Withdrawing Your Assets in Retirement: 2 Important Factors to Consider

Developing a game plan for the distribution of your wealth in retirement is a fundamental aspect of every dermatologist’s retirement planning. In this article, we will discuss the impact of 2 factors that can dramatically impact retirement savings and withdrawals: inflation and taxes.

Factor No. 1: Inflation

Increasing inflation in recent years has caused many physicians to share a common concern about their financial futures—that they will not have saved enough to sustain them in retirement. In other words, they fear that they will outlive their money. With the spike in inflation since 2022 fresh in many dermatologists’ minds, this issue maintains its relevancy at all times.

Inflation is an important factor for dermatologists to consider when projecting future spending. Like other key assumptions for financial modeling, such as future income, expenses, investment returns, and health, inflation is not stagnant and changes over time.

Long-Term Inflation Rate Assumptions

Since retirement projections can span a few decades for older physicians—and 50 or more years for young doctors—looking at the inflation rates over the last year or two is not helpful. We need more data and a longer time period.

To examine inflation over the last 100 years or so, we can look at the Consumer Price Index (CPI) from 1921 to 2021, where the average has been 3.21%.^1-3 Many advisers use the 30-year average of 2.5% as the starting point for a retirement projection.

CPI: Is It the Right Measure for Retirement Modeling?

When discussing an inflation rate, including our data above, many refer to the CPI, as it is the most common measure used in the US to measure inflation. Importantly, housing is almost one-third of the CPI. This heavy weight for housing may make sense for the general population, as many people have a large rent or mortgage expense in their monthly budget.

However, for many dermatologists in retirement, this will not be the case. Some may have either a fixed-rate mortgage for housing costs or no mortgage at all by the time they retire. Therefore, using the full CPI rate may result in higher than realistic retirement projections for a physician. Generally, for retirement projection purposes, it may make sense to reduce the 30-year average to 20%, depending on the physician’s likely housing situation.

What About the Investment Return Assumption?

When building out retirement models, physicians should consider erring on the side of conservatism when selecting an investment return assumption, especially during retirement years. Thinking one is on track using high return assumptions often means taking on more risk in one’s portfolio.

It may be wiser to use a conservative investment rate of return in retirement. For one, this allows the physician to reduce risk in the portfolio. If financial goals can be met without taking on excessive risk, why not do that? Further, if a portfolio designed to earn a lower, conservative rate of return outperforms, the results are even better for the retiree and his or her family.

Third, by using a conservative rate of return, inflation can work for physicians in retirement on the investment side, even as it works against them on expenses. In essence, in times of higher inflation, the most conservative investments may have an opportunity to provide a decent return, which could be enough to sustain a portfolio that only needs to meet conservative assumptions.

For example, let’s assume “Dr Dan” had built a retirement projection where he only needs to get a 5% return now that he is retired. With elevated inflation, he might be able to get a large portion of the return he needs simply from a money market account. He could also allocate just a small fraction of the investments to higher-risk assets to make the 5% that he needs. In this way, Dr Dan benefits from today’s higher inflation on the investment side of the spending-earning balance.

Factor No. 2: Taxes

No one knows what tax rates will be during their retirement. This does not mean physicians should ignore tax planning, but that they should account for the potential costs of taxes on their retirement withdrawals and employ tactics to minimize them.

To do this, one must understand how taxes will impact withdrawals and liquidations of retirement assets. Physicians who practice a tax diversification methodology as their wealth accumulates will be better prepared for the impact of taxes on withdrawals in retirement.

Tax diversification means building wealth in 3 buckets: assets subject to ordinary income tax rates upon distribution in retirement, assets subject to capital gains tax rates, and assets not subject to any tax upon distribution (Figure).

Assets in the first bucket include 401(k)s and IRAs, where the contributions are made before taxes are withheld. During the distribution phase, these assets are taxed as ordinary income. The second bucket includes brokerage accounts and other long-term investment assets where only the investment gains are taxed at capital gains rates. The third tax bucket incorporates after-tax assets, such as a Roth IRA or Roth 401(k). The money goes into these accounts after taxes are withheld, and future distributions are tax-free.

Spreading your wealth across the 3 tax buckets puts you in a position of strength and affords you greater flexibility in managing the taxes in effect during your distribution years. Dermatologists who have built up significant assets in all 3 buckets can pick and choose which bucket to distribute depending on where taxes are at that time. For example, if income taxes are high because of government policy or a move to a high-tax state, the physician could lean more heavily on capital gain or tax-free assets to fund retirement for some years. If the opposite situation occurs, the physician could liquidate more ordinary income assets.

Conclusion

Inflation and taxes are 2 factors that can significantly impact the distribution of a physician’s wealth during retirement. While physicians and their advisers cannot control these factors, savvy planning that incorporates flexibility can prepare a retirement plan for success in a variety of scenarios.

References

1. United States - 30-year Breakeven Inflation Rate. Trading Economics. Accessed September 16, 2025. https://tradingeconomics.com/united-states/30-year-breakeven-inflation-rate-fed-data.html

2. United States 20-year Breakeven Inflation Rate. Trading Economics. Accessed September 16, 2025. https://tradingeconomics.com/united-states/30-year-breakeven-inflation-rate-fed-data.html

3. US Consumer Price Index YoY. Y Charts. Accessed September 16, 2025. https://ycharts.com/indicators/us_consumer_price_index_yoy

David Mandell, JD, MBA, is an attorney and author of more than a dozen books for doctors. He is a partner in the wealth management firm OJM Group (www.ojmgroup.com), where he can be reached at 877-656-4362 or mandell@ojmgroup.com.

Disclosure

OJM Group, LLC. (“OJM”) is an SEC-registered investment adviser with its principal place of business in the State of Ohio. SEC registration does not constitute an endorsement of OJM by the SEC nor does it indicate that OJM has attained a particular level of skill or ability. OJM and its representatives are in compliance with the current notice filing and registration requirements imposed upon registered investment advisers by those states in which OJM maintains clients. OJM may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. For information about OJM, please visit http://adviserinfo.sec.gov/ or contact us at (877) 656-4362.

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