Providing a comfortable retirement for self and spouse is the top financial goal of young physicians, according to statistics compiled by Laura Dyrdra for BeckerHospitalReview.com.
Other goals include providing an education for children and grandchildren, and then having the means to secure long-term health needs for self and spouse. The focus is worthy of praise. It is conscientious, shows concern for others and looks forward.
Then comes the statistics concerning retirement savings. Only 7 percent of doctors who are 45 or younger believe they are ahead of schedule. Fortunately, 50 percent say they are on track, but 43 percent claim they are likely behind in their goals. That’s a problem.
Does anybody ever really catch up with savings plans? I put that under the title of wishful thinking. Hard-working professional people secretly hope things will get better—a windfall will shower them in wealth, or maybe an inheritance will be promised. But is that any way to plan for the future?
Obviously, feeling behind at 45 is different than feeling overwhelmed at 35. The more time you have, the better off you might be—if a realistic plan is in place. A plan that includes passive income and does not rely too heavily on paper assets.
Retirement Riddle: Is there such a thing as too much?
The Millennial generation may have different lifestyle values than older physicians, but my fear is their investment strategies are decidedly old school. More statistics shared in Dyrdra’s article reveal that 74 percent of young doctors have a 401(k); 49 percent have a Roth IRA; and 33 percent have a traditional IRA.
That sounds responsible but is it wise? Most doctors pour a percentage of their earnings into these accounts with the assurance from brokers that the money will grow over time via stocks and bonds.
Now that’s an old idea.
High-income earners in the medical profession typically max out their retirement accounts with the hope their retirement will be luscious. But there are limits. If a physician sets aside $50,000 per year for 20 years that equals $1 million. A cool million may impress most Americans, especially baby boomers, many of whom are not able to retire due to lack of savings.
Yet when you consider the physical and psychic wear and tear doctors experience over time, that nest egg doesn’t not strike me as fair compensation. Not when considering the annual income of the 5 top earners in the medical field.
- Orthopedics: $329,000
- Dermatology: $312,000
- Anesthesiology: $309,000
- Cardiology: $307,000
- Gastroenterology: $294,000
Impressive incomes. But shouldn’t that kind of money perform much better over the course of a career?
And look at the hours doctors typically work each week.
- Work 40 to 50 hours per week: 40 percent
- Work 51 to 60 hours per week: 25 percent
- Work 61 to 80 hours per week: 22 percent
The majority work between 51 and 80 hours per week. But how do our doctors feel about the work load?
- Would prefer to work more hours per week: 3 percent
- Would prefer to work fewer hours per week: 47 percent
- Happy with current schedule: 37 percent
The majority feels over worked. Yet buried in the numbers is the joy and fulfillment physicians say they experience when they visit with patients. If possible, most would expand the number of hours they spend with people who need them, but cut back on paperwork and management concerns. Doctors want to be doctors, not administrators.
Passive Income vs. Wishful Thinking
Too often I’ve been in conversation with intelligent people who look bewildered when I use the term passive income. What’s that? they ask. It is money that comes your way even when you are sick in bed or on vacation. It is derived from assets that bear ongoing revenue, not just a one-time profit.
But don’t stocks and bonds provide a nice return? And isn’t that passive income. The return is passive income, but its generosity depends on changing market conditions. When the market under-performs, those accounts won’t grow at a steady pace. And how much of their gains are young physicians giving to brokers and hedge fund managers?
The long haul in and of itself is not a solution for retirement, though starting to invest early in life is wise. The more significant factor is expanding net worth. Yet look at net worth statistics from the Dyrdra report:
- Net worth under $500,000: 72 percent
- Net worth $500,000 to $999,999: 18 percent
These numbers do not bode well for retirement, even though a healthy percentage of doctors are looking forward and want to provide for their families in the future.
Wishful thinking won’t work. But passive income when properly understood can turn mediocre returns into something impressive and lasting.
Multifamily Massive Action
Multifamily real estate has the potential to create expansive wealth because it benefits from tax codes that invite us to make lots of money. Money that will allow us to earn a secure, abundant retirement.
In recent years, my net worth has grown exponentially. This is not a boast. It happened because I realized that as an emergency medicine physician I was burning out, yet I was still a young man. I had to take massive action to turn my ship around.
You can do it to. But not by trusting old road maps for retirement. Download my free guidebook to get started learning about the tax incentives and other benefits that come with some types of real estate.
Or if property investment does not interest you, begin educating yourself on passive income opportunities that go beyond paper assets.
We work hard, under enormous pressures, and we earn impressive funds. Now we have one more responsibility: to make that money work for us while we are working so hard to earn it.