Physician retirement planning becomes increasingly important during the final 5–15 years of a medical career. After decades of earning and accumulating wealth, doctors approaching retirement face a different set of financial questions than they did earlier in their careers.
How much can you safely spend? When should you claim Social Security? Should you begin Roth conversions? How should you invest several million dollars once you’re no longer earning a physician’s income? What will Medicare cost? How should you handle a practice sale? And perhaps just as importantly, are you paying too much for financial advice?
Physicians often enter retirement with substantial retirement accounts, taxable investments, real estate, practice interests, and other assets. Coordinating those assets can become more complicated as retirement approaches because taxes, investment risk, retirement income, Medicare, Social Security, and estate planning all begin to interact.
This guide covers some of the most important physician retirement planning considerations for doctors who are within 5–15 years of leaving medicine.
How Physician Retirement Planning Is Different
Physicians have many of the same retirement concerns as other professionals, but several factors can make financial planning more complicated.
Doctors often have high lifetime earnings, significant retirement savings, and a large percentage of their wealth concentrated in tax-deferred accounts. Some also own medical practices or have partnership interests that need to be addressed before retirement.
A physician approaching retirement may have:
- A 401(k), 403(b), 457(b), or other employer retirement plan
- Traditional and Roth IRAs
- A taxable investment portfolio
- A cash balance or defined benefit plan
- Concentrated stock positions
- Real estate
- A medical practice
- Practice-related receivables or goodwill
- Deferred compensation
- Social Security benefits
- A pension
- Life insurance
- Significant estate-planning considerations
These assets don’t all receive the same tax treatment, and they don’t necessarily belong in the same role within a retirement-income strategy.
How Much Does a Physician Need to Retire?
A doctor who wants to spend $150,000 per year in retirement has a very different financial situation from a physician who wants to spend $300,000 or $500,000 per year.
A retirement analysis should consider:
- Current and expected retirement spending
- Taxes
- Inflation
- Social Security
- Pension income
- Portfolio withdrawals
- Health care costs
- Long-term care
- Estate goals
- Charitable giving
- Investment returns
- The timing of retirement
- Whether you’ll work part-time after leaving medicine
For example, a physician with $5 million invested may have a very different retirement plan depending on whether the portfolio needs to provide $150,000 of annual spending or $300,000.
Rather than relying on a single withdrawal-rate rule, it’s useful to model multiple scenarios and examine how spending, taxes, investment returns, inflation, and longevity affect the likelihood of successfully funding retirement.
The 15-Year Physician Retirement Planning Checklist
Retirement planning doesn’t need to begin when retirement is five years away.
For physicians who know they eventually want to leave medicine, the 10–15 years before retirement can provide an opportunity to make important changes gradually rather than trying to solve everything at once.
10–15 Years Before Retirement
Start by establishing a clear picture of your balance sheet.
Review:
- Retirement accounts
- Taxable investments
- Cash
- Real estate
- Practice ownership
- Insurance
- Estate documents
- Expected Social Security benefits
- Pension benefits
- Retirement spending
It’s also worth examining the tax diversification of your portfolio.
A physician who has accumulated $4 million or $5 million almost entirely in traditional retirement accounts could eventually face substantial required minimum distributions and ordinary income taxes.
There may be opportunities to diversify the tax treatment of future retirement income through Roth contributions, Roth conversions, charitable strategies, and other planning techniques.
5–10 Years Before Retirement
The focus can begin shifting toward retirement-income planning.
At this point, physicians should begin asking:
- How much will I actually spend?
- When should I claim Social Security?
- How much income will my portfolio need to provide?
- Which accounts should I withdraw from first?
- Should I begin Roth conversions?
- How much cash should I hold?
- How much investment risk is appropriate?
- When should I sell my practice?
- What happens to my health insurance when I stop working?
This is also an important period to evaluate the investment portfolio itself.
