Physicians: Are You Saving Enough for Retirement?

Did you know that 45% of physicians feel they can’t afford to max out their workplace retirement plan. 

 

A recent analysis from Fidelity Investments examined 13,330 physicians’ workplace savings plans Fidelity’s Money FIT Physicians Study and found that on average, physicians are saving a fairly healthy 19.8 percent. While this number is up from 15.3 percent in 2012, Fidelity Investments points out a few areas where physician retirement savings fall short:

• 48 percent of physicians are saving less than Fidelity’s recommended workplace savings plan rate of 15 percent with an average savings of only 9 percent.
• 58 percent of female physicians, and 45 percent of male physicians are not maxing out their contributions to a qualified workplace plan such as a 403(b) retirement savings plan.
• 39 percent of physicians close to retirement are very aggressive in their equity allocation, making their savings more susceptible to market fluctuations. A similar number of physicians in their 40s are conservatively allocated, limiting their potential for growth during the second half of their careers.
• 61 percent of physicians participating in the study are at least a little confused about how to navigate their financial path for the future.

Physicians are known to have a large amount of student debt – industry research reveals that 84 percent of medical students graduate with student debt averaging more than $176,000, with many also juggling expensive practice-related costs. However, Fidelity’s business data shows physicians earn an average of $300,000 per year annually.

According to Steven Podnos, MD, CFP, a critical care physician and fee-only financial planner, many physicians should start a pretax retirement plan early and aggressively. Podnos stresses that starting early will allow for decades of tax-deferred earnings, “Since you are deducting the contributions when your taxes are high, and you will most likely take out distributions in a lower tax bracket, you will experience some powerful advantages.”

If you have questions about your retirement options, consider talking to a certified financial planner. Ask your colleagues if they can recommend a trustworthy CFP, or search for one here.