Part of our financial strategy should be to create a plan to reach retirement, even if it is decades away. A written plan helps us realize what our expenditures are, and how much we hope to have by the time we finish our careers. If our time horizon for retirement is in the far distance, we have more time to adjust to our strategy so that we won’t be left asking our heirs to help us out.
One of the dangers for physician retirement planning is that our incomes are generally high compared to the average population, our expenses are generally high compared to the average professional, and many of us are oblivious (or choose to ignore) the fact that our income is unlikely to remain as high in the future.
I mentioned previously that physician income is tied to insurance reimbursement. Current Medicare reimbursement levels do not even keep up with the rate of inflation! The only way that you will ever earn more money in the future is if you see more patients or if you have ancillary income streams outside of medicine. Since most doctors don’t have enough time to even take care of themselves, it’s unlikely that they are able to invest prudently in alternative income streams.
What Can I Do To Break Out Of The Usual Doctor Habits?
- Income arbitrage. Like every financial blogger has written, what goes out must be less than what goes in. Doctors deal with higher numbers than the average person, but the principles are unchanged. You are already a decade behind the average person out there, so you need to count your pennies (or Benjamins!) more carefully early in your career.
- Be wary of easy money strategies. This includes investing in gold, rare metals, insurance policies, or shifty real estate deals. There is no easy money. You worked your butt off for a decade in order to guarantee a six-figure salary. Nothing comes easily in life.
- Accelerate your savings early in your career. The amount you will be reimbursed for performing an appendectomy will be cut in half between the time you start your career and the time you end your career. Maybe a quarter. You’ll never know. Live like a resident for the first few years of your career, even if you have a family to feed. You don’t need a Mercedes [yet].
What aspects of your career do you consider in financial planning?