Publication

Article

Physician's Money Digest
December31 2003
Volume 10
Issue 24

Portfolio CHECK-UP

Name: Thomas Camner, MD

Residence: Florida

Age: 43

Family: Married; 2 children

Years in practice: 10

Type of practice: Radiology

Annual income: $250,000

Savings: $110,000 in 401(k) pension and profit sharing plan

Financial concern: Dr. Camner would like to retire in 12 years at age 55. By that time, the children will be out of school, the mortgage will be paid off, and the Camners will be debt-free. With their major financial obligations behind them, the Camners are confident they can support a comfortable retirement lifestyle with only half of what Dr. Camner currently earns today. Although Dr. Camner currently contributes $40,000 annually to his retirement plan, he worries it may not be enough. He is primarily concerned with how much he will have to save each month to retire at age 55.

The Finance Professor's Solution

Before we discuss Dr. Camner's retirement situation, let's assume the following factors:

  • A life expectancy of 82 years for Dr. Camner and 85 years for his wife
  • A tax-deferred basis for all retirement savings (including savings in retirement plans, annuities, and life insurance contracts)

After running some financial projections, I discovered that Dr. Camner is going to be extremely hard-pressed to reach his retirement goal. First of all, in addition to his current retirement savings and the expected benefits he will receive from Social Security, Dr. Camner will have to accumulate an additional $1.9 million over the next 12 years. This means that he will have to save $6300 a month on an after-tax basis.

Annually, Dr. Camner will have to contribute nearly $75,000 to his retirement plan. This is virtually impossible to do on a pretax annual income of $250,000. To address the situation, Dr. Camner will have to modify his retirement income expectations and/or delay his retirement for at least several more years. Despite their confidence, the Camners are going to have to accept that their current retirement goals are not realistic.

For more information, call Mr. Kosky at 800-953-5508 or visit www.assetplanning.net.

Thomas R. Kosky and his partner, Harris L. Kerker, are principals of the Asset Planning Group in Miami, Fla, specializing in investment, retirement, and estate planning. Mr. Kosky teaches corporate finance in the Saturday Executive and Health Care Executive MBA Programs at the University of Miami.

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