A Retirement Guide for Physicians Retiring from Southern California Permanente Medical Group (SCPMG) in the next 5 years - 25 important questions and answers that often come up.
Below are 25 of the most common questions we tend to see from physicians of SCPMG who are within 5 years of retirement and our answers to those questions.
“I’m close to 10 years—does it really make sense to walk away now and leave the pension on the table?”
Unless things are really terrible it is usually wise to try to make it to 10 years at Southern California Permanente Medical Group if you've been there for at least 5 years. A pension of up to 20% of your salary could be vested if you make it 10 years and 1 day. If you make 9 years and 364 days, you get no pension so it is worth it to try to get to 10 years in our view.
“What is my pension actually worth if I stay until I vest, versus leave for another job or private practice?”
The SCPMG is usually worth about 2% of you salary for each of the first 20 years you work there and 1% of your salary for the next 10 years you work there (assume you make it to the 10 year of employment vesting cliff that you'd need to get anything). So long term your SCPMG salary can result in a pension of 50% if york 30 years at SCPMG.
In our experience the typical Kaiser doctor has about 5-10 years of experience and are in their 40s, but if you put in 5 years it is usually very worthwhile to try to get to 10 years. After that the benefits are worthwhile but more marginal.
But a simple rule of thumb is to take 2% or 1% of your salary x 20-30 years and that is the value of basically one more year of pension payments in our view.
“Can I count on the Common Plan when I retire, or should I treat it as a nice extra and still save like it might not be there?”
This is a bit of a tricky question. If you haven't been at SCPMG for at least 5 years, then no you can't count on the pension. SCPMG can choose to freeze the pension and if you are not vested due to 10 years of service, you may not get access to it.
If you are between 5-10 years of service, I think it is very likely to persist due to SCPMG's and So Cal Kaiser's current profitability and the fact that the pension is a strong recruitiing tool for SCPMG.
If you are past 10 years of service, we believe the SCPMG pension is relaible in well funded, in our opinion.
“The pension looks good on paper, but it’s non-qualified and backed by the Health Plan. How much risk am I really taking by depending on it?”
We do not regard the SCPMG pension to be high risk. Basically when we analyze pensions and sometimes mark down their value in our projections we basically look at three things: 1) Profitability of the underlying entity, 2) Credit Rating of the underlying entity and 3) Funding Ratio of the pension.
The Kaiser Health Foundation has been profitable for the last several years according to our recollection. We believe the Kaiser Health Foundation has a credit rating of AA-, which is very good, as of 9/18/26. Finally we believe that the pension may be as much as 92% funded right now. We generally regard a funding ratio of 80% of above to be good for a pension plan.
While things can always change in the future, we don't personally see that SCPMG pension as high risk as of 9/18/26.
“Should I just max the 401(k) and Keogh, or does the pension mean I need to be doing something different with Roth versus pre-tax savings?”
While this is an individual choice, the things that we think are important to this decision are your likely income and tax rate in retirement and your likely cash flow needs.
Taxes hit harder in retirement because you have less income so SCPMG physicians who want more income in retirement may consider the roth or after tax options were available. Physicians in lower tax brackets or don't have strong income needs from their retirement accounts in retirement may consider tax deferred approached.
These are important choices, we encourage you to do either do your own research or talk to a fiduciary financial advisor before making these decisions and get a rough projection of what your income might look like in retirement depending on your choices.
“If I’m going to have pension income later, am I making a mistake by putting everything into tax-deferred accounts now?”
This is very similar to question #5 above and the pension and social security does don't as ordinary income, and tax deferred accounts (like the Keogh or tax deferred 401(k) contributions) would also increase your pre-tax income which can lead to a higher tax bill in retirement compared to some other options.
“Is staying one more year actually worth it, or am I just trading another year of long hours and call for a relatively small bump in pension?”
This really depends on your needs and if you are on the fence, I'd encourage you to talk it over with a good fiducuairy financial advisor. Basically the pension is pretty easy to understand it is 1% or 2% of your salary more or less times 20 or 30 years - that is the cash value of the pension in our opinion.
Whether you can retire and be comfortable and your plan is sound is something that a fiduciary financial advisor could easily tell you and if you are on the fence about retiring it can be worthwhile working with one for at least a short period of time until you've made the transition.
“Is 20 years the main breakpoint? If I get there, is there much financial reason to keep working full-time after that?”
You'd still be accruing an additional 1% of your salary per year towards your pension to year 30. After year 30 there isn't a strong pension reason to stay. Generally if you like your work and want to keep on doing it, it can be beneficial to do for a while, if you want to do something else in the near future - I recommend making a plan or talking to a fiduciary financial advisor to help work towards a smooth transition. It can be a big adjustment from getting a paycheck to living off your investments.
“What happens if I go down to 0.8 or 0.6? Do I still get credit toward retirement, and how much does it reduce the pension?”
To our knowledge working well than 1.0 FTE can reduce your pension payout because you didn't really work a full year at your salary if you only worked 0.8 or 0.6 time. So this is something to consider but for some people's situation this will matter to their financial picture and the life they want to live and for some it won't.
