Here’s how doctors can catch up on retirement savings

By Naveed Saleh, MD, MS
Published March 9, 2021

Key Takeaways

A dearth of retirement savings is a big problem in the United States, according to a report published by the National Institute on Retirement Security (NIRS). The typical working American has no retirement savings. And those who do save, often don’t save enough.

“Even after counting an individual’s entire net worth—a generous measure of retirement savings—three-fourths (76.7%) of Americans fall short of conservative retirement savings targets for their age and income based on working until age 67,” according to the authors of an NIRS report.

As a physician, you’ve studied, trained, and worked too hard not to enjoy retirement. Many physicians can only start saving for retirement in earnest by their 40s. At this point, it becomes a game of catch-up. So, what’s a doctor to do?

Here are nine tips for shoring up your retirement savings.

1. Set a date

It all begins with a specific date and time, according to Matthew Seppanen, a CFP at Newpark Wealth Management.

“To know how much the physician must catch up, the first—and most important step—is for physicians to create a date-specific and dollar-specific plan that makes best guesses on what they are trying to accomplish financially,” he said. 

So, this means being definitive on when exactly you plan to retire, and how much you want to retire with. Here’s how much doctors should save at every life stage.

2. Define your goals

Doctors saving for retirement must create a clear plan so they can be prepared for expenses at retirement, said Seppanen.

“Thinking through some basic questions including what are they saving for, who is the money for, and when will they need the money, can help the physician (and their family) begin to clarify their goals. Getting clear on these questions will quantify the ‘catch up’ need,” he said.

3. Invest and save

The key to attaining retirement-savings goals entails investing in addition to savings, said Chris Jennings, CFP, of Heron Wealth

“Physicians often have a lot of money in savings accounts, but not enough in investment accounts,” he noted. “Whether that’s because of the intimidation factor inherent to investing or because their jobs leave them with little time to proactively manage investment accounts, they’re leaving a lot of money on the table.”

Not sure where to invest? Here’s where doctors should put their money

4. Consider taking on more work

Most physicians are overworked as it is, and burnout is a big issue. But, if you can comfortably fit a little extra work into your schedule, and anticipate that you need the extra green to pad your retirement savings, perhaps taking on a side gig is the right decision.

“In most cases physician income will allow for implementing a properly thought-out retirement accumulation plan and they can make up for the investing time missed in their 20s and 30s,” said Seppanen.

“If extra income is needed, physicians have opportunities that many professionals do not. This can be the ability to increase their income through picking up extra shifts, or serving in a group leadership position that provides extra income. Additionally, physicians who are partners in a group often have the opportunity for tax-advantaged savings in profit-sharing plans, employer contributions, or defined benefit plans,” he added.

5. Take advantage of tax benefits

Depending on the nature of your work, you may be able to save even more in tax-deferred accounts.

“Physicians with equity in private businesses (eg, doctors who run their own practices) can take advantage of defined contribution plans,” said Jennings. “Depending on the person’s circumstances, these plans could make them eligible to put away a substantial sum in a tax-deferred vehicle, sometimes in excess of $200,000 annually.”

Want to learn more? Here are five tax deductions every physician should take advantage of.

6. Say ‘no’ to commissions

Not all investment vehicles are equally beneficial, according to Elyse D. Foster, CFP, of Harbor Wealth Management.

“Avoid insurance and other commissionable products like annuities,” she said. “Many physicians come to us loaded down with variable life, annuities, and so forth, which carry high commissions, yield very little and are hard to unwind.”

7. Spend wisely

It may be tempting to splurge on the finer things in life, but do so wisely.

According to Jennings, “After years of rigorous education, grueling residencies, and financial sacrifices, physicians finally start earning real money in their 30s or 40s. By that point, they see their peers driving nice cars, living in big homes, and taking fancy vacations, and they feel that they have to do the same—keeping up with the Dr. Joneses, if you will. This can lead to unsustainable spending habits that have an insidious effect on their finances.”

The industry term for someone who splurges unnecessarily as they climb up the income ladder is “lifestyle creep.” Here are the symptoms and ways to overcome this debilitating financial habit.

8. Don’t feel guilty

Doctors shouldn’t feel guilty about their lack of savings. Instead, focus on getting the ball rolling.

“Physician training can be very intense and requires them to focus on the ‘now’ just to get through,” said Seppanen. “In many training cases, physicians are overworked, underappreciated, and underpaid, and there can be a level of guilt that they have not saved more and have to play financial catch-up. I encourage the physicians who I work with to stop ‘should-ing’ on themselves that they should have done more. Evaluate where they are, look at the resources they have available to them, and start making good decisions as they move forward. If they do these things, they will reach their financial goals.”

9. Be patient

Keep in mind that retirement savings take time to accrue.

“The list of needs/wants is long and can be overwhelming. The best plan is to start small and increase savings with every income increase until you have met your goal,” said Foster.

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