DMD Staff

And now for a little something different. Yes, most of our coverage on 

 is encouraging you to put more away now for the benefit of your future self. And for good reason. Studies and surveys consistently point to the sorry state of preparation of most Americans for their coming retirement. But there is another side to the coin as well. It was covered by popular financial blogger Michael Kitces here also. There’s a very real possibility you could be saving too much.

Sounds silly, right? For one, you won’t ever know how much you’ll need in retirement, given that you won’t ever really know how long you’ll live in retirement. Isn’t it better to have too much? After all, that extra money can be given to heirs or donated to charity. It’s not as if it will go to waste. What’s the worry, even if you are saving “too much?” More on that in a moment.

The general rule of thumb in retirement investing is to try to replace 70% to 80% of your pre-retirement income in retirement, with appropriate adjustments for the expected inflation rate. But for most people, their spending will peak in their mid-40s to early 50s. From there, income may still go up, but spending is likely to decline. Perhaps the kids have left college and started earning incomes of their own, perhaps the mortgage is finally paid off, and certainly the dental student loans are but a distant, if not fond, memory. If you base what you need in retirement on what you’re spending now, you may be overlooking an overall dip in your expenses that will be coming as you near your late 50s.

The cost of over-saving isn’t exactly a monetary cost. It’s more likely to be a lifestyle cost. That is, if you’re saving too much for retirement, chances are that your income is meeting your expenses, and your lifestyle choices are within your budget. But perhaps you’re not necessarily making optimal choices when it comes to activities you might enjoy. Maybe your children are taking on student debt as opposed to graduating with a clean financial slate. Perhaps some of the income you’re putting away could be put to better use.

Or, maybe not. Look, there may be some people who are saving more than they’ll ever need. This is still, on the whole, a much less severe problem than not saving enough. There are other reasons to save as well, even if the saving may fall into what some consider the “too much” category. For one, inflation has been relatively low for several years now, but the economy is notoriously difficult to predict. Inflation could be on the rise at some point between now and your retirement. And Social Security, an additional source of income for most in retirement, really can’t limp along forever in its current under-funded state. Chances are it will be either a defunct or very different program by the time you’re ready to reap the benefits.

Last but certainly not least, retirement savings are not designed to be a contingency fund and shouldn’t be used that way, because there are investments much more suited to this use. But a turn for the worse health-wise, or some unexpected calamity, can be solved, in part, by using retirement savings.

The simple truth is that too much retirement savings can’t hold a candle to too little saved. Keep saving and investing. 

Articles

There's a very real possibility you could be saving too much.

Are You Saving Too Much for Retirement?

, we looked at the potential hurdles of early retirement. 

 took us through Early Retirement, where we emphasized the importance of monitoring your cash flow. In 

, middle retirement, we examined how things tend to settle down a bit as you become comfortable with the mental and financial challenges. That brings us to the final part of this series: Late Retirement. As you head into your 80s, the number of decisions related to your finances tend to wind down. Still, there are a few things to keep in mind.

· If you need income, consider income from your home.

 Reverse mortgages can seem confusing, but our guide from earlier this year will help you consider this option, alongside possibly relocating to a cheaper residence.

· Have a plan for if your health worsens.

 Even if you’re in great health now, that’s no guarantee of future great health. Always consider what will happen if things take a turn for the worse. This includes the health of a spouse or partner, of course. Keep a short list of assisted living facilities you’d be interested in. 

 You can and should establish a financial power of attorney and a healthcare power of attorney to handle financial and medical decisions in case you are no longer able to make them.

Just because you’re entering your late retirement years doesn’t mean the end is nigh. You may have decades of a great life to look forward to. It will be much more rewarding if you’re well-prepared for what happens if your health begins to decline or after you pass on.

Retirement consists of 4 key phases. Here, we'll present some key considerations for each phase in 4 parts. This is Part 4.

Planning for the 4 Phases of Retirement: Late Retirement

The stunning election results from earlier this morning will have short- and long-term reverberations, many of which are unknowable at this point. But beyond questions of health care policy and immigration, Supreme Court nominations and gun control, as an investor you may have one immediate reaction: What the heck is going on with the markets, and are my retirement account investments safe?

Those are understandable questions in the immediate aftermath of a Donald Trump victory few saw coming. Among the immediate developments following the election was the steep drop in Dow Industrial average futures, and an alarming stock market opening this morning. Let’s take a look at what’s happening and what it might mean for you.

