You’re just getting started out in your new career as a doctor. You’re young, you’ve got student debts to worry about and you’re distracted by the myriad of new responsibilities on your plate. Now’s not the time to be thinking about retirement.
Or is it?
Medical accountant Kym Nitschke shows how contributing the right amount to your super every year starting now will help you secure a successful retirement.
Even though retirement may be the farthest thing from your mind at this point, it’s important to start paying attention to your super fund right now.
Why Do Doctors Need Super?
Odds are that you’ll need more in your super than you currently think. Prices can inflate beyond expectation. You might encounter health problems of your own down the road. If you don’t save up diligently, then that nice standard of living you currently enjoy may shrink and suffer cutbacks as you enter retirement.
You might be hoping to hit it big with an investment scheme and be set for life. While doctors can do well with investing, it’s not something you should rely on. Investments carry risks while whatever you put aside in super is guaranteed to grow and be there for you in the future.
Remember, too, that there are tax benefits to maintaining a healthy super fund. For example, if you’re self-employed, you may qualify to claim deductions for personal super contributions.
With annual super contribution caps fixed at just $25,000 a year, it’s crucial for young doctors to start making regular contributions ASAP and you’re no exception.
The next question is: how much should you contribute every year?
Make a Plan
The first thing you need to do is establish a starting point. Determine the following things:
– How much you currently have in super
– How much you’re currently earning
– When you plan on retiring
– How much you’ll need to live on in retirement
– How much you can afford to set aside right now
An expert medical accounting and financial planning team, like Nitschke Nancarrow, can help you figure out all of these details. Only after you find the answers will you know exactly how much you should set aside each year for super contributions.
There are a few other points you should consider to help you decide.
Consolidate Your Super
You might have super left in multiple separate funds if you’ve worked a variety of jobs. Each fund is charged different fees so that accumulated super could slowly slip away if you lose track of it. Putting your super all in one place will help you cut down on fees.
Start Saving Early
Let’s review a few reasons why it’s so important for young doctors to start saving for retirement as soon as possible:
– Your money is guaranteed to accumulate interest every year. The sooner you put it in, the more it will grow.
– You’ll be better prepared in the event an unexpected illness or accident forces you to take an early retirement.
– You can compensate for several years down the road when you may not be actively earning income such as if you take time off to raise young children.
Once you figure out how much you should be setting aside each year, do it! Don’t wait!
How Much Should a Young Doctor Save?
In today’s current economic environment most financial advisers would recommend that you put aside anywhere from 10 to 20% of your income in a retirement fund. Aiming for 15% is a good range.
Granted, the exact amount depends on a lot of factors unique to your situation. But let’s take a look at an example of someone who contributes the max of $25,000 every year to their super fund.
If this person started putting away that $25K per year starting at 30 years of age and received a 5% return on it, they would see close to $2 million in their super account by the time they’re 60 years old and ready to retire.
Leaving that $2 million in the bank would earn $100K per year at that 5% rate. That’s sufficient to afford a very comfortable lifestyle for the doctor and his or her partner in retirement. Assuming the house is paid off, that income would easily cover basic living expenses and then some.
Sound nice to you?
Then it’s time to get started with a savings plan for your super fund. Contact Nitschke Nancarrow today on (08) 8379 9950 or send me an email to plan your free initial consultation. We’re happy to help young doctors like you start successfully saving for retirement.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.