There are many things to consider when thinking about retiring as a medical professional. It is true that many medical professionals working in the NHS see the NHS pension scheme as a solution to all their pension requirements and therefore do not have to plan anything further. In recent years however, the governmental changes in the medical sphere are changing how pension planning works for those who are classed as ‘medical professionals.’ Due to this, taking a few simple steps to plan for your pension to ensure a comfortable retirement is necessary.
It is therefore wise to prepare for your retirement early and efficiently so that you do not find yourself in an undesirable situation when your retirement comes around. It is also advisable to consider using a financial adviser to help you work through your options and select the best one for your circumstances.
Typically, individuals can contribute up to £40,000 tax-free cash into their pension fund each year. The first step for medical professionals should be to work out how much you should be contributing each year in order to live comfortably. If you need help with this, it is common to seek the services of a financial adviser who will recommend an annual amount based on your income. A financial adviser is likely to recommend to a medical professional that they will need around one half to two thirds of their base annual income when they retire, this way they will not have to make drastic lifestyle changes when that time arrives.
Many medical professionals believe that just because they are entitled to an NHS pension, they will have enough money to live the same kind of lifestyle when they retire as they do whilst working. However, this is almost never the case. It is recommended that all medical professions in the NHS should write directly to the NHS Pensions Agency to ask for a pension estimate, drawing up how much you will be entitled to once you take retirement.
Medical professions with a separate income derived from non-NHS work (such as those who practice privately) should consider pension income via a private pension scheme. Private pensions can be tax efficient in terms of saving money and are just one of many ways in which to maximise one’s savings and investments. However, they can be subject to the vagaries of the stock market and economy in general.
An ISA may at times be advisable to further save money. Maximising your ISA contributions annually is affordable and tax efficient. Any form of tax-free income is of great value to most during retirement.
Timing Your Retirement
The timing of your retirement should be based around when you are ready to leave work in the medical world. However, you must also only do this when you have worked out your finical situation. It is important to keep on top of your finances throughout your medical career, not just when you are about to retire. Preparing your finances properly throughout your working life will make it a lot easier to retire when you wish, rather than later than you would like to not having your funds sorted out properly.
Preparing for retirement is not just about your pension fund and sorting this out. You must also psychologically and emotionally prepare yourself, your partner and sometimes even your wider family.
Due to the nature of the medical profession, leaving medicine can be a shock to the system. It can be hard to adjust to a more relaxing lifestyle over a full-on work life. It can also be hard for people to accept they have left a job, sometimes leaving retirees feeling that they are no longer contributing to the benefit of society. Therefore, it is easy to see why people may be unprepared for the amount of free time they will have on their hands.
It may be a good idea to work part time in the years following up to retirement, so if you know when you are going to retire, you should switch to a part time role to ease yourself into what it means to live a retired lifestyle. Furthermore, in the years that precede retirement try and find some hobbies to do in your spare time if you do not have any already. This way, you will not find yourself feeling hopeless day-to-day when tasked with the amount of time you have on your hands.
The main thing you can do when preparing for retirement is to take initiative. Prepare yourself financially and emotionally so your time as a retired person is not so much of a shock.