A portfolio that made sense during the accumulation years may not be appropriate once withdrawals begin.
1–5 Years Before Retirement
The financial plan should become much more specific.
This is when physicians can begin modeling actual retirement dates, expected spending, Social Security, Medicare, taxes, portfolio withdrawals, and potential practice-sale proceeds.
The question becomes less about whether retirement is theoretically possible and more about how to structure the transition.
Tax Planning for Physicians Near Retirement
Taxes can become one of the largest expenses in retirement for a high-income physician.
A physician may enter retirement with millions of dollars in traditional retirement accounts. Those assets haven’t disappeared simply because the physician stopped working. Withdrawals are generally taxable as ordinary income, and required minimum distributions eventually become part of the equation.
That makes tax planning before retirement particularly important.
Roth Conversions for Physicians
Roth conversions can be valuable for some physicians, particularly during years when taxable income temporarily falls.
For example, a physician who retires at 62 may have several years between retirement and the beginning of required minimum distributions when taxable income is substantially lower than it was during the physician’s working years.
Those years can potentially provide an opportunity to convert portions of traditional retirement accounts to Roth accounts.
However, a Roth conversion isn’t automatically beneficial.
The decision should consider:
- Current marginal tax rates
- Future expected tax rates
- The amount being converted
- Other taxable income
- State income taxes
- Medicare IRMAA
- Charitable giving
- Estate-planning objectives
- Expected retirement withdrawals
The right question isn’t simply, “Should I do a Roth conversion?”
It’s, “How much should I convert, when should I convert it, and what will the long-term tax consequences be?”
How Physicians Can Reduce Taxes in Retirement
Tax planning shouldn’t stop when the paycheck stops.
Depending on the circumstances, physicians may benefit from strategies such as:
- Roth conversions
- Tax-loss harvesting
- Tax-efficient asset location
- Qualified charitable distributions
- Donor-advised funds
- Charitable giving of appreciated securities
- Managing capital gains
- Coordinating taxable withdrawals
- Managing required minimum distributions
- Planning around Medicare IRMAA
- Considering state income taxes when relocating
The most effective strategy is often not one isolated tax technique. It’s coordinating several decisions over many years.
Retirement Income Planning for Physicians
Retirement income is fundamentally different from a physician’s career income because it may depend heavily on the investment portfolio.
During a medical career, income generally arrives through employment, partnership distributions, or practice income. In retirement, however, the portfolio may become one of the primary sources of cash flow.
This shift changes the purpose of the investment portfolio. Rather than focusing solely on long-term growth, the portfolio must also support reliable income, maintain sufficient liquidity, manage taxes, and reduce the risk of selling investments during a significant market decline.
A retirement-income plan might incorporate:
- Social Security
- Pension income
- Portfolio withdrawals
- Roth assets
- Taxable investments
- Cash reserves
- Real estate income
- Practice-sale proceeds
The objective is to create sustainable income while maintaining enough flexibility to deal with market volatility, inflation, health expenses, and unexpected spending.
Should Physicians Change Their Investment Strategy Before Retirement?
A common mistake is making a dramatic investment change immediately before retirement.
A physician who has spent 30 years investing aggressively may suddenly become concerned about a market downturn and move most of the portfolio into cash or bonds.
The opposite can also happen. A physician accustomed to a high income may continue taking substantial investment risk because the portfolio has historically performed well.
Investment risk should be evaluated in relation to:
- Retirement spending
- Other income sources
- Portfolio size
- Time horizon
- Required withdrawals
- Estate goals
- Ability to tolerate market declines
A physician with $6 million and modest spending needs may have considerably more financial flexibility than a physician with $3 million and a very high desired lifestyle.
What Should Physicians Do With Their 401(k), 403(b), and 457(b)?
Physicians frequently accumulate retirement assets across multiple plans.
Before retirement, it can be useful to determine whether those accounts should remain where they are, be consolidated, or be rolled into an IRA.
