Average Physician Retirement Savings

When it comes to planning for retirement, it is important to keep track of your finances. You may be at the start of your career or you may be a few years away from retiring but in any case, it is a common question to ask: how much savings should I have to retire? Based on the answers from a survey conducted on 2,365 physicians, a report on average physician retirement savings was prepared in 2013. Physicians reported savings:

• Below $100,000 – 2%
• Among $100,000 and $500,000 – 8%
• Among $500,000 and $1 million – 17%
• Among $1 million and $3 million – 43%
• Above $3 million – 30%

The average physician retirement savings depends on several factors such as age, income, current standard of living, debt, and more. In general, while you may lead a financially comfortable lifestyle, many physicians such as you, are falling behind when it comes to saving money for retirement. Regardless of solid average savings rates of 19.8%, nearly half of the populations of physicians are saving an average of 9% (with a recommended 15% rate). So why are so many physicians falling behind on retirement savings? Statistics show that physicians earn around $300,000 per year. Even though you are among the most highly paid professionals, 84% of student debt from medical school amounts to over $170,000. Moreover, over 60% of physicians report being confused as to how to anticipate and plan for long-term financial stability. However, perhaps one of the main reasons why so many physicians are falling behind on setting up a retirement plan is because they do not take complete advantage of available retirement saving opportunities – such as maxing out contributions to a high quality and effective work plan.

If you are a young physician, you may be more focused on paying off your debt as opposed to saving for your retirement. What’s more, one of your main priorities may be spending money on a comfortable lifestyle for yourself and your family as well as taking care of your mortgage and bills. For this reason, it can be hard to get an accurate picture of what your retirement plan should look like and how much you should save. This is where financial planning comes in. A retirement calculator is one way in which you can estimate how much you will need to save for retirement. The calculator takes into account your current age, the age you wish to retire, your total household income, current retirement savings, annual rate of return before retirement, annual rate of return during retirement, annual retirement savings, expected income increase, years of retirement income, income required at retirement, expected rate of inflation, marriage status checkbox, and social security checkbox. It is important to keep in mind that these settings are hypothetical and future return rates cannot be predicted with absolute certainty. The actual rate of return on investments that you make may vary greatly over time, yet the calculator can serve to provide you with a good sense of what you can expect in terms of retirement planning.

Another example of how you can track your retirement savings is leaning on the expertise of other professionals, such as a financial advisor. A financial advisor can assist you in the financial outlook of your retirement plan by creating a structure that takes into account your personal lifestyle – wants, needs, and goals. The advisor can serve to ensure the necessary savings are taking place and that they will lead to financial stability in the future.

Tax-advantaged accounts are one of the most effective ways in which you can take advantage of saving for retirement. 401(k) or 403(b) plans allow you to save up to $18,000 annually. Another tax-advantaged retirement saving option is opening an IRA – Individual Retirement Account - where can save an additional $5,500. There are two main types of IRAs – traditional and Roth. In a traditional IRA, all contributions are tax deductible. In a Roth IRA, there are no tax deductions or taxes on withdrawals. Moreover, there are no required minimum contributions. The only catch to IRA is that you, may not qualify, depending on your income level.

Increasing your Health Savings Account (HSA) is a great way to save money for retirement, as it allows you to shield your savings from taxation. What’s more, as you age, medical fees and commissions tend to increase, thus greatly impacting on your savings. With HSA, you can pay the difference in your fees with your tax-free investment savings. Just as important as it is to save money, it is equally important to know where you should invest your money. Choosing to invest your money in treasury bills or stocks can significantly affect your returns so be wise in choosing how you will invest your finances. Talk with a financial advisor about asset allocation and risk ratios. The more you know and understand these terms, the better.

Finally, when it comes to retirement savings, the financial aspect is not the only thing that you should take into consideration. Above all, while practicing medicine is about providing the best care possible to your patients, it is also about taking care of yourself and your personal health. Being physically, mentally, and emotionally healthy will help boost your career as well as your ability to earn a steady income. What’s more, the more energy you have, the longer you will be able to work. Earning more income throughout the years means saving more money towards retirement.

The five most effective ways in which you can boost your retirement savings is by:

• Evaluating your practice’s expenses – See in what areas your practice spends the most and figure out if there is a way in which you can cut down on expenses.
• Spreading out your savings – Set up a savings account that takes a certain percentage of your salary so that it is not all available to you at once. By automating your savings, you can also maximize your contributions towards your retirement plan.
• Focusing on long-term benefits – Investing your money in yourself is the best thing that you can do for your “future self”. Take the time to review your finances and invest your money in available retirement accounts – HSA, IRA, 401(k) or others that offer long-term benefits.
• Searching for partnership opportunities – By reaching out to other healthcare professionals, you can open up opportunities to work with others and merge medical practices. This way, you may be able to split the expenses associated with running a medical practice and put more money away towards your financial goals, such as retirement savings.
• Learning more about financial planning – Understanding where to invest, how to cut down on expenses, and how to save on taxes can help you to determine the right type of retirement plan for you. Look into the different options at your disposal and compare them in terms of your financial objectives. Finally, select those that meet your needs and desires.

The bottom line is that high cost of medical school education and setting up a medical practice takes its toll on saving for the future. With chaotic schedules and countless financial decisions, understanding how to manage your savings is crucial – especially for healthcare professionals such as you. While physicians earn a decent income, many are lacking behind when it comes to retirement savings. The above steps are a few suggestions in how you can remedy a shortfall and ensure that you are taking complete advantage of financial plans and investments. The world of medicine offers plenty of opportunities, in which you can prioritize your savings and become financially independent. By securing a proper retirement plan tailored to your wants and needs, you can continue your days knowing you will have a comfortable nest egg to fall back on in the future.