With less time to manage both their practices and the finances many physicians have poor or no financial plans, which can erode their wealth before they even retire.
With less time to manage both their practices and the finances, a multi-year study commissioned by The Abernathy Group II revealed many physicians have poor financial planning.
Among the trends was the fact that 50% of physicians nearing retirement age have postponed it, and one of the reasons is because medical practices are just worth less these days. When a community physician retires competitors will naturally inherit the costumers when the vacuum, so they have little reason to bother purchasing a practice.
Abernathy also found that doctors seldom create and preserve generational wealth, even though the average MD with a specialty or subspecialty makes roughly $350,000. However, bad or no planning will ensure that the doctors won’t see as much as they should when they retire.
“There are consistent patterns among most physicians who fail to create and grow their wealth despite high earnings,” said Brian Luster, president and principal of Abernathy, in a statement. “We see this all the time — doctors consistently hire advisors who are not advocating for their best interest because they have no fiduciary responsibility. People often mistake salespeople for experts and advocates; they’re not.
Even if a physician has hundreds of thousands in the bank, he could see that wealth erode if his advisers aren’t on the same page as him.
Also wearing on a doctors’ wealth? Practice costs and long hours. The cost of operating a practice is up with integration of EMRs, IT systems and HIPAA compliance, but physicians might also find that malpractice insurance is up.
The physician shortage has led to longer hours and more patients per doctor, which can easily lead to an increased risk of making mistakes. With medical risks up, so is the cost of insurance: up 54% for OB/GYNs and internal medicine, and 70% for general surgeons. Litigation against surgeons is also up.
According to the report, the way physicians practice medicine, serve their patients and run their practices has to evolve, or they run the risk of diminishing the value of their practice.