The decision should consider:
- Investment options
- Fees
- Creditor protection
- Required minimum distributions
- Roth conversion opportunities
- Withdrawal flexibility
- Institutional plan features
- Tax considerations
There isn’t necessarily a reason to roll every retirement account into an IRA immediately after retirement.
The best choice depends on the specific plan and your overall financial situation.
Selling a Medical Practice Before Retirement
For physician-owners, retirement planning may involve much more than investment accounts. The medical practice itself can be one of the largest assets on the balance sheet.
A practice transition can involve:
- Valuation
- Goodwill
- Equipment
- Real estate
- Accounts receivable
- Partnership interests
- Buyer negotiations
- Transition periods
- Tax consequences
The timing of a practice sale should ideally be considered several years before the intended retirement date.
The proceeds may also need to be integrated into your investment and retirement-income plan. A practice sale isn’t simply an event that produces a check. It can fundamentally change your household’s tax and investment situation.
Social Security Planning for Physicians
High-income physicians may be tempted to treat Social Security as relatively unimportant compared with their investment portfolio. That can be a mistake. The decision about when to claim Social Security should be considered in the context of:
- Life expectancy
- Spousal benefits
- Other retirement income
- Portfolio withdrawals
- Taxes
- The desire to maximize guaranteed lifetime income
For a financially independent physician, delaying Social Security may sometimes allow the portfolio to support spending during the earlier years of retirement while increasing future guaranteed income.
The right decision depends on the household rather than simply following a rule based on age.
Medicare and IRMAA Planning
Medicare introduces another consideration for high-income retirees: its income-related monthly adjustment amount, commonly known as IRMAA, can increase premiums for households with higher incomes.
Because Medicare premiums are based on income, tax planning and Medicare planning often overlap. A Roth conversion, large capital gain, practice-sale transaction, or other significant income event may affect future Medicare premiums, so physicians with substantial assets should evaluate these interactions before making major tax or investment decisions.
Estate Planning for High-Net-Worth Physicians
Retirement planning and estate planning shouldn’t be treated as completely separate projects.
A physician who has accumulated several million dollars may have estate-planning considerations involving:
- IRAs and retirement accounts
- Beneficiary designations
- Trusts
- Life insurance
- Real estate
- Business interests
- Charitable giving
- Inherited retirement accounts
- Estate and gift taxes
The estate plan should also coordinate with the investment and tax plan. For example, the most tax-efficient asset to spend during retirement may not be the most tax-efficient asset to leave to heirs.
Flat-Fee vs. Percentage-of-Assets Financial Advice for Physicians
One of the questions physicians should ask when evaluating a financial advisor is how that advisor is compensated, particularly when the relationship involves a substantial investment portfolio.
Many wealth management firms charge a percentage of assets under management, commonly referred to as an AUM fee. Although this arrangement can make sense for some households, it can become an increasingly significant expense for a physician with several million dollars invested.
For example, a physician with $5 million invested would pay approximately $50,000 per year under a 1% annual advisory fee. If the portfolio grows to $10 million, that same 1% fee would increase to $100,000 per year, even if the scope and complexity of the financial planning relationship remain largely unchanged.
The percentage may sound small when viewed in isolation, but the dollar amount becomes substantial as the portfolio grows. For that reason, physicians should evaluate advisory fees based on their actual annual cost and the services they receive rather than focusing only on the stated percentage.
Why a Flat Annual Fee Can Be Different
A flat annual fee can provide greater predictability and separate the cost of advice from the size of the investment portfolio.
If an advisor charges a flat annual fee for comprehensive wealth management, the fee doesn’t automatically increase simply because the portfolio grows from $5 million to $7 million.
A physician may need sophisticated advice regardless of whether the portfolio is $4 million, $6 million, or $8 million.
The amount of work involved in tax planning, retirement-income planning, Social Security decisions, estate coordination, and investment management doesn’t necessarily increase proportionally with every additional dollar invested.
