Retirement Planning for The Permanente Medical Group (TPMG) Physicians Ages 55-65 - 7 important questions to address

For The Permanente Medical Group (TPMG) physicians in their late fifties and early sixties, retirement is no longer a distant idea—it’s a real decision on the horizon. At this stage, many physicians are asking not just about pension payouts or the SRP, but how to manage the assets they have personally accumulated outside of employer plans. Understanding how to structure these assets can dramatically influence whether you can retire comfortably, preserve purchasing power, and meet your lifestyle goals.

1). Am I Fully Vested, How much pension income will I receive and how will it be taxed?

One of the first questions physicians ask as they approach retirement is whether they are fully vested. TPMG physicians are fully vested in both the pension (Plan 1) and the company contribution plan (Plan 2) after five years of credited service.

For Plan 2, the vesting schedule is 10% after one year, 30% after two years, 50% after three years, 70% after four years, and 100% after five years. So for most physicians in this age group, earned benefits are secure.

The main pension formula—2% per year for the first 20 years and 1% per year thereafter—provides a predictable income stream in retirement. For late-career physicians, this predictable income, combined with Social Security, dramatically reduces the financial uncertainty that most retirees face. Knowing that a substantial portion of your basic retirement expenses is covered allows you to take a more flexible and strategic approach with your non-pension assets.

It’s important to note, however, that many TPMG / Kaiser pension plans do not include cost-of-living adjustments (COLA). While the nominal benefit is guaranteed, inflation can erode its real value over time. This makes non-pension investments an essential part of long-term financial security and lifestyle maintenance.

2). Understanding Plan 2 Contributions and what to do with them once you retire from the Permanente Medical Group (TPMG)

TPMG makes company contributions to Plan 2 regardless of your personal contributions. For 2025, TPMG contributes 5% of your compensation up to the Social Security Wage Base ($176,100), plus 10% of compensation over the Social Security Wage Base up to the federal compensation limit ($350,000). For a physician earning at least $350,000, this means a total contribution of $26,195 for 2025, according to our calculations.

Beyond this, physicians have the opportunity to contribute up to $23,500 pre-tax, and up to $20,305 after-tax via the Mega Backdoor Roth.

Fidelity can help set up automatic conversions for after-tax contributions, and these conversions before appreciation has taken place may have a small or minimal tax impact in some cases, in our experience.

it is possible to leave plan 2 contributions in the TPMG where it receives some creditor protection to our knowledge, or roll it over to an IRA. Because The Permanente Medical Group 401(k) is actually pretty good, it is often okay in our view to keep the money in the retirement plan, for many retired physicians, if they wish.

3). How Do I Handle the Supplemental Retirement Plan (SRP) and Taxes?

For many physicians, the SRP represents a concentrated source of wealth that will be paid as a lump sum shortly after retirement. Because it is fully taxable in the year it is received, the SRP often becomes a central focus of financial planning. A key consideration is that the SRP is fully investable once received, but it requires a decision: how to use the after tax proceeds of that money.

Some options include buying an annuity for an insurance company which can replicate the pension, although when doing this you should be knowledgeable about your state guarantty association limits on insurance.

As of the time of this writing to California Life and Health Guaranty Association covers 80% of the value of an annuity up to $250k, to our knowledge, in many cases and beyond that you may get nothing if the insurance company goes under. Source: https://www.califega.org/FAQ

You should understand that the Supplemental Retirement Plan (SRP) is simply a non-qualified deferred compensation plan to our knowledge. What this means is that it can be seized by creditors - similar to what happened to the physicians at Steward Healthcare.

This is a very rare occurance, but you should know that it is at risk until they distribute it to you.

4). What Is the Full Early at 60 Non-Qualified Retirement Plan?

The Full Early at 60 Non-Qualified Retirement Plan allows TPMG physicians with at least 15 years of service to begin receiving a pension-like income stream at age 60 without the typical early-retirement reduction.

Unlike the standard pension, which is capped by IRS limits, this plan calculates benefits based on full earnings until age 65—a major advantage for high earners.

Payments continue from age 60 until 65, at which point physicians transition to the standard Plan 1 pension. For many, this transition results in a slightly lower income stream, but the SRP lump sum helps bridge the gap.

Physicians should also be aware that some TPMG / Kaiser regions offer lump-sum options or different early retirement windows, so plan specifics can vary. Reviewing your regional plan documents or speaking with HR is essential.

5). Should I Retire at 60 or Wait Until 65?