10. “Can I coast part-time for a few years and still qualify for the retirement benefits I’m counting on?”
Technically yes you can do that. If you've worked 10 full time years you'll vest for the pension. However if you cut back your hours too much it can reduce the size of your pension payouts.
“Can I realistically retire before 65, and what exactly fills the gap before the Common Plan starts?”
For many SCPMG physicians retiring before 65 if very doable especially with the help of the Early Separation Plan annuity.
“Does ESP actually make early retirement workable, and how early do I need to decide if I want to apply?”
Generally a minimum 1 year notice is necessary to be approved for the ESP program and yes the ESP program can make early retirement workable for many SCPMG physicians and combined with wise investment choices and income planning early retirement is possible for many SCPMG physicians in our view.
“What if I want to leave at 58, 60, or 62 because I’m done with the pace? What benefits do I give up?”
For many SCPMG physicians utilizing that ESP program, the benefits drop may not be that significant in our estimation. The main losses are not accruing more pension credit, not having some of your potential highest earning years as part of the pension calculation.
But for many physicians these are relatively minor opportunity costs in our view, unless your are a little bit behind in retirement savings and need every little but of pension credit to help you.
“Do I have enough outside the pension to retire if ESP does not come through or if my assumptions are too optimistic?”
Our understanding is that once the ESP programs starts it should pay through until you are qualified for the pension.
If in the future SCPMG decides to take the ESP program away, I recommend metting your with your fiduciary financial advisor or doing your own research to determine if your investments can replace the ESP annuity for up to 7 years.
“How do I figure out whether I’ve hit the age-plus-service rule for retiree medical benefits?”
To our knowledge these are the requirements but you should check with the benfits people at Kaiser to confirm.
To get retiree medical benefits at SCPMG you must also meet one of the following requirements:
• Retired at age 55 with at least 15 years of Common Plan Qualifying Service, or
• Retired at age 65 with at least 10 years of Common Plan Qualifying Service, or
• Retired when age plus years of Common Plan Qualifying Service equal at least 75, with at
least 10 years of Common Plan Qualifying Service, or
• Was approved for the Early Separation Program
We recommmend getting your actual statements from SCPMG to determine your common plan qualifiying service.
SCPMG provides a guide for retiree medical benefits here: https://scpmgnewhire.kp.org/scpmgretiree/benefits/Forms%20and%20Brochures/Medicare%20&%20Senior%20Advantage%20Guide%20for%20Retiring%20Physicians.pdf
“If I retire before 65, what am I paying for health insurance, and how does that compare with staying another few years?”
To our knowledge if you stay anoher few years your current health insurance rates will continue like they are today.
If you retire before 65, if you are an eligible retiree you may be able to buy health insurance at the subsidized retiree rates. An eligible retiree we believe must meet the criteria laid out in question #15.
If you are not an eligible retiree you would pay unsubsidized health insurance rates which can be quite expensive.
Health insurance is an important componente of early retirement and it is absolutely that you confirm all the informatio from #15 and #16 with Kaiser before making any decisions. They are the ultimate authority on what your reitree medical benefits will cost you given the choices that you may select over the next few years.
“At 65, do I have to enroll in Medicare and Senior Advantage? What happens if I miss something or choose the wrong option?”
It is critical that you enroll in Medicare and Senior Advantage by the deadlines. Kaiser covers the deadlines here specifically on pages 5 and 6: https://scpmgnewhire.kp.org/scpmgretiree/benefits/Forms%20and%20Brochures/Medicare%20&%20Senior%20Advantage%20Guide%20for%20Retiring%20Physicians.pdf
If you don't enroll in Medicare and Senior Advantage by the deadline you could permanently lose SCPMG retiree medical coverage and/or lose SCPMG premiium reimbursement. Addiitonally you may face a permanente hike in your part b premium and a hike in your part d premims as well.
Some of these deadlines are quite short so it is important to be on top of them.
“Does Kaiser reimburse Part B for me and my spouse, or are there service and enrollment requirements that could leave us paying it ourselves?”
Typically the answer is yes but there are certain rules that apply. Please see the following packet from Kaiser: https://scpmgnewhire.kp.org/scpmgretiree/benefits/Forms%20and%20Brochures/Medicare%20&%20Senior%20Advantage%20Guide%20for%20Retiring%20Physicians.pdf
“If we move out of Southern California—or out of California entirely—what happens to Senior Advantage and the Medicare reimbursement?”
Basically to our knowledge this depends on whether you move to another area where Kaiser has coverage or you move to an area where Kaiser doesn't have coverage.
Kaiser explains what happens in this case on page 8 of their guide - we recommend that you read it carefully: https://scpmgnewhire.kp.org/scpmgretiree/benefits/Forms%20and%20Brochures/Medicare%20&%20Senior%20Advantage%20Guide%20for%20Retiring%20Physicians.pdf
And important always with your Kaiser benefits people before acting on any information you read in this article or elsewhere. Kaiser is the authority on their own rules.
“Can I retire here and then move closer to my kids, or will the loss of Kaiser retiree coverage make that much more expensive than I think?”