AUM Isn’t Automatically Bad
Percentage-based fees aren’t inherently inappropriate. An AUM relationship can provide a straightforward way to pay for ongoing investment management and financial planning, and some investors value that simplicity. The important question is whether the fee structure makes sense for the services being provided and your circumstances. For high-net-worth physicians, it’s worth comparing the actual dollar cost of an AUM arrangement with a flat-fee model rather than focusing only on the percentage.
Why Some Physicians Prefer a Flat Annual Wealth Management Fee
For a physician with substantial assets, a flat fee can provide several advantages.
Predictable costs: The annual advisory expense is known in advance.
No automatic fee increase as assets grow: The cost doesn’t necessarily rise just because the portfolio becomes larger.
Alignment with advice: You can evaluate the cost based on the complexity and scope of the relationship rather than simply the amount invested.
Transparency: It’s easier to see exactly what you’re paying for wealth management.
Potential savings at higher asset levels: For households with several million dollars, a flat fee can be substantially lower than a traditional percentage-of-assets arrangement.
For example, a physician with $8 million invested may want to compare the cost of paying a percentage of assets every year with a flat annual fee for comprehensive wealth management.
The comparison should be made using actual dollar amounts, not just percentages.
What Should Physicians Look for in a Financial Advisor?
Physicians approaching retirement should look beyond investment performance when evaluating an advisor.
Important questions include:
Is the advisor a fiduciary?
A fiduciary should put the client’s interests ahead of the advisor’s own interests when acting in a fiduciary capacity.
Is the advisor fee-only?
Fee-only advisors are generally compensated directly by their clients rather than receiving commissions for selling financial products.
Does the advisor work with physicians?
Physicians have financial circumstances that can differ substantially from those of the average household.
Does the advisor provide tax-aware planning?
Investment management and tax planning shouldn’t operate independently.
How does the advisor charge?
Ask for the actual dollar cost.
A fee of 0.75% may sound inexpensive until it’s applied to $5 million or $10 million of assets.
Who actually manages the relationship?
Some large firms have multiple layers between the client and the person responsible for the financial plan.
Physicians should understand who they’ll actually work with and how accessible that person will be.
A Different Approach to Physician Wealth Management
At Inclinevest, I work with professionals approaching retirement who have accumulated significant assets and want objective financial guidance around taxes, investments, and retirement income.
For physicians, that can mean coordinating the financial decisions that become increasingly important during the final years of a medical career.
My approach combines:
- Financial planning
- Investment management
- Tax-aware investment strategies
- Retirement-income planning
- Roth conversion analysis
- Social Security planning
- Medicare considerations
- Estate-planning coordination
- Practice-transition planning
- Ongoing wealth management
I also offer a flat annual wealth management fee for clients who prefer a predictable cost rather than paying a percentage of assets indefinitely.
For physicians with substantial portfolios, this can be an important distinction.
The right advisor isn’t necessarily the one with the lowest fee, the highest advertised investment return, or the largest firm. It’s the advisor whose services, expertise, compensation structure, and level of involvement make sense for your particular situation.
Physician Retirement Planning Checklist
If you’re within 5–15 years of retirement, consider reviewing the following:
- How much will I actually spend in retirement?
- How much income will my portfolio need to provide?
- How much do I have in traditional retirement accounts?
- How much do I have in Roth accounts?
- Should I begin Roth conversions?
- How should I structure my taxable investments?
- When should I claim Social Security?
- What will Medicare cost?
- Could IRMAA affect my Medicare premiums?
- When should I sell my medical practice?
- What will happen to the proceeds from the practice sale?
- How much investment risk should I take?
- How should I coordinate my retirement accounts?
- Does my estate plan reflect my current assets?
- Am I paying an appropriate amount for financial advice?
- Would a flat annual fee be more economical than an AUM fee?
These questions are interconnected. Making each decision independently can lead to an inefficient overall plan.
