would like to see, missing beneficiaries or even an ex-spouse are listed on accounts. This immediately triggers a critical conversation. It's highly likely her wills, healthcare proxies, and powers of attorney haven't been reviewed or updated in years (a very common scenario, especially after adult children). Working with an effective estate attorney is paramount. This helps ensure:
Your Wishes Are Known: Your assets go to precisely whom you intend, in the manner you intend.
Avoid Probate: Keeping assets out of the lengthy, public, and potentially costly probate court system.
Minimize Family Conflict: Clear instructions can prevent disputes among beneficiaries during an already difficult time.
Personal Care During Life: Healthcare proxies and powers of attorney ensure decisions are made according to your wishes if you become incapacitated. I’d rather choose who takes care of me, then hope for the best.
Personal Insurance Review:
Umbrella Insurance: As a physician, Dr. Sarah is acutely aware of professional liability. However, as her personal net worth has grown, so has her need for personal liability protection. An umbrella insurance policy provides additional liability coverage above her homeowner's and auto insurance, protecting her significant assets from unforeseen personal lawsuits. We'd recommend matching her personal liability protection to her net worth.
Disability Policy: Given her strong financial position and proximity to retirement, she likely no longer needs a private disability income policy. This could be a source of savings. However, any free disability benefits offered by her employer should absolutely be retained.
Life Insurance: Same goes for life, if free from her employer. After that we would need to review if life insurance still fits.
Taking Social Security at 70: I have written more on this topic here: Social Security Timing & Taxes. In her case, assuming she started working as an attending in 1995 and earned $135,036; Source: Center for Studying Health System Change (2006). These numbers are important because her SS benefit is based on her best 35 years of work. I assume Dr. Sarah will live to age 90. Below is an illustration of the projected difference between taking Social Security at Full Retirement age (67) and at age 70. Delaying helps Dr. Sarah protect against inflation eating away at her quality of life during her retirement and believe it or not living too long. Social Security has annual cost of living adjustments and pays for life.
What Else is Possible? Retiring Sooner & Strategic Growth
Beyond these optimizations, Dr. Sarah's strong foundation opens up even more exciting possibilities:
Retire Sooner! Given her current trajectory and savings, retiring at age 64, or even potentially earlier, is a very realistic possibility, depending on her exact spending needs and comfort with market fluctuations.
Strategic Portfolio Adjustments: While her 60/40 portfolio is solid, there might be an opportunity to strategically add a little more stock exposure for growth without unduly sacrificing safety. This calculated increase in risk could provide even more potential for wealth accumulation, allowing for greater flexibility, increased spending, or even more significant support for her adult children. On the flip side, given her strong position she may choose a portfolio aimed at being more stable. She might be willing to give up growth potential for a potential steadier return. After all, personal finance is personal.
Navigating Healthcare Before Medicare: Retiring before age 65 means planning for pre-Medicare healthcare expenses. While this can seem like a "big bad wolf," it doesn't have to be terrifying. We'd work with a healthcare expert to carefully map out her options (e.g., COBRA, ACA marketplace plans) and costs. It's important to remember that even with Medicare (post-65), there are still significant out-of-pocket costs, often exceeding $6,000 annually for supplemental policies and prescription drug plans. Proactive planning minimizes the shock.
Early Retirement Tax Opportunities: The early years of retirement, before Social Security benefits begin and other income streams are fully active, often present a unique opportunity to take advantage of lower income years. This is an ideal time for Roth conversions, allowing you to pay taxes on converted amounts when your income is lower, thereby reducing your overall lifetime tax burden.
Long-Term Care Planning: Finally, ensuring coverage for potential long-term care needs (such as planning for two years of potential long-term care expenses) is built into her overall strategy, adding another layer of security.
Key Assumptions:
Inflation
Health Care: 5%
Social Security COLA: 2.5%
General Inflation: 2.5%
Tax inflation: 2.5%
Investments
60/40 portfolio: 8.2% annual return
Source RightCapital
Dr. Sarah’s case illustrates how thoughtful planning, strategic adjustments, and regular financial check-ins can transform a strong retirement outlook into an even more confident and flexible future. While every situation is unique, many physicians share similar concerns about timing, taxes, and healthcare as they approach retirement.
If you're within five to ten years of your target retirement age, now is the time to ensure your plan reflects your goals, lifestyle, and potential risks. A comprehensive financial review can uncover opportunities you may not have considered, whether that's retiring a bit earlier, traveling more, or simply having greater peace of mind.
This is a hypothetical case study presented for illustrative purposes only. It does not represent an actual client and is not intended to guarantee results or outcomes. All financial decisions should be based on your unique situation, objectives.
The information in this blog is the opinion of Nathan Tomkiewicz and does not reflect the views of any other person or entity unless specified. The information provided is believed to be reliable and obtained from reliable sources, but no liability is accepted for inaccuracies. The information provided is for informational purposes and should not be construed as advice. Advisory services offered through Tomkiewicz Wealth Management, LLC, an investment adviser registered with the State of New York.
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Experts Planning Family
I want to share a personal experience. This story isn’t unique to my family, though it is about my family.
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