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Retirement planning for osteopaths
It’s never too early to start thinking about retirement, however far off it may seem. Achieving a comfortable retirement requires good planning and a level of financial understanding well before actually retiring. In this article, Brian Nicholls, a recently retired osteopath, offers some advice on this advanced planning based on experience from his own pathway towards retirement. Part 2, to be published in the next issue of Osteo Life, will discuss aspects to consider as retirement becomes a reality.
WHY ME? Apart from the fact that I’m a retired osteopath of nearly two years’ standing, why am I writing an article about retirement planning? Here are a few reasons.
I used to teach a practice management module for the Victoria
University osteopathy course, which included lectures on financial and retirement planning.
I’ve worked just about every way an osteopath can work. I’ve been an associate and a university academic.
I’ve run a sole practitioner practice from rented premises and also from a home I owned outright. I’ve co-owned a large practice with seven osteopaths, and I’ve sold two practices. Therefore,
I have a perspective on the pros and cons of all of these in relation to retirement planning.
I’ve also made plenty of retirement planning mistakes. I never thought about retirement until I was 35; I didn’t buy a house until I was 43 and I worked overseas for seven years and saved nothing for retirement over those years. I then moved to Australia and had to start again from scratch. By dint of careful planning since then, I’ve been able to retire comfortably, but having had to play catch up for so long has given me a much clearer idea of how to do it better. WHAT I HAVE LEARNED
How you practise is less important than learning to manage your money well It’s worth remembering that not everyone can or even wants to deal with the stresses of running their own business. As the profession grows, we are likely to see the majority of practitioners working as employee associates. As an associate you can have a perfectly comfortable retirement if you plan well. Also, don’t assume that owning a big practice is always the most profitable way to work. For me, the most profitable way of working was as a sole practitioner working from a home I owned outright.
Start early Time is your friend when it comes to building your savings. Accept that your savings may go down as well as up, at least for a time. Australia is one of a small group of developed countries where most workers are forced to invest part of their income in the private finance sector for retirement, so planning for ups and downs is important.
Seek advice You need to understand that the demands on your finances and savings will vary not only throughout your working life, but into retirement as well. Look for the
BRIAN NICHOLLS Brian Nicholls became an osteopath in his 30s after living and working for seven years in Japan. He worked in the UK before moving to Australia in 1994, where he practised on the Mornington Peninsula and also taught osteopathy at Victoria University for 16 years. He retired in 2020.
best banking and investment products and get the best advice, especially on how to catch up if you didn’t start early. Financial planners tend to divide working life into three stages, usually called:
Accumulation – the stage where you build your income, but also acquire debt in the form of home loans, maybe business loans and car loans and perhaps also education fees for children. At this stage much of your income will go to servicing debt and there will be less to save.
Consolidation – the stage where you will be further growing your income (hopefully) and paying down debt as early as possible in order to grow savings and assets.
Estate planning – the stage where you are working out not only how to use your savings and assets to fund retirement, but also how to maximise the benefit to those who will inherit your remaining assets.
FINANCIAL LITERACY 1: PRODUCTS Financial literacy is important. You need to know the differences between the various financial products out there and learn how to make the most of them with good advice. A couple of caveats here. The first is that I am not a financial adviser. The second is that many pundits are predicting an era of
Strategies to make the most of your money
First, look for ‘professional’ bank account packages that offer better terms to ‘professional’ customers such as healthcare practitioners. Also, understand how savings work. Everyone knows about mortgage calculators, but investment calculators are available too and will show you how small changes in contributions and rates can make huge differences to your funds over time. The government’s Moneysmart website (moneysmart.gov.au) has one, but there are many others.
Another strategy is to pay as much attention to your debts as to your income. If you play around with online mortgage calculators you will see that a cut of 0.5% in interest rates can save you tens of thousands of dollars in interest, and repaying $500 a month extra on a 30-year $500,000 loan can save you over $100,000. Repaying debt as fast as possible is vital in maximising savings.
considerable uncertainty in the finance sector as a result of factors such as geopolitical instability and the effects of climate change. Consequently, financial strategies that worked well in the past may not always work so well in the future. However, the box above sets out some general recommendations.
