The pandemic has been taking a grueling toll on medical professionals. According to a recent survey, more than 73% of physicians reported feeling overworked, and more than 30% reported that they are looking for another career or considering retiring early as a result.[i] Additionally, nearly one in five health care professionals has already quit since the pandemic began.[ii]
Even if you’re not at your wit’s end with your job, you may want to be certain that you could quit if you wanted to, and that you will be able to retire when the time comes. But you likely also have a few other financial goals you’d like to tick off the list before that, such as funding a college education for one or multiple children.
With no end in sight to an emotionally and physically exhausting daily routine, you may not have a lot of free time to plan for your financial future, but that doesn’t mean you can’t gain the peace of mind that comes from knowing you have enough money to retire – or reach your many other important financial goals. The trick is to take it step by step.
Don’t Treat Thyself
Being a good doctor takes special skills, which don’t always translate to financial acumen. Just as you would probably never recommend that your patients perform medical procedures on themselves, it may make more sense not to try to build your financial plan by yourself, especially when you’re short on time. Instead, consider engaging a professional with the skills and experience to expertly guide you through the process. The Certified Financial Planner™ (CFP®) designation is considered the standard of excellence in financial planning, and advisors with that credential are held to the fiduciary standard of acting in your best interests at all times. Also look for someone who is respectful of your (limited) time and understands your priorities. They will be the best at ensuring you continue making progress toward your goals.
Understand the Process
The planning process generally starts with a conversation about your values and your financial objectives. The goal is to clarify and prioritize your financial goals and identify any impediments to reaching them. Like a routine check-up with a general practitioner, this initial conversation with your advisor can help pinpoint any critical problems and often indicate where you need to focus first. Often, any urgent needs can be addressed relatively quickly and easily. For example, for many doctors, their practice often represents their single most valuable asset. In that case, immediate first steps may include ensuring you have the proper insurance in place to protect your income in the event of accident, injury, or a lawsuit.
Once you’ve addressed urgent issues, you can start to gradually build out a comprehensive financial picture of all your income and expenses, how much you are saving, and your future plans. Working backwards from your cash flow, your advisor can help you estimate how much you’ll need for each of your goals, including for retirement. Those savings targets, in turn, inform the rate of return you’ll need to earn on your investments. That rate of return, combined with your risk tolerance and time horizon until you need the money, then lead to determining an appropriate asset allocation.
The result is a better understanding of your overall financial life and determining whether you’re on track to reach your goals. In addition, with a clearer view of how you are spending your money today, you may be able to more easily find ways to reallocate some current outlays to pay your future self.
Use Your Limited Time Effectively
Financial planning is never a one-time event, but for doctors with busy schedules, the most successful approach usually entails building a plan little by little over several months. Rather than waiting until a vacation from work or a big stretch of free time (which may never come) to tackle it all in one go, you can make progress in smaller bursts, with short meetings at times that work with your schedule, such as before work in the morning or after hours. You might also lean on a spouse or other family member to provide information to your advisor. By taking bite-size pieces and focusing on each area in turn, you will gradually start to see the outlines of your overall financial picture. Then, once you’ve built out the long-term plan, you can go into maintenance mode and adjust whenever circumstances change.
Smartly Leverage Your Advantages
As a doctor, you may have access to saving and investing opportunities that others do not. For example, some hospitals and private practices offer non-qualified deferred compensation plans or profit-sharing defined benefit plans – in addition to a qualified plan like a 403(b), 401(k), or 457 – that generally have much higher contribution limits and allow you to accumulate significantly more for retirement. If you’re not already doing so, consider how you can maximize any tax-advantaged accounts. In addition, you may get offers to invest in some unique private ventures that hold the promise of high return potential. When these arise, keep in mind that high potential reward often means high risk, and any individual investment may not work out as planned. Before you invest, do your research. Or, if you don’t have time to fully vet the opportunity, ask your advisor to evaluate the risks so you can understand if and how they might fit into your overall plan.
Contact a member of our team to learn more about how we can help you.