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Crash Proof Retirement for Doctors

Can you create a crash proof retirement? It’s something that is on most doctors’ minds, especially as they near retirement. And it’s a debate in the financial community with many eager listeners and followers.

To the uninitiated, a crash proof retirement can seem like a white whale…impossible to capture. That’s because to most physicians, investing in general seems like such a risky endeavor, best left to financial advisors or financial planners. That is how the financial industry makes a lot of its money.

crash proof retirement
Don’t let this happen to your retirement!

However, once you begin your financial education and learn the simple investing strategies that will lead you to financial freedom, you start to realize that retirement information is not that complicated. That was my overwhelming response once I began my financial education.

First, how much do you need to retire?

One of the top financial challenges I see others worry about is figuring out how much they need to retire. Luckily, with good financial information, this common goal can be pretty easily solved.

There are many different paths to retirement. But, one foundation of truth is that, in order to retire, your yearly income via investment withdrawals or passive income sources (like cash flowing real estate) needs to equal or exceed your yearly expenses.

You can accomplish this by increasing your investments or passive income streams or decreasing your expenses.

Ultimately, for doctors to figure out how much they need in their nest eggs, it’s necessary to estimate their expenses in retirement.

After this, subtract any actual or expected passive income you will have in your retirement. The remaining expenses need to be covered by withdrawing from your investments. Any you can safely assume you can withdraw 4% of your nest egg each year for expenses from your financial vehicles.

If you don’t yet know your own retirement number, this 5 step calculator of mine can help you figure it out!

However, many doctors hesitate to retire even when they reach their goal number. Why?

Fear of market crashes!

The big fear in retirement is that the stock market or real estate market or other investment market will experience a huge crash.

The value of your investments will plummet and you won’t be able to cover your expenses. And there goes your retirement!

It’s a real fear. And you can understand why! Especially given the representation of the latest financial news in the mainstream media and on Wall Street.

So how can you crash proof retirement?

The good news is that there are plenty of steps that you can take to crash proof your retirement. And I’ll mainly focus here on crash proofing from stock and real estate crashes. I won’t cover crashes in less safe alternatives that I don’t endorse like cryptocurrency.

Let’s start with the stock market…

Here are the top ways to crash proof your retirement from the stock market:

1. Invest in index funds

There are a ton of financial products out there. But index fund investing should be a core tenet of your investment strategy. When you invest broadly in low cost index funds, you approximate the overall stock market. You are investing in the ingenuity of humankind and the global economy. Over the long term, this has been a safe bet.

Sure, a market correction occurs on average every 2 years and a bear market on average every 10 years. And we get nervous the first time Bye experience this. But overall, passive investing outperforms actively managed mutual funds 80% of the time.

And, when you invest in individual stocks, actively managed funds, or other high-risk securities, these can surely drop to near or actual $0 value. That’s bad news.

But it’s highly unlikely that the overall stock market will drop to $0 value. Even in the worst of crashes. I mean, if that happens, you’re talking about the economic collapse of society and humankind.

So, investing wisely in index funds is the first step to insulating from a stock market crash.

2. Adjust your asset allocation based on risk tolerance

This is a big one. Especially at the forefront of the retirement.

In the beginning of our investment careers, we are looking for growth and increased return. And we are willing to take on more risk to achieve this higher return.


Because we are investing for the long term and know that corrections and bear markets will happen. And we are ok waiting these out for the inevitable overall market gains to come.

But, in retirement, our goal is preservation of our investments, not growth. We already reach our goal nest egg number. We need to keep it safe, not grow it more.

So, as we near and reach retirement, we need to adjust our asset allocation – the percentage of stocks and bonds in our portfolio. We increase our proportion of bonds, which are less volatile but with less return, and decrease our percentage of more volatile but higher return stocks.

Then, when a stock market crash happens, we safely have most of our portfolio in boring, old, safe bonds.

Here is a guide to creating and maintaining your asset allocation.

3. Use safe withdrawal rates

I mentioned above that a good rule of thumb is assuming a 4% withdrawal rate for your retirement nest egg.

Studies have shown that this withdrawal rate provides a safe certainty of your nest egg lasting at least as long as you do throughout your retirement.

But, like all rules of thumb, it is not perfect.

So, in retirement, adjust your withdrawal based on the markets whether you are withdrawing from retirement accounts or taxable accounts. In good years, maybe withdraw 5%. If the next year is bad, withdraw less – maybe 3%.

This is a big part of a crash proof retirement.

4. Keep your expenses nimble

In all phases of life, we can have anything we want – but not everything. Retirement is no different.

Build a margin of error in your expenses. Keep debt low. Be able to decrease your expenses in years of market losses and you need to lower your withdrawal rate temporarily.

Now, let’s move into real estate…

Real estate is a great investment vehicle. So how can you crash proof it?

1. Invest based on cash flow

Everyone hears that the housing market is high right now. And we all know about regression to the mean so we expect that a housing market crash is on the horizon. I see a new article or post saying that one is imminent everyday for this or that reason.

However, no one has a crystal ball. So no now knows. But I can guarantee that there will be a housing crash at some point.

