The most important thing to know about retirement savings planning

Excerpted from page 42 of the September/October 2022 edition of AOA Focus.

Whether your career is just starting or winding down, there can be a lot to unpack when charting a course to retirement.

AOAExcel^® checked in with Nathanael Kelley of endorsed business partner Equitable to discuss pertinent questions that doctors of optometry should be asking.

What criteria should doctors use to determine how much they will need to retire?

Financial planning is very personal, and everyone’s goals are different. There are many factors to consider in determining how much each individual needs to retire, so I would recommend speaking with a Certified Financial Professional (CFP) if you haven’t already and meet with your CFP on a semi-annual basis to make sure you are on track.

What factors go into determining how much to save each month?

The amount needed to save is different for everyone and can be an evolving goal, so it’s important to revisit your plan at least once per year. But a good rule of thumb to go by is to save as much in your retirement plan as you can afford to save.

Investing in a 401(k) is a common way to save for retirement. What questions should doctors be asking about their 401(k)?

First off, if you can afford to do so, you should be maximizing your contributions. The 2022 401(k) salary deferral limit is $20,500 and $27,000 if you are 50 or older due to the catch-up contributions provision. Contributions reduce your taxable income, which is so important for doctors to reduce their tax liability.

Another thing to ask is, “Am I allocated properly?” Everyone is different. Generally speaking, younger folks can afford to be more aggressively invested, but as you get older you may want to reduce your equity exposure.

Again, everyone is different, so there is no one-size-fits-all approach to investment allocation.

What happens during a complimentary consultation that Equitable can provide an AOA member?

Every member is different. So we start by getting to know you and your practice, so that we can suggest a retirement plan that makes sense in your specific situation. What can the AOA member learn? Hopefully, a lot. We’ll go through retirement plan options, contribution limits, best practices, tax benefits, etc.

What are the most common questions doctors ask the Equitable team?

I often hear, “I’m an optometrist. I don’t know much about retirement savings or investing. What should I do?” From there we try to explain things in a conversational manner and demystify retirement saving.

For doctors under 40, what is the single most important thing they need to know about retirement savings planning? And doctors over 50?

The answer to both questions is the same. You want to know your options, pros/cons of each plan, cost to fund employees, potential tax savings, etc. And for doctors over 50, they should be aware of their opportunity to contribute additional money to their plans through annual catch-up contributions.

What advice do you have for doctors who haven’t started saving for retirement yet but know they need to?

The best time to start saving for retirement is 20 years ago. The second-best time is today.