Decide How to Take Your Pension

One of the first financial choices many physicians face at retirement is how to receive their pension benefits.

Depending on your plan, you may be able to choose between:

• A lump-sum payout

• An annuity paid over your lifetime

• A joint annuity that continues payments to your spouse after your death

Each option has its advantages—and potential tax consequences. For example, if you’re in good health and anticipate a long retirement, a lifetime annuity might provide steady, predictable income. However, if you’re managing a serious medical condition or prefer flexibility, a lump-sum distribution could make more sense.

The key takeaway: don’t lock in a decision too early. Wait until retirement is near so you can evaluate your health, income needs, and overall financial picture.

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Roll Over Retirement Accounts Thoughtfully

Many Mayo physicians have substantial balances in 403(b) and 457(b) accounts through their employer. At retirement, you may have the option to roll these funds into an IRA.

This rollover can make sense if you want a professional advisor to manage your investments or consolidate multiple accounts. However, there are important items to consider before making the move.

An experienced financial planner and estate planning attorney can help ensure your rollover aligns with your long-term strategy, including how your beneficiaries are designated under your estate plan.

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Evaluate Employer-Paid Life Insurance

As you approach retirement, you’ll likely have the option to continue your employer-provided life insurance.

Many retirees choose to decline this coverage because it can become expensive once you leave active employment. Still, there are situations where keeping it may make sense—particularly if:

• You have ongoing health issues that make it difficult to obtain new coverage.

• You want to leave additional liquidity for a surviving spouse or to cover estate taxes.

Review your overall estate plan and insurance needs before making this decision. In some cases, maintaining the policy for a few years post-retirement can offer valuable peace of mind.

Update Your Estate Plan at Retirement

Perhaps the most overlooked part of retirement planning for physicians is updating your estate plan.

Most doctors create their first wills or trusts when their children are young—naming guardians and protecting minors. But as those children grow up, your estate planning needs change dramatically.

Retirement is the perfect time to revisit your plan. You’ll likely want to:

• Name your adult children as successor trustees, powers of attorney, and healthcare agents.

• Reassess your beneficiary designations on retirement accounts and life insurance policies.

• Review your tax planning strategies to minimize Minnesota estate taxes.

Your children—now responsible and mature adults—may be ready to take on new roles within your plan. At this stage of life, estate planning shifts from raising young children to preserving your legacy and simplifying matters for your heirs.

Coordinate All Pieces of Your Financial Picture

Effective estate planning for physicians in retirement isn’t just about legal documents—it’s about coordination. Your pension choices, insurance decisions, charitable giving, and asset distribution all affect one another.

Our team at Yanowitz Law Firm, PLLC works closely with financial advisors and accountants to ensure every element of your plan fits together seamlessly. We design strategies that minimize taxes, protect your assets, and ensure your wishes are honored well into the future.

Frequently Asked Questions

1. What is the best time to update my estate plan?
Retirement is an ideal time to review your plan—especially if your children are now adults and can serve as trustees or agents.

2. Should I keep my employer-paid life insurance after retirement?
It depends on your health, financial goals, and existing coverage. Many physicians decline it due to high costs, but it can be valuable for specific estate or tax planning purposes.

3. What are required minimum distributions (RMDs)?
RMDs are mandatory withdrawals from qualified retirement accounts. They are taxable, but you can avoid taxes on them by donating directly to charity through a Qualified Charitable Distribution (QCD).

Author

Claire creates wills and trusts which provide security and peace of mind. She compassionately listens to her clients’ dreams, goals, and fears and then fashions plans that best meet their needs. It is important to Claire that her clients understand different options and make decisions that are right for them. She loves to educate clients by drawing out complicated concepts.

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