The Ultimate Guide to

Financial Planning for Physicians

1 Introduction

Making the decision to retire should be up to the individual- complete their education and to come into their career,
even for physicians. This is a decision that one makes both physicians in the United States tend to work longer time
financially and professionally. However, in most instances, frames when compared to other professionals. Often times,
physicians are forced to retire due to professional reasons. a physician’s retirement age is around seventy years of age
Physicians may be forced to retire due to inability to practice, or older.
health concerns, administrative challenges, etc. Or
physicians retire simply because they are ready to hang up
their white coat. Whatever the reason, retirement is a big
financial and personal commitment. As a physician, through
medical school, your residency and fellowship, you are
groomed and conditioned to put work above all other
aspects of your life. The “always on call” hours and busy
schedule of taking care of others can make any form of
planning rather difficult for physicians. It is easy to get
caught up in a life of busy scheduling and taking care of
other’s well-being all while ignoring yourself in the process.
Successfully finding a way to transition into retirement and
being prepared is essential for all physicians. Not only do you
need to make sufficient financial arrangements to match
your current lifestyle but you also need to explore other
avenues to be more productive in your leisure.

What is the ideal age for a physician to retire? According to

the 2010 United States Census, approximately thirty percent
of physicians retire at age sixty or older. Fifty percent of
physicians retire past the age of sixty-five due to insufficient
funds needed to maintain their desired lifestyle. When
factoring in the amount of time a physician needs to

*Approximate data from hospitalmedicaldirector.com & comphealth.com


When looking at a career graph of an average American
physician, physicians start their careers much later.
Physicians are shown as beginning their career after thirty
years old while their peers in other professions are well on
their way. This means that physicians have a much shorter
time frame to accumulate adequate savings. In that short
time, physicians have to save for retirement while
simultaneously meeting their standard of living and other
expenses such as student loans, a mortgage, child’s
education, living expenses, etc. It is imperative for physicians
to start financial planning in the early stages of their careers.
This will help you put less strain on your dollar as you continue
to grow towards your goals and save to maintain your lifestyle
throughout your career and into retirement.
What reason do you have for practicing medicine
beyond the age of 65?*
*Approximate data from hospitalmedicaldirector.com & comphealth.com
2
Benefits of Financial
Planning for a Physician
Once you find a job, making money is easy however, it can be
confusing when deciding how, when, why, and where to save.
This is where an advisor can help. Planning for your future is
not a one conversation event, it is an ongoing process that
can help you make the right decision about your money and
how you can use it to meet your goals in the most effective
and efficient manner. Saving for your future is not limited to
the purchase of an IRA, a pension fund, or contributing to
your 401(k), 403(b), 457(b) – an advisor can help you view
possibilities in addition to and beyond these benefits.
Physicians work long hours and love what they do but they all
eventually want to hang up their white coat. Spending time
with family and going on vacations can help make retirement
a lot more comfortable. Financial planning can show you
how to achieve your objectives. Advisors can help you find
options for minimizing your debt, plan for your children’s
education, show you how to prepare for medical
emergencies pre-retirement and post-retirement, all the while
upkeeping personal expenses during retirement, etc.
Financial planning illustrates how you can achieve
numerous goals and provide many advantages
such as:
a. Financial Well-Being

Being financially secure is an amazing feeling. Financial

planning helps individuals feel secure
about their future and aids in better physical health, stress
reduction, relationship stability, and job satisfaction.

b. Accelerate Savings

One of the main benefits of financial planning is being able to

earn additional income by investing earned income. There
are two approaches an individual can take when planning
towards their goals - they can choose to be negligent and
take things as they come or strategically plan towards each
goal. Advisors help you to understand the benefits of saving
now vs. later. They can help you to understand the effects of
compound interest over time and how it can aid in
accelerating savings if planned correctly.

Strategic financial planning can aid in your mission of

accomplishing your goals not only for your family needs but
also your own.

c. Risk Management

Unfortunately, unforeseen circumstances can arise at any

time. Having a financial plan in place can help provide a
safety net for you when needed. This will prevent you from
using huge sums of money in such circumstances. For
example, as a physician, what would your next step be if you
could no longer practice in your specialty?
Occupation specific income protection provides you with an
income in case of an accident or illness that renders you
incapable of working within your specialty. A chronic illness,
home repairs, a loss of the sole earning of a family member are
all difficult situations to be in, but being prepared can help.

d. Discipline Yourself
As physicians, you all have a lot on your schedules whether it be
taking care of patients or documenting EMRs’. Being in the
business of always helping others can sometimes lead to you
not being able to help yourself or delaying your own goals. It can
be hard to find the time to think about the future. We sometimes
find ourselves unprepared for unexpected financial obligations.
Advisors can help you decide on the how, when, why and where
to save a part of your paycheck every month. They can show you
how to keep yourself prepared and help you create a disciplined
savings schedule that fits your goals.