Deciding whether to retire at 60 or continue to 65 depends on both income needs and investment strategy.

For example, a physician retiring at 60 with 20 years of credited service and $500,000 in average earnings could receive 40% of that income—$200,000 per year—from age 60 to 65 under the Full Early at 60 plan. After that, the benefit transitions to the capped pension formula. This predictable income allows you to be more flexible with your personal investments. You can focus on achieving long-term financial goals, preserving purchasing power, and building legacy wealth, because your core expenses are largely covered.

The one mistake to avoid at TPMG is to retire before age 60 (instead of just going to 6/10th) because that can cost you lifetime healthcare - which can be a very valuable benefit.

6). How Should I Think About My Non-Pension Assets?

With the combination of a pension and Social Security providing a strong income floor, late-career physicians have more freedom to manage a personal portfolio that supports their goals.

Using guaranteed income as a foundation allows measured risk-taking without jeopardizing essential expenses.

Considering time horizons for when assets will be accessed helps guide strategy rather than reacting to short-term fluctuations. Maintaining a diversified and flexible approach helps balance potential growth with stability over time.

The SRP lump sum is a particularly important part of this strategy, as it requires deliberate planning to maximize its impact and invest it in a way that is aligned with your goals.

7). How to plan for a confident retirement as a Permanente Medical Group Physician

Retirement for TPMG physicians is about strategically coordinating guaranteed income with personal investments. Understanding how to integrate the Full Early at 60 plan, the SRP, Plan 2 contributions, and your personal savings into a cohesive strategy can make the difference between a comfortable, flexible retirement and one constrained by uncertainty.

For physicians ages 55 to 65, now is the most critical window for planning.

A fiduciary financial advisor who understands TPMG’s retirement system may help you create a personalized strategy designed to grow and protect your non-pension assets while taking full advantage of the security already provided by your pension and Social Security.

Sidebar: How Your Pension and Social Security Give You Investment Flexibility

Core Idea: Your defined benefit pension and Social Security act as a guaranteed income floor, covering basic living expenses. This allows you to take a more flexible, growth-oriented approach with your personal (non-pension) assets.

Step 1: Identify Your Guaranteed Income -

a). The TPMG Pension: Predictable monthly income based on years of service and salary.

b). Social Security: Provides a lifelong inflation-adjusted income stream.

Together, these sources cover a significant portion of your basic expenses in retirement and they can last your whole life and the life of your spouse as well.

Step 2: Assess Your Non-Pension Assets401(k)

Roth accounts, taxable brokerage accounts, SRP payout. These funds can be allocated with more flexibility because you don’t rely on them for essential spending.

Step 3: Apply Investment Principles to work to generate the life you want in retirement

Align your non-pension assets with your personal goals—growth, lifestyle, and legacy objectives. Risk vs. Security: Use your guaranteed income as a foundation to take measured risk without jeopardizing essential expenses.

Time Horizon Matters: Consider how long assets need to last and when they might be accessed, letting long-term goals guide strategy rather than reacting to short-term fluctuations.

Diversification and Flexibility: Maintaining a broad, flexible approach can help balance potential growth with stability over time.

Step 4: Tax Efficiency and Coordinating withdrawals between taxable accounts, 401(k)/IRA, and SRP to manage taxes.

This is especially important in the year when you'll receive your Supplemental Retirement Plan Payment.

Step 5: Monitor & Adjust as market conditions and lifestyle needs change

Even in retirement, periodically review your plan based on changes in lifestyle, spending, and market conditions. Your guaranteed income provides a buffer, allowing you to adjust your personal portfolio with confidence.

Key Takeaway: With your pension and Social Security covering essential expenses, your non-pension portfolio—including SRP proceeds—can be strategically positioned to support your goals, manage risk effectively, and provide flexibility throughout retirement—without compromising security.

If you are a Permanente Medical Group (TPMG) Physician ages 55 and above and you are considering retiring from TPMG or going part time in the next 5-10 years it can be beneficial to discuss your plans with a fiduciary financial advisor. Our firm has experience with the Kaiser system. If you are interested in setting up a 10 minute introductory call so that we can get to know each other you can request a call by filing out the following form.

Disclaimer: This article is written for educational pruposes only. While we believe this information in the article is correct, neither Daniel Harris nor D.R. Harris and Co. are your financial advisor unless you have a signed written advisory agreement with us. We highly encourage you to do all of your own independent research, talk to your own employer, and your own professional advisors before acting on any information that you may have learned about in this article.