Kaiser Permanente Physician Retirement Package
Edi Alvarez, MSc, CFP®
After a long career, retiring physicians employed at Kaiser are faced with a Retirement Package that presents excellent opportunities and multiple planning pitfalls. Giving yourself and your adviser sufficient time to plan each component will yield the greatest return for your situation. Make sure that your retirement plan supports your goals and addresses each phase in retirement while reducing your tax burden. Start early!
The first component of the Kaiser Retirement Package is based on the number of years of credited service and the average of your highest paid three consecutive annual earning (base+bonus) years. For most long-term Kaiser doctors, this is their largest retirement resource that can be in the range of $200,000/year (amount does depend on the specific situation). Although HR will calculate this value for you there are many critical decisions that you and your adviser will need to address. Some decisions such as your payout structure will need to be based on your goals, estate wishes and your tax situation. They will require that you make life-long decisions on how you will receive these retirement benefits. Will it be for Life, Joint & Survivor, Period Certain or Installment? – These are not generic or trivial questions.
The second component in Kaiser’s Retirement package for physicians is the Defined Contribution plan that will also be calculated for you but will require your input – particularly on how you wish it distributed. Do you want it as a lump sum, an installment or defer until you are 70.5? For tax reasons in particular, it is critical that this decision be made as early as possible (ideally 5 years before you plan to retire). Often this component of the Kaiser Retirement package generates about $30,000 per year (this amount does depend on your specific situation). Don’t forget that this amount will be further supplemented by social security.
The third component of Kaiser’s physician retirement package is a Salary Deferral employee funded or 401K plan. Your annual contributions, of tax deferred dollars ($16,500 limit in 2009), properly allocated and rebalanced will grow to supplement the first two components of the Kaiser Permanente Retirement Package. With these three components Kaiser physicians can retire at close to pre-retirement salary levels.
The final piece of the Kaiser Retirement Plan provides benefits such as health care, dental and insurance benefits. These should be reviewed carefully with your adviser to ensure that they match your lifestyle and will support all of your retirement needs.