Having an advisor brings a professional approach to your

lifestyle management. Our advisors regularly track your progress
and make corrective changes based on your goals. This helps
bring order and leads to an organized financial plan.

Always remember, when planning how to save, you must first

pay taxes, save towards your goals and then spend what is
leftover. Follow this mantra and you will find financial success.

e. Better Distribution of Income

The saying goes, “Don’t put all of your eggs in one basket”.
Physicians’ have a higher earning potential than the average
employee which means they must save more in order to
maintain their standard of living. There will come a day when you
are no longer working in which your retirement plans become
your employer. It is imperative to save in addition to your
employer sponsored retirement plans.
Planning for your future helps you distribute income between
many assets and investment strategies. Advisors can help
select the right strategies and asset allocation mix for your
investment portfolio to meet your risk tolerance, return & time
horizon preferences.
f. Clear Visibility of the Future
You often hear people telling you to live for today and stop
dwelling over the future. The future often comes quicker than
you think making strategic planning extremely important. It is
imperative to ensure you have adequate funds available for
your goals whether it be emergencies, your children’s
education, disability or retirement. It is never too early to start
thinking lifestyle management.
A strategic financial plan tailored to your lifestyle can help give
clear visibility to the future.
g. Peace of Mind
Financial planning strategies and products can help provide
peace of mind. Financial disputes among family members are
common after death. In every state, every person’s will is
written for them, even for you. If you choose not to have an
estate plan drafted and executed for you and your family, state
laws will draft a plan for you which may not match your intent.
Sophisticated strategies allow you to protect your loved ones
not only from financial destitute but also from creditors,
lawsuits, divorce and outside predators.
Having a financial plan in place can help to relieve such
stresses on family members in good times and a time of crisis.
3 Checklist for Effective Financial
Planning for Physicians
As you can see, financial planning requires a fine balance
between lifestyle and money management. There are many
parameters physicians need to consider for effective financial
planning.
We have broken these parameters down into a checklist to make
it easy for you to understand everything that goes into the
financial planning process:
a. Why Financial Planning?
Physicians work long hours and love what they do but they all
eventually want to retire. Retirement is a lot more enjoyable when
you do not have to worry about making your money stretch.
Working with an advisor can help you find ways to spend your
retirement relaxing with your family instead of making financial
cuts.
b. Optimize your cash flow
Physicians work hard to earn a generous salary and live a lifestyle
to match. It is likely that physicians will want to maintain the same
standard of living in retirement.
The first step in optimizing your cash flow is to:
Account for emergencies: It is important to factor in inflation
rates as well as save enough for emergencies. A safety fund
might be of interest for unforeseen demands.
Studies show that many physicians invest 60-80% of their
money in mutual funds and keep the remaining balance
available for living expenses during retirement. Under this
plan, a slight change in the market, emergencies, or inflation
can greatly offset budgets. These are all things to consider
while creating your budget.
Calculate Monthly Financial Expenses: How much do
you currently spend to maintain your current standard of
living? Including credit card bills? Most people do not keep
track of their expenses, therefore they do not keep track of
how much they are spending each month. When making a
budget it is important to include personal expenses –
medical expenses, living expenses, clubs, travel, food, bills,
etc. This will help create a visual of your cash flow per month.
You can increase cash flows by carefully monitoring your
spending patterns and expenses. Tax planning, prudent
spending and careful budgeting will help you keep more of
your hard earned cash.
c. Make Future Goals and Plans
Everyone has long-term goals they wish to achieve such as
being a homeowner, traveling, helping their children with their
education, owning a vacation property and living
comfortably in retirement. Ensure to be specific about each
goal and set realistic benchmarks to each goal to make
monitoring easier.
d. Monitor Your Resources
Retirement can require a lifestyle change if you have not
prepared. Physicians are affluent professionals but the
United States Social Security office only provides a small
percentage of income towards your retirement plan, so most
of retirement income will come from personal savings. In
order to ensure the most stability, it is imperative to start
saving early in your career for retirement. Making smart
choices and working towards your goals will make
retirement less challenging and help you maintain your
current lifestyle.
e. Reduce Debt
It is likely that you have taken on loans to pay for school, a
mortgage to pay for your home, and possibly some credit
card debt. Focus on reducing high-interest debts first before
tackling other expenses. This helps in reducing financial
burden in the future.
f. Start Making a Retirement Fund
The first benefit organizations offer is healthcare coverage
and retirement benefits. The most popular retirement plans
include 401(k) and 403(b) plans. Most Physicians are offered
