Work hard now so you can sail smoothly into the future

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Work hard now so you can sail smoothly into the future

Dr. Mike Paul stresses the importance of planning for retirement in a veterinary career—because the security prior generations had in government programs won’t cut it anymore.
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Oct 31, 2018

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Like most of you, I came into the profession with little thought of someday leaving—and of what would follow. Hell, I had just reached my dream! For most of my life I wanted nothing more than to be a veterinarian and to provide care for my patients and clients. It would be years before I began to consider the next phase of my life.

As I began to think about it, my wife shared her outlook with a simple question: “Do you want to keep doing what you’re doing now every day for the rest of your life—until you die—or do you want to do something else?” That opened the door for me to explore a future that might not include using a stethoscope.

One of my favorite quotes about long-term life choices comes from author Robert Sharma, who admonishes us not to “live the same year 75 times and call it a life.” Many people look forward to a retirement that will somehow make up for years spent rather than invested.

Is it ever too soon?

For most people in their 20s and 30s, the concept of retirement is probably not yet on their radar—it certainly wasn’t for me. Who can focus 30 to 40 years in the future when educational expenses, family commitments, personal debt and living expenses are so immediate and ongoing?

In my younger years I didn’t know anyone who was retired. That shouldn’t come as a big surprise since retirement became a viable concept only after World War II. In the mid-20th century life expectancies were shorter. Many of today’s jobs looked very different or didn’t yet exist. Workers were involved in agriculture, manufacturing, industry or sales, and people tended to work until they couldn’t any longer. They looked to Social Security as a long-term revenue stream rather than the safety net it was intended to be.

Will Social Security deliver on its promise?

The Social Security Act was passed in 1935. According to a 2013 article by Armstrong Williams for Newsmax, Social Security benefits were intended as a safety net that supported a modest revenue stream beginning at 65 years of age. Unfortunately, the average American life expectancy at the time was only 61.7, so the likelihood of collecting benefits was small.

But better healthcare and safer working conditions led to longer life expectancies, Williams continues. By 2010, the average lifespan was 78.7 years. In 2018 it’s 80 for men and 84 for women. The number of centenarians in the U.S. was over 53,000 in 2010. In 2014 there were 72,000. That’s great news—unless you’re planning to live on Social Security income.

Today the average Social Security benefit received is $1,404 monthly, and the maximum is $2,788 monthly, according to Forbes (benefits are paid based on earnings). Imagine yourself getting by on that cash flow. That’s why CNBC has estimated that 40 percent of middle-class Americans will retire in poverty. Social Security should be viewed as a part of retirement planning, but it cannot alone sustain an enjoyable retirement. Retirement is no longer a passive transition. It requires planning and commitment.

Planning on retirement is not the same as planning for retirement

Retirement can be a wonderful time of life if we are prepared emotionally, financially and medically. Most people look forward to exotic travel, enjoying unlimited time with family and friends, and endless hours of recreation. But this takes saving and investing—a lot.

So how much will you need to invest to enjoy the kind of retirement you want? Like so many things in life, it depends. How long will you be in retirement? How much and what kind of investments have you already accumulated? Have you considered long-term healthcare needs and the possibility of major unforeseen expenses?

Most experts advise that people begin retirement with at least $1 million in investments, according to CNBC. That sounds like a lot, but if every year you withdraw the recommended 4 percent, which allows for maintenance of the principle investment, that comes to just $40,000 annually.

How much should you invest?

Planning to invest is one thing, but actually setting up a timeline and getting the money committed is a big step. The biggest factors are where you are in life and what you’ve accumulated so far—many experts will advise you based on these facts. Your salary will increase as time goes by, and it’s important to keep your investments proportionate to your salary and your age.

I realize that most young veterinarians have significant student debt, which means not a lot of free capital, but there is usually some. If you wonder whether it’s worth it to put away $5 or $10 a month until you can contribute more—it is. While It may not seem like much, stashing away even a little money every month will enable you to open up an IRA.

Get started investing regularly, regardless of how small the amount. It’s never too soon or too late. According to an analysis by the Federal Reserve done last year, the typical working-age American couple only has $5,000 saved for retirement, only one-third of Americans contribute to their employer-sponsored retirement accounts and 43 percent of working-age families have no retirement savings at all. Start saving now, whether you’re just starting out in your career or looking back on years of work.

A basic plan for early-career veterinarians

If you’re just starting out in your veterinary career, begin by maximizing any 401(k) contributions. By the time you’re 30, you should have the equivalent of one year’s salary invested while you continue to reduce your student debt.

By 35, plan to have two years’ salary invested. Increase your investment commitment to 10 to 15 percent, so that by age 55 you’ve invested four to five times your salary. Take advantage of catch-up contributions to your IRA and 401(k).

Learn about finances and investing. There are dozens of websites, books and magazines that provide education and advice. Read and learn and ask questions. Work with a certified financial advisor—not someone who will take charge of your future but who will educate and advise you.

Whatever you do, start now.

Dr. Mike Paul is the former executive director of the Companion Animal Parasite Council and a former president of the American Animal Hospital Association. He is currently the principal of MAGPIE Veterinary Consulting. He is retired from practice and lives in Anguilla, British West Indies.