Retirement: is it better to jump out or fade away?

Retirement is often thought of as an event, a date on the calendar, a threshold that you cross one day into a new phase of life. Making a person’s profession or retirement an “all in or all out” proposition like this makes it a big deal. It means that people looking at retirement need to:

•  Know that they have enough money to last the rest of their (and their spouse’s) lives
•  Know how they are going to spend their time all day, every day, for the rest of their lives
• Be comfortable with their identity, validation and relevance without their work.

Without answers to these massive questions, many people feel overwhelmed at the prospect of retirement. In their minds, retirement is inflated to mean that from one day to the next they go from having a profession, a purpose, a place to go five days-a-week, and respect from their community… to starting a new life where they spend seven days-a-week with their spouse, playing bridge and shuffling around the supermarket in their tracksuit, with nowhere to go and nothing to do.

When you look at retirement like this, it is no wonder that many will avoid selling their practice like the plague. In its absence though, many veterinarian owners spend their final years of ownership doing what is known as a phased retirement or a retirement by a thousand cuts. Year after year they choose to work fewer hours, have more holidays each year, increasingly restrict themselves clinically, until they are more comfortable with retirement, because they already have one foot firmly out the door already.

Psychologically and emotionally - Dipping a toe into retirement water by way of a phased retirement like this may help the veterinarian owner slowly get comfortable with the idea of retirement.

Financially - If the veterinarian is a practice owner at the time, a phased exit like this is usually a disaster:

• Most veterinarians will realise that by restricting their work they are also cutting back on their income every year, but they feel that this is more than balanced out by their lower golf handicap and the enhanced lifestyle they are getting in their time off. 
• What most veterinarians won’t realise is that in addition to their lower income, they are also often rapidly depreciating one of their most significant assets - their practice. A practice that is being worked fewer hours per week, fewer weeks per year, can’t help but suffer for the absence/abdication of the clinician/owner. By the time the practice owner gets to retirement, their practice is usually producing far less than it was, is far less profitable than it was, and the price achievable is often extremely compromised.

Is there a way to get the best of both worlds?

Is there a way to have a phased transition out of the workforce at a pace that the principal veterinarian is comfortable with, without compromising the practice’s value? Actually, there are two ways.

Either:

1. The owner needs to be clinically replacing themselves as they phase out of the practice, so that the production and profit of the practice are not compromised. The increase in the number of employees/contractors will increase the complexity of the practice’s operations, and will increase stress (at least in the short term) while you find the right person and get used to all the new moving parts in your practice… but it is very possible.

OR

     2.  The owner of the practice needs to sell before they start withdrawing from the practice. This             allows the owner to:

• Give their super a boost by way of the asset sale.
• Relinquish much of the day-to-day management chores (HR, payroll, compliance, etc.) that most veterinarians feel they don’t enjoy, and spend their last years in the workforce focussing their work hours on being a clinical veterinarian.
• Work post-sale at a pace that they are comfortable with, and over several years reduce their hours per week and weeks per year without worrying that they are depreciating one of their biggest assets.
• Get sufficient cashflow to live on via clinical work, without touching their super.
• Maintain their sense of identity while they slowly get used to retirement.
• Ensure a smooth transfer and handover of patients and goodwill to the buyer of the practice.

Conclusion

For a busy veterinarian whose life has revolved around his/her practice for decades, thoughts of retirement can be overwhelming because it is a step into the unknown. It is difficult for a veterinarian considering making the leap from 4 day a week work to retirement to comprehend what they will do with their time and energy. In order to embrace retirement, veterinarians need to illuminate what life without veterinary work looks like first and because of this a phased retirement rather than an abrupt halt becomes a necessary process for them to go through.

There is nothing wrong with a veterinarian’s retreat from the workforce taking years while they get comfortable with their new alternate identity outside of the practice. However any veterinarian thinking of doing so needs to be aware of the very real risk of a depreciating their practice value and be proactive with ensuring it doesn’t happen through one of the two options above.