In many discussions about physician finances, there is a common perception that all doctors achieve substantial wealth and save significantly for retirement. However, data from a retirement committee of a large medical group reveals a different reality. Monthly analyses indicate that many doctors are not saving adequately for retirement.
The findings indicate that the average savings rate among a group of physicians is 16%, approaching the recommended 20%. Still, this average can be misleading—one-third of the doctors save less than 10%, and 56% save less than 20%. Moreover, only half are on track to maximize their 401(k) contributions, with only 62% participating in a cash balance plan.
Factors contributing to the disparity in savings rates include income variability and personal financial habits. Many doctors are subject to significant tax liabilities and live off clinical earnings, which can limit their ability to contribute to retirement plans. The analysis also pointed out that while some partners save a higher percentage, others may still be contributing larger amounts due to higher income levels.
Surveys of doctors in their 60s further emphasize these trends, showing that a notable percentage have a net worth below a million. This suggests that despite high earning potential, many may not achieve multimillionaire status at retirement.
Key strategies for improving retirement outcomes include committing a larger portion of income to retirement plans during peak earning years and ensuring prudent investment choices.
Why this story matters: Highlights the financial challenges many physicians face despite high incomes.
Key takeaway: Many doctors are not saving sufficiently for retirement, with a significant portion saving less than recommended rates.
Opposing viewpoint: A few doctors may still achieve wealth through high income, regardless of saving percentages.
