7 physician retirement myths, debunked

By Naveed Saleh, MD, MS | Fact-checked by MDLinx staff
Published September 5, 2023

Key Takeaways

  • Retirement planning should be strategic and specific to your lifestyle and expected needs. Simply following “rules of thumb” may be reductive.

  • People usually spend more money during retirement than they anticipate, thus it’s a good idea to save more.

  • Because student loans affect your ability to save, physicians with student debt will find it advantageous to consult with a student-loan specialist.

An aging physician population means more doctors are preparing for retirement. Unfortunately, there is a lot of misinformation circulating on the do’s and don’ts of retirement planning. 

To get to the bottom of it, we spoke with several certified financial planners (CFPs)—here, they debunk seven common retirement myths to better guide you toward your best retirement strategy.

Myth 1: Municipal bonds will serve you well

Many believe that the safety of municipal bonds can’t be beat. But are they all that safe, really?

“This is a myth I hear from physicians frequently because saving on taxes is typically (understandably) top of mind,” Matt Elliott, CFP, CSLP, of Pulse Financial Planning, told MDLinx.

But Elliott says that owning municipal bonds is strategic only in the years you are in a top tax bracket—earning $578,125 (or $693,750 if filing jointly) for 2023.[] "While this may be the case for some of your high-earnings years, with solid tax planning, you will likely not be in a top tax bracket through all of your pre- and post-retirement years,” Elliott said.

"You should also never own tax-free municipal bonds in a retirement account."

Matt Elliott, CFP, CSLP

He also offered a reminder about the often-forgotten risks in debt securities issued by governmental entities. “While treasury bills backed by the US government are often referred to as ‘risk-free,’ municipalities can potentially default on their debt,” he said.

“If you don’t believe me, ask the Michigan residents who owned some of Detroit’s $18 billion in debt at the time of bankruptcy in 2013. I’m not saying it never makes sense to own municipal bonds. It does in many cases. It is a topic that gets discussed in the breakroom and taken as a strategy that makes sense for everyone, which it does not.”

Myth 2: Always adhere to the 4% rule

The 4% rule refers to the financial guidance that during the first year of retirement, you should withdraw only 4% of your retirement savings.

In subsequent years, you can withdraw this initial 4% plus any more adjusted for inflation. By adhering to this rule, your retirement savings should last 30 years if 50% stocks and 50% bonds.

“The ‘4% Rule’ is an overly conservative rule of thumb based on a set of rigid and simplistic assumptions that often leads an individual to sacrifice quality of life while living, only to leave a larger-than-planned legacy at passing,” said Anthony Watson, CFA, CFP, of Thrive Retirement Specialists.

Myth 3: Employee retirement plans suffice

To be prepared for retirement, physicians should mobilize multiple investment vehicles, according to Anjali Jariwala CPA, CFP, of FIT Advisors.

"I think one of the biggest myths is that if you put away the max employee deferral into your 401(k) that is enough for retirement."

Anjali Jariwala CPA, CFP

“Since physicians require more education and training, they have a late start to saving for retirement and less time for those investment dollars to grow,” Jariwala said.

“Thus, physicians are further behind than someone who started contributing to a retirement account at age 22. In order to be prepared for retirement, many physicians may need a taxable investment account on top of any retirement buckets (401k, 403b, backdoor Roth IRAs, deferred compensation plans) to fund their retirement.”

Myth 4: You’ll spend less during retirement

It may be soothing to think you’ll spend less money during retirement, with the kids grown and the house paid off, but this may not be the case.

G.M. (Buz) Livingston, III, CFP, of Livingston Financial Planning, debunks this popular myth.

“For many people [spending in retirement goes down], but for everyone, healthcare costs rise,” Livingston said. “We use a higher inflation number for healthcare costs."

"Retirees should plan on potential significant long-term care expenses, too."

G.M. (Buz) Livingston, III, CFP

Myth 5: Your portfolio should become more conservative

Further into retirement—and further away from your peak-earning years—it may be tempting to think that risk should be avoided. But, this rationale may not be prudent, according to Lewis J. Altfest, PhD, CFP, CFA, CPA, PFS, at Altfest Personal Wealth Management.

“If you are financially independent—that is, you are not concerned with running out of money (several doctors are in that position)—you should maintain your risk profile, particularly if you care about how much money you can accumulate and give to your heirs,” he said.

Myth 6: You need to save 25-times your annual income

A common retirement rule of thumb is that you need to save 25-times as much as your annual income to retire, but this advice may be too reductive, according to Watson.

“We hate rules of thumb because they are often wrong on so many levels,” he said. ”First, this simple math presumes [to know] how much you need to support yourself after taxes in retirement. Your annual retirement spending needs will be unique to where you live and how you intend to spend your time in retirement, and it often changes over time.”

"Second, not all savings are equal. The true economic value of your savings depends on where it is held and how it will eventually be taxed."

Anthony Watson, CFA, CFP

“[One-million dollars] of savings held in a pre-tax (401k, IRA, etc) account that will be taxed at your ordinary income tax rate when it is taken out is not equal to $1,000,000 in a Roth IRA account that will never again be taxed when used,” Watson stressed.

He noted that, most importantly, this “simple math” is not a strategic way to plan for retirement. “People can make much more from their savings by investing in a low-cost tax efficient way, having a tax strategy that aims to minimize lifetime taxes through an optimal withdrawal sequencing strategy, and adopting a flexible approach to spending by developing total risk-based spending guardrails,” he said.

Myth 7: You don't need an expert to review your student loans

Student loans are becoming only more complex after pandemic-related provisions, thus it’s probably a good idea to speak with an expert regarding where you currently stand, as such loans affect your savings, according to Jariwala.

“The relief provisions that occurred during COVID have provided opportunities for managing payments and, in some cases, complete forgiveness,” she said. She also noted that, due to all the recent changes surrounding student loans, it can be difficult to have a full understanding of your specific situation, especially as it relates to your retirement planning. 

Related: Medical school debt? The latest news you need to know about student loan forgiveness

“Even though I am a financial advisor, I consulted with a student loan expert for my husband's loans and recommended many of my clients to do the same. If you have not reviewed your student loans, it is prudent to try and have them reviewed as soon as possible before payments restart again in October [2023],” Jariwala said.

What this means for you

There are many misleading statements made about retirement. When strategizing for retirement, it’s important to consider your personal needs in lieu of pithy guidance. It’s also a good idea to err on the side of saving more and consulting with experts, including financial planners and experts on student loans. Taking a calculated approach to your savings can serve to cushion your golden years.

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