some form of a qualified retirement plan when working for a
hospital whether it be a 401(k) or 403(b) plan. Under both
plans, employers can make matching contributions on
behalf of eligible employees.
When planning for retirement, physicians and other affluent
professionals should seek where they will receive the most
tax leverage first, which is usually their qualified retirement
plans. Retirement plans such as a 401(k) & 403(b) allow a
physician to put away money tax deferred until retirement.
For example, if you are in a 50% tax bracket, for every dollar
you place in your retirement account, you defer 50 cents in
taxes!
Remember, your employer sponsored retirement plans are
just the beginning of a successful retirement strategy. Expert
advisors go a long way in helping prioritize the best
retirement strategy suited based on your lifestyle
requirements.
g. Estate Planning
Money is both good and bad. Money can help to provide
freedom to make choices, but can also cause controversy.
As a physician, if you plan correctly, you will accumulate
wealth throughout your lifetime. It is imperative to create an
estate plan. There is a common misconception that an
estate is only the property that one leaves at death. In reality,
it is much more than that. In its broadest sense, the term
estate planning encom¬passes the accumulation,
conservation, management, and distribution of an estate.
The overall purpose of the estate planning process is to
develop a plan that will enhance and maintain the financial
security of you and your family upon the client's
incapacitation or death. An estate plan includes wills, trusts,
health care proxies, power of attorney, etc.
It is critical to make sure that all of your assets have the
correct beneficiaries to coordinate with your estate plan. This
is a necessary financial step needed to avoid any unexpected
disputes which may occur after death.
h. Appoint a Qualified Financial Planner
Physicians have long working hours which makes it difficult
to have a lot of personal time. Appointing a qualified certified
financial planner makes lifestyle management easier.
Advisors can help you to create the blueprint to your financial
freedom.
Advisors can also help you understand how to maximize tax
credits and deductions. You are required to pay the tax you
owe, not the most amount of tax. Ideas such as a saving into
a Health Savings Account will help save for health expenses
while saving on taxes which you can utilize towards other
investments. A qualified financial advisor not only helps you
accumulate assets but also walks you through the process
of conserving, managing and distributing your assets at
different periods in time.
At the peak of careers, professionals tend to look towards
short-term goals and forget about the future which can lead
to a future financial crisis. That is why it is important to have
an advisor explain and draw out a plan with directions on
how to achieve short term and long-term success.
i. Invest as Per Your Goals
Financial planners can present different strategies based on
your short term and long-term goals. Saving towards
emergency funds, your first home, a child’s education,
retirement, etc. all require different plan of action. Each one
of your goals will occur at different periods in life and are
required to be treated differently.
Advisors often guide clients on which strategies to consider
that will best help achieve your goals. A qualified advisor
should be able to assist and educate you on your goal and its
association with your risk tolerance, time horizons, expected
rate of returns, strategy design and its relation to your big
picture.
Each one your goals is a piece to the puzzle that’s your life. A
qualified advisor should educate you on how each piece fits
together to achieve your overall aspirations.
j. Patience is a Virtue:
When executing a financial plan, our advisors work at your
pace. In the beginning, creating the plan can cause some
anxiety and seem like a lot to take on. It’s important to take
things one step at a time, one milestone at a time. Do not
overwhelm yourself trying to accomplish everything
overnight. It’s an advisor’s role to help manage your
expectations as to what can be done and in the appropriate
time frames.
When a plan is in motion, it is easy to get disheartened when
everything does not immediately line up. Life changes and so
plans must also. It is important to have patience and try to
stick to the blueprint. For example, when investing for
retirement, the markets change every second. Hold on to
your investments and don’t get wavered by small drawbacks
and minor market fluctuations. Your advisor should be aware
of your risk tolerance, time horizon, goals etc. and be able to
educate you during each step of your plan.
Conclusion:
Though it may seem overwhelming, consciously thinking about
making a will, investing whether for your children’s education,
your first home, and planning for retirement at the beginning of
your career is imperative. Planning for the future will help you be
better prepared for tomorrow. You can reach long-term goals
faster and smoother. Having a financial plan can relieve the
stress of future aspirations.
We all have aspirations we wish to achieve and we take many
steps to reach them. Planning for the future with an advisor
helps make those dreams more achievable. So, write down your
goals, discuss your plans with an advisor, and select the financial
strategy that best meets your aspirations.
Your story is much better when you’re the author!
*Asset Allocation neither assures a profit nor protects against a loss in a
declining market. Neither MML Investors Services nor any of its
employees or agents are authorized to give legal or tax advice. Consult
your own personal attorney legal or tax counsel for advice on specific
legal and tax matters.