Five Years Before Retirement: Physician Transition-To-Exit Timeline

The worst mistake physicians make about retirement is thinking it’s a date. It’s not. It’s a five-year transition project, and if you start any later, you’ll bleed money, lose leverage, and create chaos for patients and partners.

Here’s the timeline that actually works.

---

Year 5 Before Retirement: Clarity, Numbers, and Non‑Competes

At this point you should stop “thinking about” retirement and say an actual year out loud. Not a fuzzy “in a few years.” A target year. Then you build backwards.

Months 1–3 (5 Years Out): Get the Real Financial Picture

You start with numbers. Not feelings.

By the end of this quarter, you should:

• Pull a full personal balance sheet:
  • Assets: 401(k)/403(b)/457, IRAs, brokerage accounts, practice equity, HSA, cash, real estate
  • Liabilities: mortgages, student loans (yes, some of you still have them), practice debt, lines of credit
• Track 3 months of actual spending:
  • Fixed (mortgage, insurance, utilities)
  • Variable (travel, dining, kids/grandkids, “I’m tired, let’s DoorDash again”)
• Get current values for:
  • Practice ownership share
  • Any defined benefit plans
  • Unused PTO, CME funds, or sabbatical balances

Then you sit down with a fiduciary financial planner who actually understands physicians. Not your partner’s “guy” who mostly sells whole life.

At this first planning meeting, you should:

• Define a retirement income target (usually 70–100% of your current take-home, depending on lifestyle)
• Stress-test:
  • Long life (age 95+)
  • 25–30% market drop early in retirement
  • One-time big costs (wedding, helping adult child, major home repairs)
• Outline an initial retirement income “stack”:
  • Social Security (rough estimate)
  • Pensions or cash balance plans
  • Portfolio withdrawals
  • Practice sale/earn-out
  • Any rental income

Typical Physician Retirement Income Mix

Category	Value
Investment Accounts	55
Social Security	20
Pension/DB Plan	10
Practice Sale	10
Real Estate/Other	5

If your numbers are far off—big gap between projected income and desired lifestyle—better to know at Year 5, not Year 1.

Months 3–6: Read Every Contract You’ve Ever Signed

This is where most physicians get blindsided. Non-competes, tail coverage, partnership buyout provisions—they all live in contracts you haven’t seen in 12 years.

At this point you should:

• Pull:
  • Employment agreement(s)
  • Partnership/shareholder agreements
  • Call coverage agreements
  • Ancillary ownership documents (surgery center, imaging, labs)
  • Hospital medical staff bylaws (termination/retirement rules)
• Sit with a healthcare attorney (not your cousin who does real estate) to:
  • Map all non-competes and non-solicitation clauses
  • Identify notice requirements for:
    • Retirement
    • Partnership withdrawal
    • Call coverage changes
  • Understand how practice equity is valued on exit
  • Clarify who pays malpractice tail and under what conditions

You want a single summary page that says:

• “If I retire on [DATE], I must:
  • Give [X] months notice to:
    • Group
    • Hospital
    • Call pool
  • Pay/receive [specific amounts] for:
    • Equity buyout
    • Tail coverage
    • Unused PTO/CME”

If your agreements are vague or outdated, note this. You’ll renegotiate later (Year 3–4 is usually best timing).

Months 6–12: Define the Life You’re Retiring To

Retirement planning that ignores lifestyle is financially dangerous. You’ll either underspend out of fear or blow through cash on aimless travel and toys.

By the end of Year 5 you should:

• Sketch a “first 3 years retired” calendar:
  • Where you’ll live (primary residence, snowbird, split time)
  • Rough travel plans (2 trips a year? 6? Domestic vs international?)
  • Family commitments (grandkids, caregiving for parents/spouse)
  • Personal projects (teaching, volunteering, consulting, writing, medical mission work)
• Decide your identity shift:
  • Full exit from medicine
  • Occasional locums
  • Telemedicine only
  • Non-clinical work (utilization review, expert witness, admin roles)

Why now? Because the type of retirement you want affects:

• Licensure decisions
• Malpractice tail
• Non-compete interpretation
• How aggressively you need to save these next 5 years

---

Year 4 Before Retirement: Fix Gaps, Restructure, and Protect

Now you move from “assessment” to “engineering.” You’re not leaving yet, but you’re shaping the financial and legal terrain so that when you do, it’s on your terms.

