The 7 Characteristics of a “Financially Prepared” Doctor

“You can be young without money but you can’t be old without it.” —Tennessee Williams

The more I consider the matter, the more I appreciate that my father was a very successful physician — in so many ways.

He liked being a doctor, his patients respected and trusted him, he earned a very good living for many years, he had solid associations with his healthcare colleagues, his reputation in the community was excellent, he was a leader at his hospital, he lived a comfortable life, he watched his family be fruitful and multiply, he developed and enjoyed many hobbies and activities, he maintained good health, and he practiced medicine for 50 years.

And in his crowning glory . . . he lived a content and comfy retirement for about 15 years.

I was witness to much of this. For certain, he worked very hard at doing all these things. “I’m no genius,” he often told me. “It’s all about hard work and hard-working doctors can make money.” So there’s hope for physicians who have some doubts about their own “financial preparations” for a post-medicine life.

It turns out that “having enough money to retire” is the top concern for today’s doctors (among all ages and specialties), according to the American Medical Association’s new 2016 Report on US Physicians' Financial Preparedness. And while the percentage of doctors who are “ahead of schedule” in their retirement plans has nearly doubled since 2013, this new survey also shows that nearly 40% of physicians consider themselves “behind” in their retirement savings.

The AMA report offers up some clear reasons why doctors are challenged when it comes to retirement planning: 1) They start their careers eight to 10 years later than peers; 2) They carry nearly $200,000 in education debts; 3) Their delayed start can mean $71,000 in “lost savings” for retirement; and 4) Their intense, time-consuming careers leave little time to spend on personal finance issues.

The report found that about half of the 2,300+ doctors surveyed have at least $500,000 in retirement savings and 37% have $1 million or more saved. And most of the doctors (87%) claim they have the benefit of a Qualified Retirement Plan (eg, 401k or 403b) in which to invest.

My father certainly had his problems when it came to retirement funding. Like other doctors, he got a late start, didn’t know much about investing, and was susceptible to bad actors selling him things he didn’t need. At one point in his mid-40s, dad told me, he had zero retirement savings. But he was able to overcome all that and have a very satisfying post-physician life.

His route to a sound retirement came via the slow and steady technique. Over a 30-year period, he invested regularly, usually in blue chip stocks and diversified mutual funds, and road out the market’s peaks and valleys. He was lucky enough to find and stick with an honest investment advisor (his brother-in-law and buddy). And he got the timing right too.

According to historical investment records, the stock market retuned an average of nearly 8% per year in the 1960s decade (when my father began his investing), the market leveled off in the 1970s giving up a 6% average annual return (dad hung on and kept investing in this decade) and in the 1980s the market truly flourished up over 17% per year (when dad really filled his retirement pot). He even got a small taste of the 1990s continuing boom when the average market return was 18% annually (he finally got out when the tech-bubble bite him back).

As part of its report, the AMA was able to identify seven characteristics of doctors who are “ahead of schedule” when it comes to achieving a healthy retirement. These physicians are:

1. Knowledgeable about personal finance matters

2. Use a professional financial advisor

3. Carry less debt

4. Max out retirement plan contributions

5. Have elements of an estate plan in place

6. Confident about money decisions

7. Plan to retire sooner