No matter how volatile the market remains this week and over the weeks and months to come, this isn’t necessarily a reaction to longer-term economic fears brought on by the idea of a President Trump. The first thing to keep in mind is that Wall Street dislikes uncertainty more than it does any Presidential candidate. And this election result stunned many observers, pollsters, and pundits. A significant part of the immediate market reaction was due to the blindsiding. This doesn’t mean a recession is coming, and it doesn’t mean a huge sell-off will continue unabated. In fact, experienced investors are likely to buy low whenever they can, which may mean a relatively quick market turnaround.

Once your deep breath is finished, realize that this should be a time for high vigilance for you as an investor. The simple fact is that the President-elect does not have any military or government experience. And while he may be well-versed in the real estate market and tax loopholes, the world will be watching to see if he knows anything at all about monetary policy. This means global uncertainty, which is not necessarily a recipe for financial stability.

What can you do to protect your investments?

The answer to this difficult question is actually the same this morning as it was on November 7, and the same as it will be on Friday, January 20 (inauguration day): 

How? By using a wide variety of diversification strategies.

If you work with an advisor, talk to him or her about your current investment portfolio, and whether it’s truly diversified. Make sure you are diversified by not just the type of stocks and bonds you’re invested in, but also by geography; by type of investment (a mix of equity investments and debt investments); by industry, and even by companies within an industry.

A truly diverse portfolio doesn’t have to have all these types of diversification, but it should include a few of them. Why? Because some investments, over time, have shown that they typically move opposite of each other, no matter the direction of the economic cycle. So if one portion of your investments is susceptible to a downturn in the market, another might perform better.

It’s way too soon after the election to take any definitive action related to your investments. Any knee-jerk reaction is likely to do more harm to your portfolio than good. Take a deep breath, take it slow, but make sure your investments are ready for the uncertain times ahead.

What Trump's Win Means for Your Investments

 of this series, we looked at the pre-retirement phase. 

, we looked at the period of biggest adjustment, the early retirement years. Once you’ve settled into your retirement, the adjustments settle down somewhat as well. You know the mental challenges and have probably put them behind you. And you’ve probably come to some sort of retirement rhythm. But there are still some things to consider.

By now, you’re in your 70s and are very likely to have begun collecting Social Security benefits. What’s more, even if you’re still working by age 70.5, you’ll have started to take required minimum distributions from your retirement savings. Depending on how long you’ve been retired and how healthy you are, your travel itch may have subsided some as well. Here are some things to think about.

· Make sure your insurance needs are keeping up with you.

 At this stage of life, you’ll no longer need term life insurance, for example, and there’s a much greater chance you’ll be invested in some sort of annuity for income. Do semi-annual reviews to make sure your insurance holdings match up to your needs.

· Make sure your will and estate plan are updated.

 Being in middle retirement doesn’t mean death is imminent, of course, but it does mean making sure you have an updated will and a plan in place should you become incapacitated.

 On second thought, live a lot. Earlier in your retirement, you may have been concerned about possibly outliving your income, and perhaps rightfully so. But now that you’ve updated your budget and can better envision how much money you have remaining, loosen the reins a little. Take that extra trip to see the grandkids. Buy that new equipment for your recently discovered hobby. 

Retirement consists of 4 key phases. Here, we'll present some key considerations for each phase in 4 parts. This is Part 3.

Planning for the 4 Phases of Retirement: Middle-Retirement

, we looked at key considerations for the phase right before retirement. Now, let’s take a look at those dicey first few years after retirement.

Why “dicey?” While there isn’t much clinical research to back it up, anecdotal evidence suggests that the first few years of retirement can be the most difficult. Why? First of all, retiring is a big change for which few are fully mentally prepared. This may be especially true for dentists and other healthcare providers who often consider their career as part of a larger calling. Secondly, the early retirement years are when you start to settle into patterns of behavior that often become the norm in your sunset years.

Third, for the first time perhaps in your life, now is when the overall asset column starts its inevitable dip. This means a mindset adjustment, from one of building wealth for the future, to one of making your income last the remainder of your lifetime. Sounds intimidating, doesn’t it? Let’s look at some things to think about.

When the income stops rolling in and you start to use your retirement savings, you’ll want to closely monitor where your money goes and measure that against what you’ve budgeted. Don’t have a budget? You’re going to need one, even if you’re cozy in the knowledge that you have plenty of income set aside. Why? Because once income stops rolling in regularly, your peace of mind will depend on knowing exactly how much you have outgoing. The tendency for some in early retirement may be to go on several immediate vacations and engage in some spending splurges. And while that may be right for some, many would be wiser to take things slow at first and see how they feel.