There are many ways you can save for retirement. You can buy investment properties, classic cars or artworks, but of those, only investment properties provide a retirement income stream without needing to be sold. For most Australians, superannuation is considered the most tax-effective way of saving for retirement. You will need to understand the difference between:
State pension – a basic safety net payment funded by tax contributions.
Industry super funds – typically managed by trade unions primarily for their members, though many are now open to anybody.
Retail super funds – for-profit funds owned by financial institutions.
Self-managed super funds – in which you control your own investments, usually with financial advice.
Choosing the right product in your 20s can make a difference of tens or even hundreds of thousands of dollars by the time you reach 65, especially if you can add extra contributions when income allows.
Employers will have a default super fund, but you can choose your own. Historically, industry super funds have generally performed better than retail funds and had lower fees. However, some retail funds have performed well. Most funds will offer ‘conservative’ options, balancing lower growth against lower risk, or ‘growth’ options, with potentially higher returns but more risk. Accepted wisdom is that you go for growth when you are younger, but when retired you will want to protect your assets, so will be more conservative. The important thing is to do your homework right from the start.
FINANCIAL LITERACY 2: ADVICE Australian financial advisers must now be registered with ASIC (the Australian Securities and Investments Commission). However, only about 50 advisers in Australia are currently listed as members on the website of the Profession of Independent Financial Advisers (pifa.org.au). These are advisers who are not receiving incentives to recommend particular investment products. That doesn’t mean you should avoid all non-independent advisers, but just make sure they disclose their incentives. Some financial advisers specialise in retirement planning. Accountants are not usually advisers.
OTHER CONSIDERATIONS There are a number of other matters to think about when planning for your retirement.
First, you need to understand the impact of breaks in your working life on your savings towards retirement. Breaks occur for reasons such as starting a family, illness or working overseas. If you can afford to continue making super contributions during breaks, or to make additional concessional contributions to your super while working, you’ll increase your retirement savings and may also save on tax.
If you work overseas you may end up paying into a state or private pension scheme where you are working. You need to check whether any pension earned overseas can be paid in Australia when you retire, or if not, whether you can cash in the payments made before returning to Australia and add them to your savings here. I spent seven years paying into the state pension fund in Japan, and essentially lost the money as I hadn’t paid enough contributions to get a Japanese pension paid here.
Also, don’t be too hopeful that the sale of your practice will fully fund your retirement. The sale price of a practice is whatever someone is prepared to pay for it, which is almost always less than what you think it should be worth. Osteopathic practices are very dependent on goodwill towards the practitioners who work there, and there’s no guarantee that goodwill will transfer to new owners. A multi-practitioner practice is worth more, and selling the property with the practice will put the value up further, but in the end it’s down to negotiation between the parties. You’ll need a proper sale contract drawn up, and if you’re simply closing your practice, check you have complied with State and Territory laws relating to practice closures.
Finally, look after your mental and physical health. You want to be able to enjoy your retirement. All the retirement savings in the world are no use if you are burned out, exhausted or barely able to walk after all those accumulated snowboarding injuries. Maintaining good health is an important part of retirement planning, as is thinking about what you actually want to do in retirement. It’s nice to just have a break for a while, but that soon gets boring. You need to plan ways to keep yourself occupied. Your partner needs to do the same. There’s a reason why the post-retirement divorce rate is surprisingly high!
* The information provided in this article is a personal perspective based on life lessons and not intended as formal financial advice. Always seek professional advice from qualified advisers.
Useful sources of information
www.moneysmart.gov.au www.choice.com.au/money/financial-planning-andinvesting/superannuation/buying-guides/super www.calculator.net/investment-calculator.html
