Julie Jason: A financial checkup for physicians

August 13, 2017

Here’s a question for you: What career does this describe? People who graduate with more than $100,000 in loans and work in “intense, time-consuming careers that leave little time to spend on personal finance issues.”

If you guessed doctors, you were right, citing the most recent AMA Insurance study described in the U.S. Physicians’ Financial Preparedness 2016 Report. The AMA Insurance Agency is a subsidiary of the American Medical Association.

Personal finance is hardly ever taught well enough in high school or college to make a difference in the real world. And if you don’t have the time to learn personal financial skills, you are at a serious disadvantage when it comes to achieving a satisfactory lifestyle, a common goal for physicians.

And, indeed, when surveyed, physicians say that their top concern is “having enough money to retire.”

According to the study, whether the doctors were in their 30s, 40s, 50s or 60s, the answer was the same: The top concern was having enough money to retire.

As a proponent of financial education and a money manager who specializes in retirement portfolios, I see that as a good sign.

Concern can lead to deliberate action — early enough in a working career to take advantage of the math of compounding, and smart enough to save more than is spent, invest to grow assets to beat inflation and taxes, and to get ready before retirement to create a pensionlike income stream that not only supports a desired lifestyle, but has the potential for leaving a legacy.

Concern without action is another story, of course.

So, how many physicians have actually done the planning and are on track to a secure retirement? In response to this request: “Describe the overall status of your retirement financial plans,” a small portion were ahead (7 percent of the 30s age band; 11 percent of the 40s; 13 percent of the 50s; and 11 percent of the 60s).

Part of the dilemma is that a large number of physicians carry student loan debt of $150,000 to $200,000 on average. The percentage of physicians with student loans declines over time (81 percent have debt in their 30s; 48 percent in their 40s; 10 percent in their 50s; and 3 percent in their 60s). There also is consumer debt (mortgages, credit cards, car loans) and practice debt (business loans, lines of credit and other business debt). Only 37 percent of physicians in their 60s have no debt, according to the study.

What can be learned from the physicians who are ahead of the game? The study identified seven characteristics:

1) Knowledge of personal finance

2) Use of a professional financial adviser

3) Carrying less debt

4) Contributing the maximum permitted to retirement plans

5) Having estate plan elements in place

6) Having confidence in their decision-making

7) Planning to retire before age 65

As the study found, “a comfortable retirement” is “a universal personal financial goal for U.S. physicians.” Here are some thoughts from physicians who have mastered the task, quoting from the report:

“Do not forgo contributions to retirement funds to fulfill short-term needs.”

“Educate yourself in basic finances even if you choose a financial planner.”

“You don’t realize how old you are going to become ... and putting cash away, bit by bit from a young age, will pay off.”

“Unless interest rates are high, [its] better to make payments as scheduled on school loans, not early, and (to) put (the) excess into retirement.”

“Don’t make crazy long-shot investments.”

“Financial independence is a lifetime job.”

And my two cents: Anyone, even a physician, can and should make retirement security a priority with a little guidance. The path need not be time-consuming or difficult if it is directed properly. We’ll talk more about how to start and manage the process.

Julie Jason, JD, LLM, a personal money manager (Jackson, Grant of Stamford, Conn.) and award-winning author, welcomes your questions/comments (readers@juliejason.com). To hear Julie speak, visit www.juliejason.com/events.

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