Frequently Asked Questions About Physician Retirement Planning
How much does a physician need to retire?
There is no universal number. The amount depends on spending, taxes, Social Security, pensions, portfolio size, investment returns, health care costs, and estate objectives. A physician spending $200,000 annually will have a different retirement requirement than one spending $400,000.
When should physicians start retirement planning?
Ideally, physicians should begin detailed retirement planning at least 5–10 years before retirement. Starting 10–15 years ahead can provide additional opportunities for tax planning, Roth conversions, investment changes, and practice-transition planning.
Should physicians do Roth conversions before retirement?
A Roth conversion can make sense for some physicians, particularly during lower-income years after retirement and before required minimum distributions begin. The decision should be modeled based on current and projected tax rates, other income, Medicare considerations, and estate-planning goals.
How can physicians reduce taxes in retirement?
Potential strategies include Roth conversions, tax-efficient investment management, charitable giving, qualified charitable distributions, tax-loss harvesting, capital-gain management, and careful coordination of retirement-account withdrawals.
Should physicians use a flat-fee financial advisor?
A flat-fee arrangement can be particularly attractive for physicians with substantial assets because the annual cost isn’t necessarily tied directly to the size of the portfolio. However, physicians should compare the actual cost and services of each advisor rather than assuming one compensation model is always better.
What does a physician financial advisor do?
A physician financial advisor can help coordinate investments, retirement income, taxes, Social Security, Medicare, practice transitions, estate planning, and other financial decisions. The value is often in coordinating these decisions rather than managing investments alone.
Can physicians work with a financial advisor anywhere in the United States?
Many fee-only registered investment advisers work with clients remotely, allowing physicians to work with an advisor regardless of where they live. Physicians should confirm that the advisor is registered and able to serve clients in their state.
Bottom Line: Physician Retirement Planning Requires More Than Investment Management
Retirement can be one of the most significant financial transitions of a physician’s life.
After decades of earning and accumulating, the financial plan needs to shift toward protecting wealth, generating sustainable income, managing taxes, and making intentional decisions about how assets will ultimately be used.
For physicians with substantial assets, the difference between a good retirement plan and a great one may not come from finding a slightly better investment. It may come from coordinating taxes, investments, retirement income, Social Security, Medicare, estate planning, and the transition away from medicine.
If you’re paying a percentage of several million dollars in assets each year, it’s worth calculating the actual dollar cost and comparing it with alternatives such as a flat annual wealth management fee.
At Inclinevest, I work with professionals approaching retirement who want objective, fee-only financial planning and wealth management. If you’re a physician within 5–15 years of retirement and want to evaluate whether your current plan is positioned for the transition, I’d be happy to discuss your situation.
About the Author
Gabriel Motta, CFP®, MBA is the founder and principal of Inclinevest LLC, a fee-only fiduciary wealth management firm serving professionals approaching retirement throughout the United States.
Gabriel began his career in financial services in 2004 at GE Capital in New York City and has spent more than two decades working in financial services and wealth management.
Today, he works primarily with professionals who are within 5–15 years of retirement and have accumulated significant assets. His work focuses on helping clients coordinate investment management, retirement income, tax planning, and other financial decisions that become increasingly important as retirement approaches.
Gabriel is a CFP® professional and holds an MBA. Inclinevest is an independent registered investment adviser. Gabriel helps clients navigate retirement income planning, Social Security strategy, tax-efficient withdrawals, and equity compensation. Gabriel is a NAPFA and XY Planning Network member. Learn more at inclinevest.com or schedule a conversation.
Disclosure: This article is for general informational and educational purposes only. It isn’t personalized investment, tax, or legal advice, and it shouldn’t be relied on as a substitute for guidance specific to your situation. Inclinevest LLC is a registered investment adviser. Registration doesn’t imply any level of skill or training. Please consult a qualified professional before making decisions about your own financial circumstances.
