Financial Planning

Real Retirement Concerns


Mark McNulty


September 15, 2014

September 15, 2014

I work with dentists nearing retirement, and I can tell you that this stage of life can be a very worrisome time for many of your colleagues. Despite all the happy seniors you see in financial commercials, many financially successful dentists feel a high level of stress during this period of their lives. The first step in managing any stress is understanding the cause. What are the real concerns you should have when it comes to planning for your retirement?

I first witnessed this stress when I was my father’s assistant planner back in the 90s. We had been working with a couple for several years, helping them to plan and save towards their retirement. I remember looking forward to our upcoming meeting where I would experience the joy of advising this great family that their plan had come to fruition. They had achieved financial independence (the ability to work out of desire rather than need). I remember smiling at this couple, expecting an expression of joy to be reciprocated, only to observe an expression of fear on both of their faces.

Why were they so reluctant to retire? For some very real reasons, most of which I take for granted because I deal with them daily. Below are some of the real concerns that can make or break your retirement:

Longevity—how long will you live? This is the greatest unknown. Whether you live for another 15 years or 30 years makes a big difference to your planning. There is a good chance you will have to finance your retirement lifestyle into your 90s. According to Moshe Milevsky, an associate professor of finance at Toronto’s Schulich School of Business at York University, there is a 41 per cent chance that at least one member of a 65-year-old couple will live to age 90.After-tax spending—how much will you need to spend every year of your life? Will you spend the same amount each year for the rest of your life, or will you spend more in your healthy early years and less when you are 85? The timing of when you spend your savings will affect how long your money lasts.Inflation—how much more will your lifestyle cost in the future, simply because the prices of everyday items have increased? Too little attention is being paid to the topic of inflation right now because it is currently low. Do you remember the 80s? Just like the clothing, I’m afraid inflation will be making a comeback.Health care—how much will your health care cost? Will you need in-home care some day at $150,000 per year? As we all know, there is going to be a great strain on the health care system as we have more seniors needing support every day. How will this affect costs in the future?Income taxes—how much of your savings must you withdraw each year in retirement (and from which accounts) to receive enough money after-tax to live? When do you withdraw funds from each account so you pay as little tax as possible? Remember that term tax deferral? Well, the government now wants that tax you saved by deferring all your money in RRSPs and corporations.Interest rates—how will interest rates affect your retirement savings? How can you grow your savings faster than inflation when the average bond is paying less than three per cent today?Market bubbles—how would another stock market decline like we had in 2008 affect your retirement? How can you build your portfolio to withstand this type of event?

What are the costs of retiring early or of waiting too long to retire?

The result of these very real concerns is that most dentists I know work longer than they have to. They want to build a cushion into their plan. The reality is that for every year you retire early you pay three penalties: you lose a year of potential savings, you lose a year of growth for your retirement savings, and you gain one more year of retirement expenses.However, there is another reality that you must weigh as well. For every year you work, you lose another year of being a healthy, active individual with freedom. As my father always says, no one lies on their deathbed wishing they had worked more. While it is true you may live into your 90s, how many of those years will be healthy?

Do these considerations pull you in different directions? Regrettably, both realities are true and accurate. But there is another reason some dentists work even though they have achieved financial independence. They simply don’t know they already have enough. So how much is enough for you?

You are the only one who can make the final decision about when you are ready, given all these variables and risks. But make sure you know what number you should be working towards. It would be a shame to have already reached it and never get to enjoy it.

Mark McNulty is President of McNulty Group, a firm responsible for managing $200 million of Ontario dentists’ retirement savings. McNulty Group helps professional families transition from a life of successful practice to a stress-free retirement by using a holistic approach of practice and personal retirement planning. Mark is the author of The Transition Coach 2.0–A Canadian Dentist’s Guide to a Perfect Retirement. Mark may be contacted at 1‐866‐261‐4768 ext 209 or at