Study finds many doctors don’t save enough for retirement

Doctors take a lot of flak for their money habits.

They either trade too aggressively or tune out completely and fall prey to unscrupulous brokers, so the stereotypes go. Laden with medical school debt, they often compound the problem with pent-up spending once they finish training. Advisers often compare physicians to professional athletes who get a sudden windfall and, many times, blow it.

In a new study of 13,330 physician retirement accounts, however, doctors appeared to be healing themselves.

Physicians' median savings rate (including their own contributions and their employers') jumped nearly 5 percentage points between 2012 and 2014, to 15.2 percent of pay, according to the study released Dec. 2 by Fidelity Investments, a retirement plan custodian.

That's a healthy increase, but it masks some real challenges, said David Martin, vice president in Fidelity's tax-exempt client analytics and research group. Some physicians are saving a bundle, while others aren't keeping anywhere close to enough to replace a substantial percentage of pay in retirement, he said.


The group that fell below the typically recommended savings rate of 15 percent actually saved an average of just 9 percent, Fidelity found. Nearly 60 percent of female doctors aren't maxing out their retirement plan contributions at work, and 45 percent of men aren't maxing out.

And in a separate survey Fidelity commissioned of 360 physicians, 45 percent said they can't afford to contribute the maximum.

"Physicians often don't start earning and saving until their mid-30s, and missing out on that 10 years of compounding is a big deal," Martin said. "And then for some specialists who use their hands, they may not be able to work into their 70s, so they may be limited on that side as well."

Adding to the mix today is the squeeze on doctors' reimbursement rates and new requirements for keeping electronic records, sparking a wave of them to leave private practice for employment. Previously, like entrepreneurs, they invested heavily in their office buildings and equipment and looked for a young physician to buy them out at retirement. Today, more are employed by hospitals and large groups, meaning their major retirement savings vehicle is often a 403(b) plan, similar to a 401(k) but geared toward nonprofits.

One of the benefits of this trend is larger retirement plans with higher numbers of participants, which means individual physicians generally pay low management fees and often have access to free or low-cost financial planning guidance.

At Geisinger Health System in Danville, Pa., with about 1,600 physicians, retirement plan participants receive an employer contribution of 5 percent of pay up to the Social Security wage base ($118,500 in 2015), and 9 percent on wages above that. The health system automatically enrolls new employees in the plan and escalates those contributions each year. Employees also have access to one-on-one guidance from a financial planner, said Wendy Marshall, employee benefits director.

Having a robust retirement plan has helped Geisinger psychiatrist Dr. Stephen Paolucci and his wife, Dr. Susan Paolucci, put their two children through college without accruing debt. Their youngest is now in medical school.

Meanwhile, Dr. Eric Smith, an independent internist affiliated with Geisinger, hopes to continue as a solo practitioner. His wife, Kristin Liptock, is an employed oncologist, so the couple has access to a workplace savings plan.


"If I can swing it, I want to stay independent as long as possible," he said. "There's more flexibility at the end of your career to work less, where in an employed situation the end is often decided for you."

Dr. Terence McAllister, a solo pediatrician in Plymouth, Mass., has a stiffer challenge. His wife, Leann, is his practice manager, so neither gets an employer match. They save what they can in a SEP-IRA, an individual account for the self-employed.

"We have a savings goal, but will have to see how we did at the end of the year," he said. Even if they did well, he projects, they will save less than 10 percent. "I've decided to focus on keeping the practice as independent as possible. To save more, I'd have to abandon the practice and go work for somebody else."

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