Navigating the retirement planning maze isn’t easy. With ever changing regulations and new pension freedoms, it can be a challenge for doctors to work out how best to save.
But how can you make the most of your pension planning to give yourself the retirement salary you need?
Here are some tips I often share with doctors to help them plan for the future.
Prioritise saving for the future
Our research* shows that almost a third (29%) of doctors cite not saving early enough for retirement as their biggest financial regret. We also know that the average age they want to retire is 59, six years younger than the average worker in the UK and that a third wish they could save more for retirement, but they currently can’t afford to. Yet the earlier you save, the easier it will be to reach your end goal.
That’s why we always encourage people to save little and often from the start of their career.
Why? Because we know that the top priorities for retirement for doctors involve enjoying a more leisurely lifestyle, spending time with family and renovating their home**. All of which require a healthy and stable income.
First things first, you need to have an idea of what you want your income to cover, then you can calculate how much you’ll need each year to achieve those goals. There are a number of planning tools available online to help calculate what you will need based on what you want.
Better still, you could speak to a financial adviser who will be able to help give guidance on retirement planning.
Understand how much to save
According to our research*, almost a fifth (17%) of doctors don’t know how much to save for retirement. As a general rule of thumb, it should be half your age as a percentage of your salary. For instance, the average person who starts saving at 32 should set aside 16% of their annual salary. Initially, this may seem like a large proportion but including employer contributions, it can be achieved.
Once you know how much you might need in your pension pot you can start to calculate how much to set aside each month on top of your employer pension. Aligning your retirement income with your retirement ambitions will help to avoid an income shortfall as you approach retirement.
Pay off any debts
Another big financial regret cited by doctors is not clearing their debts. Almost a fifth (18%) of doctors say it’s their biggest financial. As you approach retirement it is even more important to repay any outstanding debts.
Your income is likely to decrease during retirement, so it’s good practice to pay off any debts early.
Work out how much you owe on any credit cards, personal loans or mortgages, and use any spare cash you have now to start paying off the debt, starting with the highest interest rate first. That way, you can start clearing your debts in the most cost-effective way possible and ensure any income you have in retirement is yours to enjoy.
Our research shows that not planning for the future is a major financial regret for doctors, so it’s important to remember to make the most of the financial support out there.
But for doctors especially there are areas of pension planning that are very important. A face-to-face planning session with a financial consultant is a good way of understanding your retirement options and will enable you to put a plan into place to help you towards achieving your retirement goals.
Wesleyan provides specialist financial advice to doctors, teachers, dentists and lawyers.
* Research based on a survey of 203 doctors, by Censuswide on behalf of Wesleyan, February 2016.
** Research based on survey of 118 Wesleyan customers, July 2016.