Quarter 1–2 (4 Years Out): Patch Financial Leaks

At this point you should have a clear sense of any shortfall. Now you attack it.

With your planner, you should:

• Adjust savings:
  • Maximize all available tax-advantaged accounts:
    • 401(k)/403(b) + catch-up
    • 457 (governmental, if safe)
    • Defined benefit/cash balance if your practice has one
  • Decide if a few more “heavy savings” years are needed
• Simplify investment accounts:
  • Consolidate scattered old 401(k)s/IRAs where appropriate
  • Reduce redundant or high-fee funds
  • Move toward a slightly more conservative allocation, but not “all cash” panic

Year From Retirement	Stocks	Bonds	Cash
5 Years Out	70%	25%	5%
3 Years Out	60%	30%	10%
1 Year Out	50%	35%	15%

You’re aiming for resilience, not hibernation. I’ve watched physicians move everything to cash two years before retirement and then realize they’re stuck working longer because inflation quietly erodes their safe little pile.

Quarter 2–3: Tune Up Legal Documents and Risk Protection

By now, your personal life and your legal documents probably don’t match.

At this point you should:

• Update or create:
  • Will
  • Revocable living trust (if appropriate)
  • Healthcare proxy/POA
  • Financial power of attorney
  • HIPAA authorizations
• Review titling and beneficiaries:
  • Make sure accounts are titled correctly (individual, joint, trust)
  • Remove ex-spouses and outdated beneficiaries (yes, happens all the time)
• Review insurance:
  • Term life: do you still need that large policy? Or should you downsize but extend?
  • Disability: often still essential at Year 4 if you’re clinically active
  • Long-term care: decide early whether you’ll self-fund or insure

Get an estate attorney and your financial planner talking to each other. Directly. Not through you forwarding PDFs at midnight.

Quarter 3–4: Start the Practice Exit Strategy

This is where many physicians wait too long.

At this point you should:

• Have a blunt conversation with:
  • Practice partners
  • Group leadership
  • Or if employed: your medical director or CMO
• Clarify:
  • Your anticipated retirement year (you can say “subject to change,” but give a real target)
  • The current partnership buyout formula and whether:
    • It’s actually being followed
    • Groups are open to revisiting for senior partners
  • Options for:
    • Gradual ramp-down (clinic sessions, OR days, call schedule)
    • Transitioning leadership roles

With your attorney, start:

• Reviewing partnership/operating agreements for:
  • Conflicts with your updated goals
  • Ambiguous valuation language
  • Missing retirement provisions
• Identifying:
  • What needs formal amendment
  • When to bring these changes to vote

You’re not negotiating hard yet. You’re surfacing issues so no one can claim surprise later.

---

Year 3 Before Retirement: Lock in Structure and Timeline

Now the timeline gets more precise. You should be talking in specific months, not just years.

Quarter 1 (3 Years Out): Finalize Target Date Window

At this point you should:

• Narrow your retirement timeline to a 6–12 month window:
  • Example: “Between July and December 3 years from now”
• Map this against:
  • Vesting schedules
  • Pension formulas
  • Stock or equity cliffs
  • Major personal events (child finishing college, spouse’s retirement)

With your planner, build a draft “retirement cash-flow calendar”:

• Which accounts you’ll tap years 1–5
• When Social Security will start (and whether to delay to 70)
• How any practice buyout will be paid (lump sum vs installments)

Retirement Income Sources Over First 5 Years

Category	Taxable Accounts	Tax-Deferred	Social Security	Practice Payout
Year 1	60	20	0	20
Year 2	50	25	10	15
Year 3	40	30	15	15
Year 4	30	35	20	15
Year 5	20	40	25	15

This is where you start seeing how taxes will actually hit you in the first years of retirement.

