How Is Your Financial Health?
Retirement experts write an Rx: Save, invest and waste no time
Nurse practitioners know plenty about health, but they are not particularly advanced when it comes to knowing about wealth.
Keith Klein, CFP, ChFC, CLU, CASL, owner of Turning Point Wealth Management in Phoenix, observed: "One distinguishing factor for NPs that impacts retirement planning is that they typically are extremely caring people who put the needs of others first. This tendency makes saving for a far-off goal, like retirement, very difficult."
And while NPs are battling for improved patient outcomes on "the frontlines of America's healthcare system, they may not be taking adequate care of themselves in terms of their retirement savings," said Pamela Sams, MBA, CRPC, a Washington, D.C., financial planner and retirement planning expert with a special interest in women's finances. Sams pointed to the latest Financial Check-up of Nurses Retirement Readiness study by Fidelity Investments, a PDF of which is available at this link: http://dcda.fidelity.com/static/dcle/WPSFidelityPerspectives/documents/F...
"The study showed that nurses' attitudes toward their retirement savings reflect worry and confusion," she said. Specifically, the Fidelity study found that 50% of the 356 respondents worry about not having enough money to last through retirement, 68% admit to some level of confusion about navigating their financial path for the future, and 76% believe they could use more knowledge to improve their retirement outlook. Respondents also reported a growing trend toward saving for retirement: "Over the last 3 years, nurses have improved their total savings rate by 23%-increasing it from 9.8% [in 2012] to 12.0%. This includes an increase in nurses' elective deferrals, which have increased almost 1 percentage point over the 3-year period. While this is a positive trend, there is additional progress to make as many nurses are not meeting a suggested total savings rate (employee plus employer contributions) of 15%," the study states.
No Time Like Now
This all begs the question: Exactly when should an NP begin to prepare for retirement?
"From the first moment they walk into an HR office at a healthcare facility," answered Shomari Hearn, CFP and vice president of Palisades Hudson Financial Group in Fort Lauderdale, Fla. "When considering a position with a hospital or practice, do not solely evaluate salary, health insurance and whether or not it provides a flexible work schedule. Closely consider the retirement benefits as well, no matter how far off you think retirement might be. If the facility offers a 401(k) or 403(b) plan, does it match a certain percentage of the money you contribute? As in other industries, employers in the healthcare industry are doing away with pensions, so you are wise to contribute as much as possible to your 401(k) or 403(b) plan each year. The maximum contribution amount for 2015 is $18,000, with an additional $6,000 contribution allowed for those over age 50."
Along with an immediate commitment to saving for retirement, a basic premise of retirement planning for NPs emerges from yet another question, according to Jeffrey Bogart, president of Sila Wealth Advisory in Mayfield Heights, Ohio. "Are you self-employed or are you an employee? If NPs are employees of a facility or a large practice, retirement planning is not all that different from other nurses who opt for 401(k)s, Roth IRAs, etc." But Bogart cautions that for NPs who are self-employed or whose practice constitutes a small business, the retirement landscape is more complex.
"If they have no other employees, they can do a solo 401(k)[also known as a solo-K, uni-K and one participant-K] and contribute a lot of money-up to $53,000 per year if they are under 50 years of age and $59,000 per year if they are over 50," he explained. "But if they have employees, it becomes complex because more often than not, they must include their employees in the pension plan and match or make contributions for them as well. There is also more cost and compliance, too."
However, for NPs who work under the umbrella of a larger practice, hospital or healthcare system, "Retirement savings are often best handled through automated processes such as payroll deductions, or with the assistance of a wealth manager in lieu of the practitioner being responsible for making monthly choices about how and where to divert funds," Klein said.
Liam Timmons, president and founder of Timmons Wealth Management in Attleboro, Mass., specializes in retirement planning for nurses and NPs. He told Nurse Practitioner Perspective that he, too, encounters NPs whose intense focus on patient care leaves them with little time to plan and effectively assess existing savings strategies that will lead to future retirement goals.
That's where professional retirement planning may come to the rescue. Timmons explained the process an NP might expect when working with a financial advisor: "We would typically advise an NP to begin with taking a personal inventory of retirement assets, current living expenses and future retirement goals. That means you must consider how long you intend to work and if you expect to step back entirely in retirement or continue to work part time or on a per diem basis."
Timmons said NPs he has observed have some difficulty leaving work "cold turkey," and often a gradual easing into retirement offers the best of both worlds along with a beneficial cash flow.
"The most important point, however, is to really think through this process, consider the longevity of your working years and get a realistic grip on how many years you have to save and invest. And I would emphasize: You don't have to regard this as a fixed plan; it's an ongoing and iterative process that will be fine-tuned over time," Timmons said.
He noted that part of the planning process requires NP clients to consider living-expense needs in retirement. "Factoring in potential ongoing health insurance benefits from an employer can dramatically decrease living expenses, as can dropping medical liability insurance if it is no longer needed in retirement," Timmons said.
Next it is time to move onto crafting a realistic savings plan. "Typically the foundation of an NP's retirement savings is a deferred retirement savings plan. Using a person's current retirement savings balance, we must work toward establishing a required growth rate for savings and determine an appropriate level of ongoing savings. This must be calculated to lead to the required savings level at retirement, meeting the NP's retirement goal. Often this entails boosting existing pre-tax contributions to plans, rebalancing existing investments to match appropriate investment strategy, as well as exploring matching hospital contributions, pension payouts, etc.," Timmons said.
He said he also encourages NPs to take full advantage of any available workplace benefits, such as low-cost term life insurance and healthcare savings accounts. "And as NPs continue to advance within their profession, it is important to gauge the competitiveness of salaries and eligible productivity bonuses, since some NPs may be leaving money on the negotiating table," Timmons warned.
Are You Ready?
In her article titled "Retirement for Advanced Practice Nurses," published by Medscape in 2014, Carolyn Buppert, MSN, JD, offered a retirement checklist for NPs and other APNs. Among her many suggested action points for retirement-bound APNs were these:
- Contact your certification board to determine if is has an option for retired APNs who want to leave open the possibility of a return to work.
- Contact your state's Board of Nursing to determine options for making a license inactive and the procedure to reactivate it later, if so desired.
- Contact your malpractice insurer or employer to determine if you have an occurrence or claims made policy. If you have the latter, arrange for tail coverage or get written assurance from the employer that it will purchase a tail policy.
Buppert also offered some common sense thinking around personal readiness for retirement: "The bottom line is going to be determined by the answers to these questions: Can you live on Social Security (SS)? Do you have enough investments or savings to support the gap between SS payments and what you need to live comfortably? Does your employer offer any retirement benefits, and when do they begin? Is your employer the government or another entity not covered by SS? How much will you receive through the employer's retirement plan?"
At the end of its Financial Check-up of Nurses Retirement Readiness report, the financial team at Fidelity Investments wrote the following pared-to-the-bone retirement "Rx for Nurses":
- Make retirement planning a priority.
- Strive to save at least 15% of your salary (including any employer match). At a minimum, try to save enough to take advantage of your employer's matching contribution, if available.
- Seek out help: Most employers offer retirement guidance as a free employee benefit.