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Retirement planning for physicians

Medical Economics JournalMedical Economics December 2021
Volume 98
Issue 12

Click here to access the full session video and slide deck (registration required).


Physicians are often at a disadvantage when it comes to retirement planning compared to other professionals because they enter the workforce later in life and typically carry a lot of debt. In fact, the average medical student graduates with more than $200,000 in debt.

Regardless of where physicians are in their career, it’s never too late to start planning for the day when they hang up their stethoscope and retire. In addition to retirement, physicians also need to protect their family’s financial future with a solid estate plan that retains the wealth they have worked so hard to accumulate.

With a strong investment plan and a financial strategy that minimizes taxes, it’s possible for physicians to achieve all their financial dreams.

Learning objectives

How to prepare for retirement at any stage of your career

Estate planning 101: Protecting your family’s financial future

Investment and tax minimization tips

Meet the panelist

Joel Greenwald, M.D., CFP Greenwald Wealth Management

Take these key steps to
ensure a financially secure retirement

The No. 1 question physicians ask about retirement is, “How much money will I need to retire?”

The answer can widely vary depending on a host of factors, including age and spending levels. Creating long-term projections can be complicated, so physicians might rely on a simple rule of thumb, such as the 4% rule — essentially taking out 4% of your retirement savings each year — to simplify things.

Joel Greenwald, M.D., CFP, says that kind of oversimplification can lead to running out of money in retirement. “Unfortunately, as with any rule of thumb, particularly ones that are simple, they’re not entirely reliable,” says Greenwald.

For example, the 4% rule only covers a maximum of 30 years of retirement. “People seem to extend that to 35 or 40 years of retirement, which certainly can happen now with people retiring earlier and particularly with longevity,” he says. That, however, means they will most likely run out of money.

In addition, the type of account holding the money can affect the calculations because taxes may take a larger share of the money than anticipated. On the flip side, physicians may die with too much money, meaning they may have missed out on a lot of experiences for fear of running out of funds in retirement.

One of the best strategies to make sure you have the right amount of money is to ask a slightly different question. “It isn’t, ‘How much can (I) safely withdraw from a nest egg at retirement?’ ” says Greenwald. “It’s, ‘How much do I need to be saving every year during my working years, during my accumulation years, so that I make sure I have enough money?’”

In most cases, saving 20% of your gross income allows you to retire in your 60s. And the quickest way to get to that 20% is to automatically invest into a growth-oriented brokerage account each month.

“The reason it needs to be automatic is because a lot of people say, ‘OK, I’m going to get through the year, and at the end of the year, any extra money I have, I (will) put in my investment account,’” says Greenwald. “Lo and behold, come the end of the year, there is no money for the investment account.” The automatic investment ensures the money is not spent and, instead, compounds over time to grow retirement savings.

Another good strategy is to plan for market downturns so that you don’t have to withdraw money from your investment accounts. “What some folks advocate is having a year or two at least of spending in cash or in short-term bonds, so that when you retire or soon after you retire, (if) the market goes down, you’re not having to sell stocks to pay the bills. You’ve got money on the side,” says Greenwald.

Physicians also need a long-term tax strategy to minimize impact and should consult with an accountant who has experience working with doctors on this. “Rather than looking simply at, ‘How do I save on this tax?’ people need to look bigger picture,” says Greenwald. “What things can you be doing over a lifetime to save on taxes?”

The other financial piece that physicians often overlook is creating a solid estate plan. For younger, married physicians with no children, having a financial power of attorney and a health care directive in place is probably good enough. But for older, wealthier physicians, they will need a much more detailed plan that may include a revocable trust to hold their assets. Without a proper estate plan, a lifetime of earnings may be siphoned off to taxes or held up in court. A good plan makes sure your money is protected and goes to the people you want it to go to.

Solutions and takeaways:

Don’t rely on oversimplified investment guidelines to fund your retirement.

Create a long-term investment plan that includes money for contingencies and market swings.

Analyze your spending patterns now to better understand your retirement needs.

Approach tax-planning with a long-term view.

Form a rock-solid estate plan to protect your wealth.

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