 Yes, this will cut into the idea of not having any responsibilities, but depending on your health and the age at which you retire, this may be your greatest opportunity to pursue another long-held interest or just meet some new and different challenges through part-time employment. No doubt there will be opportunities to fill in for a vacationing dentist, but you may find your way to other pursuits as well. Be open to them.

Keep an eye on health benefits and Medicare changes.

 As a healthcare professional, you know better than most that Medicare changes from year to year. So may any health plan you maintain. Make sure you know what changes to your benefits are about to occur before they do, and always consider your current health status and that of your family members before making any substantial health plan changes. This advice seems obvious, right? But you’d be surprised how many recently retired people end up going back to work because the status quo changed when it came to health. That’s the simple fact with health: It’s more likely to change than to stay the same.

 Let’s just be blunt about it: This is an adjustment period. Going from the daily grind of patient care to hours of leisure spread out before you may sound ideal on certain rainy Mondays, but every single person who has ever retired from anything has gone through a period of uncertainty. Know that it’s coming, and take steps to prepare for it. Those steps may include planning more activities, communicating closely with your partner about how you feel, considering volunteering in the community, or even joining retirement groups or communities of people facing similar challenges.

Yes, early retirement will involve an adjustment period, but it doesn’t have to bring anxiety. Be prepared, and be mindful of your own health. In the last part, we’ll look at middle and late retirement.

Retirement consists of 4 key phases. Here, we'll present some key considerations for each phase in 4 parts. This is Part 2.

Planning for the 4 Phases of Retirement: Early Retirement

For you and for future generations, retirement is a much different animal than it was for your grandparents. Perhaps the biggest difference is that retirement can now last for several decades. But no matter the length of your retirement, you’re likely to go through at least 4 distinct phases. As you get closer to the big day, you’re going to want to start thinking about those phases, how each may be different, and how well prepared you are for the changes that will continue to come into your life once you’ve hung up the white coat. Here, we’ll present some key considerations for those in each phase, in three parts.

Some sites refer to this also as “peri-retirement,” but regardless of the nomenclature, this is the stage right before you retire, when your retirement date is getting very close. You’re still working, but you’re starting to get the itch, and you know retirement is right around the corner. This is the time when many retirement savers start to have a great deal of anxiety about how much they’ve put away, how much income they’ll generate from the sale of their practice, and how they’ll adjust to a life away from dentistry.

 You are likely near your peak in career earnings, and with the finish line in sight, now is the time to really sock it away. This is particularly true if you got off to a late start.

Estimate what you expect to receive from Social Security and your retirement plans.

 Long-term planning with Social Security can be difficult until you reach pre-retirement, because your income from your Uncle Sam is highly based on at what age you retire and the solvency of the federal program. In this phase, you’ll have more of those details. You’ll also know that the current balances in any 401(k) or other retirement plans are close to what they’ll be when you stop earning. Now is a great time to do some math.

Evaluate your expenses for cutbacks and unexpected costs

. If you’re concerned about income lasting throughout your retirement, while you’re still earning is the right time to consider cutting back on some expenses that you may longer need. Also, the time window for unanticipated costs is now starting to shorten, making the threat less distinct.

. It’s hard for many dentists to even picture having long days of free time stretching ahead, so you’ll want to spend some time envisioning what you really want out of retired life. Throughout most of your career, your location has probably been at least partly determined by your practice. Dentists, as a general rule, grow roots and keep them in place for a long period of time. But after you retire, you can certainly consider a very different location. The years of pre-retirement may afford you the opportunity to travel to some places that may prove to be a landing spot for you.

In part 2, we’ll look at early retirement, and in the last part, we’ll tackle middle and late retirement.

Retirement consists of 4 key phases. Here, we'll present some key considerations for each phase in 4 parts.

Planning for the 4 Phases of Retirement: Pre-Retirement

The end of the year has a way of sneaking up on us. If it seems like just a few weeks ago you were shaking the sand out of your shorts after a beach vacation, you’re not alone. But the holidays are just about upon us, and if you’re like many dentists saving for retirement, this can be the time of year when your financial plans can go off the rails.

Why? Put simply, if you’re putting away as much as you can for your future self, as much as you can tends to be a little less this time of year. Parties, holiday or end-of-year bonuses for your staff, and gift-buying can get the best of your disposable income.

This year, if you’re determined to stay the course, consider a few tips. First and foremost, develop a plan and stick to it. Here are some fundamentals.

 Part of knowing where you’re going is knowing where you’ve been. Have you gone back to look at last year’s November and December credit card statements? You should get a better sense of what you actually spent, and compare it to what you plan to spend this year. Did last year’s Santa impersonation leave you cutting back on retirement savings, or scrambling to pay off debt early in the New Year? If so, there may be some steps you can take this year to prevent the same, such as looking for sales or cutting back on spending.

