Younger physicians can struggle to adequately prioritize saving for retirement, as starting a family and servicing student loans may seem more urgent. But simple strategies like “paying” one’s retirement first can provide budgeting clarity and reduce much of the stress of juggling life goals. A new report notes the complex financial needs of physicians and provides concrete advice to help you get ahead of schedule in preparing for life after practice.
It’s well known that physicians have unique personal finance needs. They start their careers eight to 10 years later than many other professionals, carry $150,000 – 200,000 more in student loan debt and often have little time to dedicate to financial planning.
Still, there are many physicians who feel they are on track or even ahead of schedule when it comes to saving for retirement.
A new study by AMA Insurance, 2016 Report on U.S. Physicians’ Financial Preparedness®, looked at practicing physicians who are ahead of schedule and contrasted their responses with those of physicians who say they are behind in retirement planning to demonstrate that the major differences are not demographic but rather attitudinal and behavioral in nature.
The most dramatic difference is that physicians who are ahead in saving for retirement are eight times more likely to say they are very knowledgeable about personal finance. But what if you don’t know much about retirement planning, investing and insurance? What can you do anyway—and immediately—to put yourself in position to have enough money for a comfortable retirement?
According to the report, which includes responses from more than 2,300 practicing physicians, you should:
- Get a professional financial advisor. Two-thirds of physicians who are ahead use one. Those who are behind and don’t use an advisor say it is because they lack time and haven’t found anyone they can trust. “When selecting an advisor, look for competency, but also someone you can communicate with. Trust is won or lost through communication,” said Bill Zelenik, CEO of Millennium Brokerage Group. “You may not pick the right one the ﬁrst time, or the second time for that matter. Make sure they have technology—for busy physicians, technology is essential to facilitate communication. Ideally, you should be able see your balance sheet on your phone.”
- Max out your 401k/403b contribution annually. Physicians who are ahead are nearly twice as likely to contribute the maximum to their qualified plan. In addition, less than half of physicians who are behind max theirs out. “Don’t underestimate the power of maxing out your qualiﬁed plan contribution,” Zelenik said. “It’s tax-favored, un-attachable by creditors, and if you’re getting an employer match, it’s getting another 50% on your money. It should be the ﬁrst retirement vehicle that gets funded, and if your portfolio is built efﬁciently, it should be the last money you take out in retirement.”
- Carry less debt. In addition to carrying business or practice debt, physicians who are behind also carry considerable amounts of consumer debt, including credit card balances, mortgages, car loans and home equity loans. Again, paying your retirement first every month will help clarify how much debt is affordable. “Strive to enter retirement debt-free,” Zelenik explained. “No mortgage, no car loan. To plan for this, you need to be cognizant of your debt and expenses. I’ve known physicians who can tell me their monthly income without hesitation but don’t know how much their monthly ‘nut’ is. It’s important to track what’s going out.”
Financial independence is a lifetime job, the report notes, so today’s the day to get started, no matter your age. The Physicians Financial Partners program provides access to a nationwide network of independent, local and experienced ﬁnancial professionals who have undergone a comprehensive due-diligence process by AMA Insurance. To speak with an approved Physicians Financial Partner, call 1-855-210-4015.
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- 5 financial planning tips every young physician should know
- How to partner with a physician-friendly financial adviser
- How to kick your financial plan into high gear
- Top personal finance tips from experienced physicians
About Bill Zelenik: Bill Zelenik is CEO of Millennium Brokerage Group, a strategic marketing partner of AMA Insurance in its Physicians Financial Partners program. Millennium has operations with offices nationwide delivering advanced underwriting and planning services through advisors, banks, broker dealers, financial professionals and family offices.
Securities offered through The Leaders Group, Inc., member FINRA/SIPC.