As a CRNA, you’ve worked hard in your career to, hopefully, experience a comfortable retirement. Regardless of your definition of wealth, you want to protect your hard-earned money and enjoy the fruits of your labor.
But even if you’ve been saving for decades and earning a great living, you may still worry about having enough to retire. Can you maintain your desired lifestyle? Will you be able to travel the world? Can you still retire at your desired age? Can your retirement savings last a 30+ year retirement?
To keep your retirement dreams on track, there are a number of retirement concerns to tackle—especially if you find yourself within ten years of retirement. Whether you’re about to retire or are ten or more years out, make sure you address these factors to avoid putting your retirement at risk.
If there’s one thing you can be certain of in your financial future, it is taxes. While we don’t know what they’ll be, it’s important to factor them into your retirement plan. Consider your tax-deferred accounts to which you’re currently contributing. You may have a 401(k), 403(b), solo 401(k), IRA, and other accounts.
While these accounts may be growing tax-deferred, when it comes to withdrawing from them in retirement, that money may be subject to income tax. Let’s say you want to withdraw $100,000 from your IRA, and you’re in the 28% tax bracket. You’ll owe $28,000, leaving you with $72,000. Will that be enough? You don’t want taxes to surprise you once you enter retirement.
Inflation can significantly affect your retirement savings, yet many CRNAs forget to factor it into their plan. While you are working, inflation is often offset by salary adjustments, such as cost of living increases and performance raises. But in retirement, you don’t have these same gains to account for inflation, making it difficult to maintain the standard of living you desire. Your purchasing power is reduced as goods and services increase in price.
For example, if you need $5,000 a month to live in today’s dollars, in thirty years you will need $12,136 per month to maintain the same purchasing power, assuming that the annual inflation rate is 3% (and that rate can increase or decrease at any time).
Can your retirement savings make up for that loss? Looking at various potential inflation rates, review how inflation may impact your savings.
According to an Employee Benefit Research Institute (EBRI) study (1), the amount needed at age 65 to cover healthcare costs for couples in retirement can vary from $157,000 to $392,000. That’s no small figure. If you had employer healthcare coverage while working, retirement could mean paying more for medical insurance (Medicare Parts B and D and Medicare Supplement policies). And even with insurance, some expenses will be paid out-of-pocket.
Before retiring, you’ll want to make sure you’re well aware of the healthcare costs you may face, including prescription prices, long-term care costs, Medicare supplement premiums, and medical co-pays.
Start reviewing your Medicare and long-term care insurance options. How much and what type of coverage will you possibly need?
We’ve all heard that people are living longer than ever. According to the Social Security Administration (2), a married couple who’s 65 today can expect one spouse to live to age 85. For retirees, this is known as the longevity risk. There’s certainly no way to predict how long you will live, which makes planning complicated. Retirees need to secure an adequate stream of income for an unpredictable length of time. If you plan to live to age 82, and it turns out you live to 92 how are you going to make your money last the additional ten years?
When strategizing for retirement and your income, don’t leave out this risk. You may want to give yourself a five to ten year buffer to ensure you’re covered, should you live longer than expected. This also adds a hedge for unexpected medical expenses, long-term care, and inflation.
Look at your current retirement savings and income. Bring out the calculator and start estimating how long your savings will last if you live 20, 25, 30, or 35+ years in retirement. Should you live 35 years in retirement, can you make your savings last or do you need to save more?
5. Market Volatility
The unpredictable nature of our economy and volatility of markets is especially stressful when you’re nearing retirement. You don’t want a sudden change in the markets to impact your retirement. A recent Retirement Researcher study (3) analyzed 151 hypothetical portfolios that earned market returns, with the only variation between the portfolios being the 30-year period measured. The amount accumulated at retirement varied quite a bit! The average accumulation was ten times salary, but outcomes ranged from three to twenty-seven times salary depending upon the 30-year period tested.
The study concluded that the final years of retirement accumulation—when the value of the portfolio was at its peak—had the most impact on the concluding value at retirement. If your retirement date falls near the start of a bear market, your nest egg may be depleted quicker than if your timing was different.
With your advisor, evaluate your investment options and how you can minimize risk with something that isn’t completely in your control.
Addressing These 5 Threats
It’s essential that you address these five threats as you approach retirement. While all of these suggested next steps may seem overwhelming, you don’t have to go it alone. At CRNA Financial Planning®, we specialize in helping CRNAs plan for retirement and feel more confident in their financial future.
If you have questions about any of these dangers or next steps to take, call our office at 855.304.3748 or email [email protected] and we’d be happy to review them with you.
About Jeremy Stanley
Jeremy Stanley is the founder of CRNA Financial Planning® as well as CRNA Tax Associates®. He has been providing advice and guidance for Certified Registered Nurse Anesthetists (CRNAs) for over two decades. As a CERTIFIED FINANCIAL PLANNER™, Jeremy has met rigorous certification and professional standards set by the CFP® Board. He is committed to adhering to the principles of integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence when dealing with clients.
Jeremy is also the author of The Wealthy CRNA and A CRNA’s Life After Anesthesia. The Wealthy CRNA features insights into becoming a financially successful CRNA and how to start planning for your financial future, and has been prior approved for up to 4 Class A CE credits by the AANA. A CRNA’s Life After Anesthesia serves as your financial roadmap for a smooth emergence into retirement. It reviews recent changes in the CRNA industry along with the new rules of retirement and the final steps of legacy planning. This book has been prior approved by the AANA for up to 2 Class A CE credits.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.