: With Halloween just past, retailers will now turn their full attention to hitting their yearly sales goal targets. The time for great deals is January, of course, but that doesn’t do many holiday shoppers much good. But keep an eye out for special store sales or special events like Cyber Monday. There are deals to be had this time of year—they just require advance preparation so that you know when they’re coming. Get holiday wish lists early so that you can tailor your bargain searching. You’ll get the triple benefit of avoiding the late December crowds, taking advantage of early sales, and crossing off many of those on your list before you even have to stress about the internal temperature of the Thanksgiving turducken.

3. Consider gifts that can’t be wrapped:

 The holiday season is a great time to think about starting a 

 or a life insurance plan for a child or a grandchild. It’s a gift that won’t be played with right away, and it might even be received with a groan. But it’s one that may make a huge difference in the recipient’s life. Most important, it’s a gift that, when the recipient is older, will be appreciated long after this year’s hot toy is on the garbage heap.

As always, taking on unexpected debt can not only lead to expenses that magnify through interest, but it can take funds away from investing for your retirement. If you already have a heavy debt load, consider scaling back the gift-giving season, starting the shopping early and paying only in cash, and adjusting your budget accordingly.

The holidays don’t have to mean a temporary suspension of your savings and retirement plan. They may simply require a plan of their own. Do you have one?

If you plan to plan ahead this year, it's already too late.

Start Your Holiday Savings Plan Now

, we took a high-level look at some practice considerations when a marriage partnership ends. In part 2, we’ll look at some personal finance concerns.

First and foremost, even if practice ownership is not part of the equation, it’s still a good idea to consult an attorney when dealing with a pending divorce. This is true even if the pending split is a relatively amicable one. That’s because in addition to the legal expertise, an attorney can provide an objective view of a third party.

Before you sit down with your attorney, come prepared with the full financial picture of where you are, where you want to go, your current income and debt load, any partnership contracts, and a general sense of what you might want to keep the same. For example, if you and your spouse are both putting money into a 529 College Savings plan for a school-age child, you may not wish to change that. You’ll need lists of your earnings and possessions, the earnings and possessions of your spouse, and a third category: marital possessions. Your debts will have to be similarly categorized.

There are too many variables to list them all here, but the key point is to think through all the different financial aspects of your life that may change before you meet with your representative. This can be an overwhelming situation, so maximize the time with your attorney by being as prepared as you can. In particular, if there will be support for either spouse and some divvying up of current investments, consider how you’d want those to change. Although the exact scenario that works best for you may not come to pass ultimately, it will be helpful to have a baseline expectation and work from there.

Consider some tax consequences, and consulting an advisor

If you and your spouse jointly practiced medicine together, there may be significant assets that need to be split. And in many cases, there will be split equity of a home, concerns about how to claim interest deductions on tax filings, and other questions. In any divorce scenario, there can be a dispute about saved retirement funds, and if some sort of distribution is required, there are specific legal documents that will have to be filled out and some tax implications for large lump-sum distributions from one party to another. Not all attorneys are fully informed about qualified domestic relations orders and other documents that will be needed.

This is complicated stuff; consider including a financial or tax advisor in your divorce planning.

Updating beneficiaries and making insurance decisions

Are you on your spouse’s benefit plan? Chances are you’ll have to find an alternative sooner rather than later. It’s also essential that you take time to review your beneficiary designations on both life insurance policies and potentially on some savings and investment vehicles, such as any annuities you may have.

There is a lot involved in a divorce proceeding, and while you may have moments of clarity, there will likely be times of confusion and uncertainty as well. Confide in a trusted friend, think carefully about whether or not you need legal representation, and think also about working with a financial advisor. Decisions you make now with a foggy head could be legally binding for a very long time. 

Part 2: Implications for your personal finances that are worth considering when you're going through a divorce.

Going through a Divorce, Part 2: How it Affects Your Personal Finances

With rare exceptions, divorces are difficult emotionally. There may be children involved, there may be acrimony on both sides, and there may be a great deal of uncertainty about what your post-divorce life will look like.

While financial concerns may not be on the top of your mind, the reality is that many different issues must be dealt with, and many of them sooner rather than later. Some of them will likely involve an attorney, but some may also involve a financial advisor as well. Here’s a look at some of the matters you’ll want to keep in mind, over two parts. In part 1, we’ll look at practice implications. In part 2, personal finance implications.

If you’re a dentist who owns your own practice or is a partner, a divorce introduces a whole host of potential issues. The following factors will be paramount:

·         Whether or not there was a pre-nuptial agreement

·         How much of the practice you own

·         How much the practice appreciated during your marriage

·         State laws regarding business assets and agreements.

