Ready to retire? Every doctor should be planning for it now

After a grueling day, many physicians will say that they’re ready to hang up the stethoscope for good. But in reality, physicians tend to put off retirement longer than most workers in other careers. Although the average physician anticipates retiring at around age 60, physicians’ actual retirement age is closer to 69—about 3 years later than the typical American worker’s retirement age of 66, according to a 2016 systematic review.

What are physicians waiting for? Perhaps they’re just not ready to hang up the stethoscope—or maybe they’re simply not prepared for retirement. (Or maybe both.)

“Successful retirement planning was found to be related to being prepared for the financial demands, physical changes, and psychosocial dynamics associated with aging and leaving the workforce,” wrote the authors of the systematic review.

Preparing for the “physical changes” of aging is up to you, but this article can help with the financial preparation and the psychosocial dynamics of retirement. What that boils down to is figuring out how you’ll fund your retirement, as well as what you’ll do to get meaning out of life once you’ve retired.

How much do you need to save to retire?

You can use an online “retirement income calculator” to determine how much you’ll need to set aside. Many of these retirement calculators, such as this one from Vanguard, expect that you’ll need 85% of your current income to cover your retirement spending.

But 85% is likely too excessive for physicians and other higher-income professionals, wrote the Wall Street Physician in a recent blog. “Physicians can have a very nice retirement on 50% or less of their pre-retirement income, especially if they do not have mortgages or college tuitions to pay,” the Wall Street Physician explained.

Assuming you’ll have paid off your mortgage and your children’s college tuitions by the time you’re ready to retire, then your annual spending during these years—$140,000, for example—may be substantially less than your pre-retirement income. Once you determine this amount, multiply it by 25 (ie, the number of years you’re likely to have between retirement and end of life) to get your retirement number.

“For example, if you currently spend $140,000 a year and plan to continue that spending rate in retirement, then you’ll need to save 25 times that, or $3,500,000, for retirement,” the Wall Street Physician wrote.

This amount is based on the 4% rule calculated by researchers at Trinity University, San Antonio, TX. “They found that if you spend 4% of your retirement nest egg each year during your retirement, there was a > 95% probability that you would not outlive your retirement funds,” explained the Wall Street Physician.

Thus, if you can calculate your retirement amount—$3,500,000, in this example—you’ll know how much you’ll need to save up before retirement. Even if you’re relatively young, it’s a good idea to start planning and investing now for your future.

How will you keep busy in retirement?

Physicians’ number one concern about retirement is the loss of social life on the job—ie, the “loss of the social dynamic of the work environment,” according to a CompHealth survey of more than 400 physicians aged 50 years and older (average age: 60). The next two concerns on that list, in descending order, were “loss of purpose,” and “boredom/loneliness/depression.” Rounding out the top five concerns: “Not feeling useful.” (The inability to maintain a desired lifestyle was fourth on the list.)

Among all physicians who responded to the survey, surgical specialists (including surgeons and anesthetists) were the least excited and the least emotionally prepared for retirement.

Indeed, 91% of all respondents said that they can still provide useful services to their patients and the community, and 89% maintained they can still be competitive in the health-care field. Accordingly, one-half of respondents (51%) said that they’d like to continue to work part-time or occasionally in their retirement.

“Practicing medicine is often an identity as much as it is a job or career. Combine that with other retirement changes and physicians often ease into it by continuing to work part-time in some aspect of the medical field,” said Lowell Thiessen, CFP, CIM, RFP, wealth lead-financial services for MD Financial Management, in a CMAJ article. “It is worth thinking through not only what you are retiring from, but what you are retiring to. Beyond compensation, what provides meaning to you as a practicing physician and how will you replace that in retirement?”

Respondents didn’t say that work would be their only focus in retirement, of course. Most look forward to travel, pursuing other interests and activities, and spending more time with family and friends.

In short, considering part-time work as well as social pursuits should be just as important—if not more important—as making a solid financial plan for retirement.