Expert guidance for doctor retirement portfolios

By Naveed Saleh, MD, MS
Published April 12, 2021

Key Takeaways

Physicians face many financially lean years in medical school and residency. A lifetime of higher earnings typically follows. These realities create a distinct financial trajectory compared with their contemporaries in nonhealthcare-related fields—requiring physicians to balance their retirement portfolios differently from other professionals.

“Physicians are generally higher-income earning individuals with steady pay,” said Anthony Watson, CFA, CFP, of Thrive Retirement Specialists. “This future string of higher secure future pay could be considered ‘bond-like.’ Because of this, physicians can often take on more stock exposure than would be traditionally considered for others." In addition to more extensive stock exposure, physicians could heed other specific considerations when planning their retirement portfolios, according to the certified financial planners we spoke with.

Gauge diversification

Many investors typically misunderstand diversification, according to Watson. In fact, an investor with one index fund could be more diversified than another with 100 individual holdings. 

“Diversification is not about the number of holdings but rather the asset class exposures each holding represents,” said Watson. He believes there are nine distinct asset classes a physician should have exposure to: 

  1. US Total Stock Market


  3. Developed Markets Europe

  4. Developed Markets Asia-Pacific

  5. Emerging Markets

  6. US Total Bond Market (investment grade)

  7. Total International Bond Market (investment grade)

  8. US Treasury Inflation-Protected Securities (TIPs)

  9. US High Yield Corporate Bonds (non-investment grade)

Watson also stressed that certain higher-risk investment vehicles should be kept out of physician portfolios.

“Alternative assets like hedge funds are complex, loosely regulated, opaque, and expensive investments that frequently fail to yield a return commensurate with their true risk, and are best avoided," Watson said. "Commodities are not income-producing assets and therefore cannot be expected to provide the portfolio with a positive return above the inflation rate and are thus not worth including.”

Changing strategy

As doctors ease into their golden years, it may be a good idea to adjust their investment strategy, according to Watson.

“As a physician approaches retirement, the portfolio should begin to look different. The investment portfolio will likely be the physician's largest asset in retirement, and there is less time to rebound from mistakes. For starters, volatility becomes much more of a factor, as sequence-of-returns-risk is highest early in retirement when the portfolio is largest. Ensuring your portfolio is well-constructed and diversified is key to minimizing volatility. Furthermore, because you cannot afford to take concentrated risks to try and hit home runs anymore, keeping as much return as you can becomes more critical. This means paying attention to fees that can eat away at your returns,” he said.


Physicians are used to dealing with numbers, whether it be data from peer-reviewed research or prescribed dosages for their patients. In this vein, Lewis J. Altfest, PhD, CFP, CFA, CPA, PFS, at Altfest Personal Wealth Management, suggested the following breakdown for a physician portfolio: 60% stock, 20% bonds, and 20% real estate.

With respect to the bond portion of the portfolio, he specified that half should be allocated to intermediate-term bonds, which could include emerging markets, and the other half in short-term bonds or cash.

Altfest noted the importance of investing in international securities, suggesting that one-third of the total stock allocation in a physician-retirement portfolio be in international vehicles, with the rest in US stocks. 

“International stocks have been neglected since the 2008 recession,” he said. “They provide diversification since a good part of their economies is unhinged from the US and should bounce back as the COVID problem diminishes. There are strong mutual funds out there.” 

He added, “As part of the international allocation, buy emerging market securities, particularly those in the Pacific Rim. They are historically cheap right now with value-oriented ones being the cheapest.”

Finally, Altfest highlighted the importance of investing in real estate as part of a diversified retirement portfolio for physicians. 

“Private real estate [investments] can provide income and growth potential. They are an excellent diversification tool not correlated with stock price movements. They also are the best beneficiary of inflation, which is likely to step up over the next several years,” he advised.

Bottom line

The distinct patterns of physician earnings make retirement savings a complex consideration for most doctors. To best weigh all your options, it may be a good idea to meet with a financial planner to discuss goals.

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