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How One Physician is Transitioning to Retirement

Most people wouldn’t consider 45 hours’ work a week as semi-retirement. But most people aren’t like Dr. C. The 62-year-old family physician currently works 65 hours a week, volunteers and is also actively involved in community theatre, where he has a starring role this fall.

Over the next three years, Dr. C plans to transition to retirement and he’ll start by divesting the most binding of his commitments in the coming year. He’s presently working in a variety of settings, including one day a week at his general practice.

We like that MD is a doctors’ organization, the fees are lower and MD Advisors are on salary, not commission,” says Dr. C, “not to mention that we’ve done well with them over the years.

Dr. C’s Profile

Age: 62

Area of practice: Family physician

Issue: Retirement transition

Assets: Registered accounts, $1.02 million; non-registered accounts, $98,000; home, $650,000; corporation, $1 million. Total: $2.77 million

Required annual income: $100,000

“I’m still enjoying medicine, particularly residential care,” he says. “But beginning in 2016, I’d like to reduce my hours from 65 to 45 a week.” He wants to continue working at his own pace, as long as he’s able and contributing. Plus, Dr. C’s wife says he’s not allowed to mention the “R” word.

However, should illness or other circumstances curtail the length of his working life, Dr. C says he is prepared to stop working completely at age 65. And with assets of about $2.12 million (excluding their principal residence), Dr. and Mrs. C’s MD Advisor says they are financially ready for retirement, too.

The couple meet with their Advisor quarterly to make sure they’re on the right track. That’s when they review their goals, discuss their investments and check that their affairs are in order—something they’ve been doing since becoming MD clients 20 years ago.

It was 1995 when Dr. C began exploring the idea of private investment management. At age 42, his assets were starting to build up quickly—but so were the associated fees and commissions. After assessing several firms, he found MD to be a good fit. “We like that MD is a doctors’ organization, the fees are lower and MD Advisors are on salary, not commission,” says Dr. C, “not to mention that we’ve done well with them over the years.”

In their early 50s, Dr. and Mrs. C began to focus seriously on their retirement goals. Because their portfolio was with MD Private Investment Counsel (MDPIC), the firm’s discretionary investment management arm, the couple had access to an MD portfolio manager as well as their regular MD Advisor.

At that time, Dr. and Mrs. C were already maximizing their RRSP contributions, but their portfolio manager said it wasn’t going to be enough—especially with interest rates on the decrease. “So in addition to the $2,000 we were already saving monthly, we would put in lump sums whenever they accumulated in our medical corporation,” says Dr. C. “It’s been a real key to building up our assets.”

Dr. C has owned his medical corporation for more than 30 years now, and has found it valuable in structuring his finances. It has allowed him to defer taxes on the funds in the corporation and split income with his wife (who doesn’t work outside the home)—all of which has helped to minimize taxes.

Market Swings Call for Change of Direction

With their personal and business assets consolidated in MDPIC, Dr. and Mrs. C have been happy to leave the money management and decision making to financial professionals. Says Mrs. C, “We check in regularly so we can ask where we are and how we’re doing, and change direction if we need to.”

What they’re especially grateful for is the advice they received before the 2008 financial crisis. Their portfolio manager reduced the risk in their portfolio, thereby minimizing losses and preserving their retirement assets. That same year, they did some tax-loss selling in the downturn and invested more money during market lows.

The couple have done well and say they appreciate the financial security they’ve been able to build up. “We want to feel secure and have money to go on holidays, buy a motorhome and visit relatives,” says Dr. C. They also want to help their two adult daughters as they’re starting out—whether it’s for a down payment, a basement renovation, or a contribution to their two grandchildren’s education savings.

Given their current assets, the couple’s portfolio should generate an annual income of $100,000 between ages 65 and 75, according to their MD Advisor. The projected income from ages 75 to 90, when certain pensions kick in, would be $85,000.

Though he could comfortably retire in a few years, Dr. C is happy to keep his options open. So far, he’s satisfied with his plans to transition to retirement—but when asked about fully retiring, he’s quick to say: “Not if I can help it.”

The information contained in this document is not intended to offer foreign or domestic taxation, legal, accounting or similar professional advice, nor is it intended to replace the advice of independent tax, accounting or legal professionals. Incorporation guidance is limited to asset allocation and integrating corporate entities into financial plans and wealth strategies. Any tax-related information is applicable to Canadian residents only and is in accordance with current Canadian tax law including judicial and administrative interpretation. The information and strategies presented here may not be suitable for U.S. persons (citizens, residents or green card holders) or Canadian non-residents, or for situations involving such individuals. Employees of the MD Group of Companies are not authorized to make any determination of a client’s U.S. status or tax filing obligations, whether foreign or domestic. The MD ExO® service provides financial products and guidance to clients, delivered through the MD Group of Companies (MD Financial Management Inc., MD Management Limited, MD Private Trust Company, MD Life Insurance Company and MD Insurance Agency Limited). For a detailed list of these companies, visit md.cma.ca. MD Financial Management Inc. provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. MD Financial Management Inc. is owned by the Canadian Medical Association.