Quarter 2: Negotiate Practice Exit Terms

Here is where you need a spine.

At this point you should:

• Sit with your attorney first, then with your partners or employer, to:
  • Clarify equity valuation method and timing
  • Discuss call reduction schedule
  • Address tail coverage responsibility
  • Set preliminary notice expectations

Common levers you can negotiate:

• Longer notice in exchange for:
  • Better valuation or extended payout period
  • Group covering part or all of your tail
  • Reduced call earlier (to protect your sanity and health)
• Shorter notice if:
  • You’re willing to accept less on the buyout
  • You’re not anchor-critical to service lines

Get key terms in writing. “We’ll take care of you” is not a term. That’s how resentment lawsuits are born.

Quarter 3–4: Prepare for Partial Practice or Encore Work

If you’re considering part-time or different work post-retirement, you start structuring it now.

At this point you should:

• Decide on:
  • Whether you’ll maintain active hospital privileges
  • Whether to keep DEA registration and state licenses
  • CME plans for the next 3 years (no sense over-investing if you’ll stop clinical work completely)
• Explore:
  • Locums options and pay rates in your specialty
  • Telemedicine groups and credentialing timelines
  • Non-clinical gigs (utilization review, pharma consulting, academics)

You don’t have to commit yet. But you should know what’s realistic, and what requires you to keep certain credentials alive.

---

Year 2 Before Retirement: Convert “Plan” Into Calendar

This is the execution year. Every quarter should have specific legal and financial actions.

Quarter 1: Tax Strategy and Withdrawal Planning

At this point you should:

• Meet with your CPA and planner together to:
  • Run multi-year tax projections:
    • Final high-income years (now)
    • First low-income retirement years
  • Identify:
    • Roth conversion windows (likely early retirement years)
    • Whether to realize capital gains now vs later
• Decide on:
  • Any major purchases you’ll make while still employed (cars, home renovation) vs after retirement

You’re aiming to smooth your tax curve, not spike it with poor timing.

Quarter 2–3: Contractual Notice and Documentation Drafting

Depending on your agreements, 18–24 months may be when notice technically must be given.

At this point you should:

• Confirm exact written notice requirements:
  • Method (certified mail, email, portal)
  • Recipient (board, medical director, HR)
  • Contents (effective date, status of partnership, call)
• With your attorney, draft:
  • Formal notice letters
  • Any proposed amendments to:
    • Partnership agreements
    • Medical directorship contracts
    • Call coverage arrangements

Do not rely on hallway conversations. You can have them, sure. But if it’s not in writing, it doesn’t exist.

Quarter 4: Patient Panel and Handoff Planning

Here the medical side and the legal/financial side intersect.

At this point you should:

• Work with your group or employer on:
  • How your patient panel will be distributed
  • What messages go out and when
  • Whether you’ll have a “wind-down” clinic schedule
• Confirm:
  • Any productivity or bonus formulas in your final year
  • Whether ramping down clinic will hurt promised buyout or bonuses

You don’t want to do the noble thing (slow down to transition patients) and then find out you tripped a productivity clause that slashes your final-year compensation.

---

Final 12 Months: Execute, Protect, and Exit Cleanly

This is where details matter. Ignore them and you’ll spend your first retired year untangling messes.

12–9 Months Out: Formal Notice and Tail Coverage

At this point you should:

• Deliver formal notice according to contract:
  • Keep copies of everything
  • Get written acknowledgment
• Confirm malpractice coverage:
  • If occurrence-based, you may not need tail
  • If claims-made:
    • Get quotes for tail coverage
    • Confirm if employer/group will pay some or all per agreement
• Decide on future coverage:
  • If doing expert witness or non-clinical only, what coverage (if any) is needed?
  • If part-time clinical elsewhere, how your coverage will work

I’ve seen physicians retire thinking the group “had it covered,” only to find out no tail was purchased and they personally owned the exposure.