But, what does this mean?

It means that if you invest in real estate, you need to expect to invest through a housing crash.

It means that you need a real estate investing plan where it doesn’t matter when a housing crash hits…because it will hit.

And that is exactly what my plan entails.

Related Post:
Are We Headed for Another Housing Crash?

That is why I invest in cash-flowing rental properties

As I’ve talked about a bunch on this blog, I love direct real estate investing in cash flowing rentals.

This type of real estate investment makes money via:

  • Cash flow
  • Equity build up
  • (Forced) Appreciation
  • Tax savings

Related Post:
4 Reasons That Cash Flow Is King in Real Estate

Want to know the great thing about all of these sources of wealth building via cash flowing properties?

None are dependent on the market value of the property!

If your property is cash flowing and a housing crash occurs in your retirement, no big deal. Passive income keeps coming in the form on rent payments and your expenses are covered.

Retirement proceeds as normal…

2. Minimize real estate debt

Debt is an absolute fantastic way to use leverage to accelerate your wealth building with real estate investing. I use it all the time.

But, this is during the growth phase of your wealth accumulation.

In retirement, again, you are in wealth preservation mode. You should have debt and mortgages paid off on your primary residence for sure. You should also have minimal debt on any investment properties.

Less debt means less monthly debt servicing. Which means higher cash flow. Which means that your investment is even more crash proof as we discussed above.

3. Don’t use your primary residence as an asset

Too many people still think of their primary residence as an asset. But it is not.

If you are retired and you think the equity in your house can save you if there is a market down turn, that’s not a good position to be in.

Here’s why:

  • If the real estate market crashes, you won’t be able to see your house at a good value, decreasing your return and your perceived nest egg.
  • If the stock market crashes and you need to see your house to cover expenses, you are out of a house. That’s not good.

Same goes for cash out refinances and HELOCs on primary homes. You are taking on debt and decreasing cash flow. And if you can’t cover those debt services, you lose your home.

Your primary residence is not an asset. Don’t think of it as such or plan to use it as such in retirement.

The final say

A crash proof retirement is achievable when your retirement finances are in order. With the right investing, saving, and withdrawal strategies, you can enter retirement confident that you will survive any fluctuations in the stock and real estate markets. Talk about peace of mind! Remember, your financial health is a big part of your overall health, even in retirement.

Now you can focus on what is really important to you and all of your retirement dreams!

I come at this with a lot of transparency. You can see exactly what my written financial plan is and how I work to crash proof it. You can start to do the same today with my free masterclass webinar on The 12 Steps to Financial Freedom for Physicians!

What do you think? Can you crash proof retirement? How? What can you do? What can’t you do? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

    8 thoughts on “Crash Proof Retirement for Doctors”

    1. I am going to retire in 2.5 yrs
      My home is mortgage free, I have 10 year leases in my commercial properties ( mostly mortgage free )
      I expect to have $10 million in cash by retirement.

      Still, I am paralyzed by the thought that I will make a mistake and Lise principal causing economic stress at the end of our lives

      • Thank you for sharing and being vulnerable. You are in a position that most (including me) would envy…but we all still feel this! Congratulations on all your hard work, now is the time to enjoy. I envision that I will ease into retirement by progressively taking more and more time off to help assure me that my retirement plan actually works – even though this is likely unnecessary

      • I feel similar. Is the 10 million cash on top of your investments? Then depending on your age I would feel better. I personally dont count my house as a asset, it is my home so I look at the finances minus my house and still nervous. Dont know what will make me feel confident to totally stop working. Lost a great house in FL, but have a mortgage free house in NY, Stupid moves many times. I understand your fear.

    2. Live within your means. Spend less, save more, avoid debt and build wealth. Pretty basic rules to follow. The unknown is medical costs and a potential collapse of the stock market. So, practice good health and own broad based stock and bond funds. Don’t gamble.

    3. My primary home is only half paid off because I have a 3.25% mortgage and it would cost me significant loss in substantial taxes and also in loss of future principal growth (which has been more like 10-12%) on the investments I would need to liquidate in order to do so.
      My accountant and financial planner both support keeping the mortgage as it better leverages my retirement overall assets. It is the only debt I have. I may pay it off when my elderly parent passes away, as I will be the beneficiary of a life insurance policy, but even then not sure that is the best way to preserve, safeguard and maximize my retirement assets.
      Not sure why all I read (including you) says always to pay off the mortgage.

      • Don’t liquidate to pay it off. But I encourage everyone to be mortgage free at least by retirement. Before that time I think it is a big plus to be totally debt free. I would keep investing but also pay off the mortgage more aggressively until then. Eliminating liabilities is always a win

    4. Over the last 3 to 5 years I have shifted my retirement income strategy to dividend paying stocks and mutual funds, and convertable bonds. dividend Aristocrats are entities that have maintained or increased their dividends for 25 years. Dividend kings for 10 or 12 years. With a fairly reliable income stream I can worry less about the market (and my stock value) going down for two weeks or two years. Marc Lichtenfeld wrote a book something like “How to get rich with Dividends” that I found very helpfull.


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