Don't make these common retirement mistakes

By Jonathan Ford Hughes | Fact-checked by MDLinx staff
Published September 14, 2022

Key Takeaways

  • Many doctors make these common mistakes that can prevent retirement from being everything it should be.

  • Sound, consistent investment strategies will ensure you don't have to play catch-up as you age.

  • Taking advantage of employer match and paying down debt is essential for building your retirement funds.

No two doctors are alike, but unfortunately, when it comes to saving for retirement, physicians tend to have more in common than you might think. The first commonality is that, unlike the lay population, doctors are playing from behind in the retirement-savings game. While they were in medical school, their non-physician friends were out making money and (hopefully) putting some away for retirement. The second is that physicians tend to be more debt-burdened, with the cost of education as the leading contributor.

Because of these two factors, it’s critical that doctors perfect their retirement-savings strategy. Luckily, other physicians have made these retirement errors so you don’t have to. Here are 5 common retirement mistakes that doctors make.

Not having a plan

Unfortunately, having a retirement account through your employer isn’t enough. And who knows what’s going to happen with social security. You need a thorough plan that takes multiple factors into account. Those factors include the earning potential of your speciality, how long you actually want to work, what you might want to do in retirement, family size, college savings, and covering healthcare costs in retirement to name a few of the literally hundreds of variables you must consider to form a sound retirement plan.

This is why many physicians elect to work with financial advisors. It’s not that they have to.

On the contrary, doctors tend to be very bright and capable of doing the planning. However, doctors also tend to be very busy. It boils down to a matter of preference. Make a sound plan yourself, or work with a professional. Which is the right approach?

“You know what you should be doing, but for some reason you never get around to it,” says W. Ben Utley, head of Physician Family Financial Advisors. “You hear ideas that sound good, but you don’t sit down and research them. If you’ve ever sat down to fill out an account application and felt a little clueless, that would be an indicator you don’t have the skills.”

All of these things, he says, are indicators that you shouldn’t go it alone.

On the other hand, perhaps you have a track record of success.

“How long have you been running your personal finances? If you’ve been doing it for 20 years, you probably have what it takes. But if you just start now on the eve of retirement, you’re going to have a very unhappy ending. The eve of retirement is not amateur hour.”

Not investing consistently

The markets might make you nervous. After all, they can fluctuate quite a lot. That volatility, however, highlights an important retirement-savings lesson. You should be investing at fixed intervals. This mitigates the obvious risk of last-minute aggressive retirement savings and reduces the feeling that you have to "time the market" (which will generally not work if you try it).

“We all pay our bills on a monthly basis,” Utley says. “At some point, you’re going to face a big retirement bill. You can pay that bill on a monthly basis too. But by paying that bill before it’s due, you get a big, fat discount in terms of returns you could have from investments.”

Paying that bill before it’s due often looks like investing monthly.

"Investing monthly allows you to automate things, and when you automate things, they tend to continue. This is one of the few places in the world where you can outsource a good habit by setting automated monthly investments."

W. Ben Utley

Sticking to extremes

There are two extremes among physician investors. Those who like to meddle, and those who like to stick their heads in the sand. The meddlers want to be involved. They may have a financial advisor, but they’re very hands-on. They might even have little side-project investments. This is fine as long as their retirement basics are covered, which should look like investments in a diverse array of mutual funds. If you’ve done that, then maybe you can stomach some experiments in crypto. 

The doctors with their heads in the sand are on the other extreme. They never rebalance their portfolios. They might not even know how they’re invested. These doctors may even be following a so-called plan that some salesman put together for them back when they were single and childless.

Physicians who fall into this category need to monitor their retirement savings, rebalancing their portfolios and perhaps working in tandem with an advisor.

“Regardless of what type of person you are, invested money is like soap, the less you touch it, the more you keep,” Utley says. “What works in the real world is to set it and forget it, with the caveat that when you set up your retirement plan, you have to set it up right. When you have a buy-and-hold strategy, you have to make sure you’re buying the right thing in the first place.” 

Leaving money on the table

Many physician employers offer retirement savings plans to doctors. These might include 403(b)s for those at non-profits and 401(k)s in the for-profit space. Of those that offer retirement plans, there’s a subset that match contributions up to a certain percentage. Employers will often offer matching contributions and/or enrollment after a specified vesting period. If you aren’t contributing the maximum amount, you are essentially leaving money on the table.

"Thou shalt fund thy 401(k). And if you max it out, you never have to worry about the matching formula."

W. Ben Utley

Carrying debt into retirement

It’s not just a laudable goal to retire debt-free, it’s arguably essential. One of the biggest debts a physician will have is their mortgage. Some may rationalize carrying a mortgage into retirement, thinking that they need a place to live regardless. But what they don’t take into account is the expenses that come along with aging: healthcare chief among them. You should know a thing or two about the cost of healthcare.

Mortgage-free physicians can offset the cost of healthcare in their later years with the value of their home. This could look like selling your home and moving to a more tax-friendly location, or if you love your home, selling it if/when you need to move to an assisted-living facility. If you’re mortgage-free, that sale will help offset the costs.

“There’s a sense of joy in living with a paid-off home,” Utley says. “Part of that joy is knowing the place where you lay your head at night is actually yours.” 

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