If you have partners and if the practice assets may be in dispute, you will likely want to prepare them for pending legal action. And you will absolutely want to speak to an attorney—preferably one with experience handling divorces of small business owners. The complications involved in dividing up the assets of the practice will likely mean you’ll pay more in legal fees than would a typical person going through a divorce. There may also be some contention around disclosing the assets of the business, so that your partner can ensure that there is no hiding of assets through the business.

One thing that catches divorcing dentists off guard is the concept of “double dipping.” This is strategy under which a divorcing spouse seeks not only a portion of the assets of the business, but an ongoing income stream from the practice. State laws vary widely on the legality and practicality of double dipping, but obviously the stakes can be very high.

In short, this is complicated stuff. You’re best served by not going it alone, even if the divorcing parties seem to want an amicable resolution. Retaining legal counsel early in the divorce process can help identify potential issues and minimize them as they arise.

In your discussions with your attorney, also seek guidance on the following questions:

	2. How will my business partners be affected if I only own part of the business?

	3. What is the risk to my future income?

	4. Do I have to disclose to my partners the specifics of the divorce or the pending divorce agreement?

	5. What if the practice is worth about the same as before I got married?

	6. What if there is business debt or leftover dental school debt?

	7. How will support be calculated if my income changes from year to year (as is the case with many dental practices)?

	8. Should I look into selling my ownership stake?

Frankly, these questions are just the tip of the iceberg. Sit down with an experienced professional early on in the process to scope out all the issues of concern.

Part 1: Implications for your dental practice that are worth considering when you're going through a divorce.

Going through a Divorce, Part 1: What Now, Financially?

 has covered extensively the benefits of working with a financial advisor. There are many, particularly for busy dentists. But there are some horror stories of working with advisors as well. Here are some warning signs to watch for.

1. Not learning or adhering to your investment goals, or your core values.

 No advisor worth her salt will suggest any transactions or investments prior to knowing your full financial picture, including your history and your goals. This information-gathering is the foundation of a long-term partnership. An advisor in it only for the commissions or fees won’t spend a lot of time on it; someone interested in a long-term, mutually beneficial relationship will.

2. Intentional vagueness, especially around fees.

 Specificity and detail are the enemy of any nefarious advisor. The bad eggs out there thrive when their customers don’t ask detailed questions about how the returns are earned or how fees are structured. Ask. If you don’t understand the answer, ask again. Make sure you understand fully, and up front, what you’ll pay for, when, and how much. You don’t always have to understand something fully to be able to ask probing questions about it. That act of questioning alone may be enough to indicate to your advisor that you won’t simply go blindly along with whatever structure he is suggesting.

3. Ignoring your calls, your spouse, or your portfolio.

 An advisor who doesn’t return your calls may not be hiding anything nefarious, but she also isn’t hiding her indifference to your business. An advisor who talks to you with impatience or condescension is telling you that giving you full explanations isn’t worth his time. An advisor who ignores your spouse or partner is telling you to find another advisor.

4. Putting their interests before yours. 

While the Department of Labor issued new regulations this past April that will ultimately help with consumer protection, many of those provisions aren’t effective until April 2017. Until then, many advisors are only held to a standard of “suitability.” Know to which standard your advisor is required to adhere. If it’s a suitability standard, look for some common signs that investments your advisor is suggesting may be benefiting him or her more than you.

, is a way for an advisor to earn commissions through a high volume of trades. While a high degree of activity may look like churning, it may simply be an advisor strategy that does indeed benefit you. How can you tell? Talk to your advisor. Ask him about the necessity of the number of transactions. Ask him to show his rationale for making the transactions. Ask for the results. Most importantly, make sure the rationale you’re given matches up to your expressed investment goals.

6. Pushing products or services excessively.

 If your advisor keeps bringing up the same opportunity, over your objections or your goals, it may be that she believes so strongly in it that she doesn’t want you to pass it up. It could also mean that she may stand to benefit by drawing investors to that vehicle. Good advisors are good listeners.

7. Always agreeing with your financial choices.

 This sounds counterintuitive, right? You are the primary decision-maker, after all. But an advisor who simply follows directions is an administrator. A good advisor will likely disagree with you on some investment choices you make, and he or she should raise those objections with you and be able to articulate the reasons behind those objections. You may ultimately plow ahead anyway, as is your right, but an advisor who simply nods at all your strategies isn’t providing very much value.

Intentional vagueness about fees, as well as a lack of interest in your investment goals, should serve as warning signs.