9–6 Months Out: Clean Up Your Professional Life

Now it’s about closing loops.

At this point you should:

• Licensure and credentials:
  • Decide which state licenses to keep vs let lapse
  • Plan DEA status:
    • Keep active if you’ll prescribe anywhere
    • Voluntarily surrender if completely done with prescribing
  • Inform professional boards of your changing status as needed
• Documentation and records:
  • Finish outstanding charts (seriously—don’t drag this out)
  • Resolve open quality or peer review issues
  • Know retention policies for your medical records and your responsibility

You want to exit without loose ends that can follow you for years.

6–3 Months Out: Final Financial Setup

By this point, your legal structure should be set. Now you arrange the mechanics.

At this point you should:

• With your planner:
  • Confirm the first 24 months of withdrawals:
    • Which accounts
    • What day of the month
    • Linked bank accounts
  • Set up:
    • Automatic transfers where appropriate
    • Cash buffer (usually 6–12 months of expenses in cash)
• With your CPA:
  • Plan final-year estimated taxes (wage + buyout + any locums)
  • Map timing of Roth conversions (if any) in early retirement
• With your practice:
  • Confirm exact buyout amount and schedule
  • Get the formula and calculation in writing

Final 3 Months: Transition, Communication, and Emotional Exit

The last quarter is a mix of logistics and psychology.

At this point you should:

• Professional communications:
  • Inform key referral sources
  • Ensure patient communication plan is executed
  • Update voicemail, website profile, and professional listings with end date or new status
• Regulatory clean-up:
  • Close any solo practice legal entities when appropriate (LLC, S-corp) with accountant and attorney guidance
  • Cancel or adjust:
    • Business insurance policies
    • Office leases or equipment leases (if applicable)
• Personally:
  • Schedule first 90 days of retirement:
    • Some structure (projects, travel, routine)
    • Not a blank calendar that invites depression

You’ve been “Dr. [Last Name]” for decades. The psychological deceleration is real. The more you’ve planned what you’re retiring to, the smoother this part goes.

---

30 Days After Retirement: The Quiet Audit

Most people stop their planning on the retirement date. That’s a mistake.

In the first month after you retire, you should:

• Confirm:
  • Your final paycheck accuracy (including unused PTO, bonuses)
  • Buyout payments have started as agreed
  • Tail coverage policy is active and documented
• Review:
  • First month of spending vs your plan
  • How your new daily routine feels (and adjust if it’s off)
• Schedule:
  • A 3–6 month “retirement review” with your planner and CPA

Five-Year Physician Retirement Timeline

Period	Event
Year 5 - Months 1-3	Financial baseline and planner
Year 5 - Months 3-6	Contract and legal review
Year 5 - Months 6-12	Lifestyle and role decisions
Year 4 - Q1-2	Savings and investments tuned up
Year 4 - Q2-3	Estate and risk planning
Year 4 - Q3-4	Early practice exit talks
Year 3 - Q1	Target date window set
Year 3 - Q2	Exit terms negotiated
Year 3 - Q3-4	Future work structure explored
Year 2 - Q1	Tax and withdrawal strategy
Year 2 - Q2-3	Contractual notice drafting
Year 2 - Q4	Patient panel transition plan
Final Year - 12-9 Months	Formal notice and tail
Final Year - 9-6 Months	Licensure and records cleanup
Final Year - 6-3 Months	Financial setup and buyout details
Final Year - Final 3 Months	Communications and emotional exit

---

Today’s action step: pull your primary employment/partnership contract and your latest retirement account statement, put them side by side on your desk, and write a single date at the top of the page labeled “Target Retirement Year.” That’s the start of a real five-year transition, not a vague someday.