On track to retirement: An MD-supported journey. In this MD Financial Management series, we talk to physicians about what gives them confidence in financial planning for the future. *Real-life stories have names changed to protect privacy.
CASE STUDY: Dr. Karla G.*, age 61, General Practitioner
- Own family practice with approximately a thousand patients, in the Greater Toronto Area
- Four adult children in post-secondary studies, or recently graduated
- Objective: maintain a practice — and a retirement plan — that puts family first
A “reverse career path” to balance motherhood and medicine
Dr. Karla G. built a successful family practice in her 30s, while she was married to a physician who was training as a specialist. She gave up her business — taking what she calls a “reverse career path” — when the couple moved to a new city.
“We had one child at that time and were about to have a second. I decided not to set up a new practice,” says Karla. Instead, she worked part time for other doctors, did locums and served in walk-in clinics.
“I didn’t make a lot of money, but [the decision] was always about family for me. Other people might have hired a nanny and continued to work full time — I didn’t want to do that,” she says.
In her early 40s, when Karla was a mom of four school-age girls, her marriage changed “out of the blue.” A divorce, left her no longer sure she was on track to meet career and retirement goals while raising her daughters.
Planning to stay on track, post-divorce
Before her divorce, Karla felt secure about the family’s financial planning. “First of all, I was involved with MD Management and had been saving right from the get-go, from the time I finished my training. I was investing savings with MD and other companies. I had saved money for a house, we had RRSPs, and we were also saving money for our daughters’ educations by contributing to RESPs.”1
As part of her planning, Karla hoped to re-establish her career once her children were older, and to incorporate her practice. “I had to carefully look at what I was going to do going forward on my own. I was concerned about how I was going to be there for my kids,” she explains.
How MD helped reset resources
Adjusting for the new circumstances through an ongoing financial planning process, Karla turned to her MD Advisor* to help her prioritize what needed to be done and to coordinate with MD specialists, as needed. The financial planning activities varied from updating estate plans and rewriting wills, to taking stock of assets and investments, to looking at incorporating in the future.
“It really helps to have an advisor who knows my life and my children, what my situation is, and can help me make decisions on changes I need to make — or [on] what I’m going to do next,” says Karla. She knows it’s an understanding formed through her long-standing relationship with MD at each phase of her life and career.
One concern was that Karla wouldn’t earn enough income to “max out” her allowable RRSP contributions — a common gap for the lower-earning spouse in a divorce. “I knew I had to worry about retirement. I knew I had to figure this out. I was scared.”
Scenarios to road-test readiness for retirement
Karla’s MD Advisor modelled future scenarios based on factors like her current savings, her projected income and how much of that she could save after expenses.
“They said, ‘Let’s put this all on a timeline over the next 25 years to see where you’re going to be at.’ And I saw how much I could contribute to my RRSP, which was never the maximum because I was using most of my money to raise my kids.”
The initial outlook suggested Karla could continue to contribute $1,000 a month to her registered plan, keep work hours to a minimum, and still accumulate enough to retire and stay in her current home until at least age 70. This could be reviewed annually, as her situation evolved. “I thought: ‘Oh it’s not as bad. I’m going to be okay.’ This was a huge help, and it gave me much greater peace of mind.”
Building a practice with family in mind
About a decade ago, Karla incorporated her current business, exactly as planned, when her youngest daughter started high school. “I set up my hours around school hours — 9 a.m. to 2 p.m. — so I could do pickup by 3 p.m.”
Self-employed, she now has a small family practice with about a thousand patients, from newborn to age 95. Karla doesn’t deliver babies, but assists in the OR two days a week to earn additional income.
All her daughters have now completed their post-secondary education—depleting their RESPs—and three went on to post-graduate studies. “Those RESPs only go so far ... and there’s no money falling from heaven,” Karla says, but she is happy to be able to subsidize the costs of continuing education for her “amazing” daughters. “I am still their rock.”
Retirement target: age 68 — well, maybe
Financial planning is a continual process, and Karla regularly reaffirms that she is on track to meet her retirement goals through annual reviews with her MD Advisor. In fact, the scenario is brighter today than it was 10 years ago: she has now saved enough to stay in her home as long as she wants to. It’s important to her that her children can always come home to visit: “If I were to move to a little bungalow, then what are they going to do?!”
“I’m very confident in the plans I’ve made,” says Karla, who now thinks she will retire at age 68. But that’s not set in stone. “I don’t know if or when I may have a grandchild in my life, but as soon as I do — I’ll be cutting back my hours.”
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Thoughtful planning, with professional support from advisors who understand the unique challenges of each stage of your career, can boost confidence as you approach retirement. See Five tips to get retirement ready, or talk to an MD Advisor. They can work through the details — from your target date to the income you need — to help you retire worry-free.
* MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
1 Registered education savings plans.