To our knowledge retiree coverage is largely portable if you follow Kaiser's terms. Some costs will change if you move, but it is not certain that the move will be much more expensive in all cases, in our view.
“How much of our retirement plan depends on Kaiser? Between the pension, retiree medical, and ESP, am I too concentrated in one employer?”
Obviously a lot is tied into the financial health of a single employer. But that is not inherently a bad thing.
In our experience with declines in company fates that usually impacts retirees - the declines usually come slowly over decades and are apparent from a long ways a way. There are a few exceptions but when you have a financial strong employer it is often okay to have more eggs in that basket.
SCPMG takes care of its physicians and that is why it is a desireable employer in our view. For many fields you can make more income outside of Kaiser, but a huge part of this is because a part of SCPMG's income is diverted to pay for great benefits in retirement. So you can have more now or have more later, but having more later is often very valuable because income drops for most retirees.
So this is not a risk that we are very concerned about for the Kaiser physician clients that we've worked with over the years.
“What happens if Kaiser changes the benefits later? Should that possibility change how aggressively I save outside the system?”
We've seen these changes in other industries like accounting where over time benefits got rolled back and more of the financial responsibility gets shifted to the employee.
Generally for employees who've already met the vesting period (10 years of full time service of SCPMG) for the pension a lot of the benfits are vested and they may be frozen and new benefits may not accrue but old ones are generally paid.
For newer employees it is absolutely always a risk that the SCPMG pension goes away or retiree medical goes away. But when I've seen this happen in other industries where we've had clients like directors and partners at Big 4 accounting firms and things like that, the loss of the pension was offset by new and increased employer contributions to other retirement accounts.
Right now SCPMG is financially healthy in our view and has a culture of taking care of their people so hopefully they continue the pension and the retiree medical benefits. But if they go away in our experience they are most likely to go away for new unvested employees first and those employees haven't necessarily been at SCPMG to have a big potential interest in these benefits yet.
SCPMG is a really good provider in our view and our physician clients who work there are happy for the most part and we expect the culture of the Kaiser to keep the pension for now for the physicians at Kaiser and economically the model seems to be working in our view.
“What does retirement actually look like after taxes when you add the pension, 401(k)/Keogh withdrawals, Social Security, and Medicare costs?”
This type of analysis is something a financial advisor like us might do with a client in the year or two before retirement to just stress test things.
But to keep things at a high level - the tax code is very progressive so taxes are very low in retirement until you pass about $130,000 in income (before deductions) and then the tax rates rapidly go up from about 12% Federal to 22%-32% depending on your household income. It is completely normal for physicians to be in the 22% or 24% Federal tax bracket in retirement.
Pension, Keogh, social security and tax deferred 401(k) distributions are all ordinary income and are taxed at basically the highest rates on income in the tax code (assuming your income is above $130k). This is why sometimes Roth contributions or Roth conversions might be worth considering for a pre-retiree who is within 5 years of retiring from SCPMG.
Taxes are also not the only story - living costs are extremely important in this analsysis - perhaps more important than taxes and so is how the money is invested, if you have sufficient liquidity buffers and things like that are important too.
“Am I going to get pushed into a higher tax bracket in retirement because the pension is taxable, even if I’m no longer working?”
You are unlikely to be in a higher tax bracket than your working years in our experience but a lot of physicians might expect a giant drop in taxes when retired and can often be disappointed when really their tax rate only falls by about 10% or less or sometimes not even at all.
One of the common concepts that early physicians mess up in our view is they get what we call "tax hungry". Essentially they are chasing the emotional relief or the high that you get from paying less taxes in a given year. But even though those taxes were easy to pay in the surplus years of our earnings in our 40s and 50s, in our 60s our gross income usually drops and after tax income drops too. When our gross income is lower those taxes that now have to be paid are actually much more painful to pay than if we had paid them in years when we had big surpluses.
So that is always something to consider whether kicking the can down the road will be the best choice for you if your income in retirement is closer to your living expenses in retirement (after tax) than it is during your working years.
“What paperwork has to happen before I retire so I do not miss an ESP deadline, Medicare enrollment, beneficiary designation, or Part B reimbursement?”
Unfortunately there are actually too many deadlines to efficiently describe but they basically run from more than a year before retirement to at least a few months after your retirement date.
We highly recommend that you talk to the benefits people at Kaiser to understand these rules and if you are still confused it can be beneficial to work with a fiduciary financial advisor.
We hope you found this retirement guide helpful. If you have questions or you'd like to schedule an introductory call with D.R. Harris & Co, a fiduciary financial advisor with experience helping SCPMG physicians you may do so here.
If you'd like to learn more about Daniel Harris you may do so here.
Disclaimer: This article is written for educational and entertainment purposes only. Netiher Daniel Harris nor D.R. Harris & Co. are your financial advisor unless you have a signed written advisory agreement with D.R. Harris & Co. We believe the information in this article is correct at the time it was written on 9/18/26 but we highly recommend that you do your own reearch and talk to your own professional advisors before acting on any information you read about in this article. Finally, you should not expect this article to be updated after 9/18/26 and if things at SCPMG change after this article if written that new information will not make it into this article.
