Doctors Seem Financially Fit, But Fall Short

While the financial well-being of physicians may seem healthy on the surface, nearly half fall short of recommended retirement savings rates, according to data from Fidelity.

Many doctors appear to live financially comfortable lifestyles, yet their retirement savings are not all they should be. According to Fidelity Investments’ analysis of physicians’ workplace savings plans, doctors are saving on average a healthy 19.8% (employer and employee contributions). That’s a rise of nearly five percentage points from 15.3% in 2012. However, a more thorough examination of doctors’ retirement savings reveals where many fall short.

Many aren’t saving enough for retirement: Despite strong average savings rates, nearly half (48%) of doctors surveyed are saving less than Fidelity’s recommended savings rate of 15% with an average of only 9%.

Almost half aren’t taking full advantage of retirement savings opportunities through their employer: 48% are not maxing out their contributions to a qualified workplace plan, such as a 403(b) retirement savings plan, a number that’s even higher for female physicians (58%) than their male counterparts (45%). More than two-thirds (71%) are not contributing to a non-qualified retirement plan, such as a 457(b).

Older and mid-career doctors are more likely to have a mix of investments that may not be appropriate for their age. Many pre-retirees (39%) are very aggressive in their equity allocation making their savings more susceptible to market fluctuations. At the same time, more than one-third of physicians in their 40s are too conservatively allocated, thus limiting their potential for growth during their longer-term savings horizon.

Why are there so many practitioners falling behind the positive financial progress of the “average” physician? According to Fidelity’s Money FIT Physicians Study, 45% of physicians feel they cannot afford to max out their workplace retirement plan.

Although doctors are among the most highly compensated professionals (Fidelity’s business data shows physicians earn an average of $300,000 per year annually), industry research reveals that 84% of medical students graduate with student debt averaging more than $176,000, with many also juggling expensive practice-related costs. Nearly two-thirds (61%) of physicians are at least a little confused about how to navigate their financial path for the future.

“While physicians are expected to be confident and knowledgeable about their medical specialty; that confidence doesn’t always extend to financial matters. In fact, most are looking for help from an expert when it comes to long-term financial planning,” says Alexandra Taussig, senior vice president, Fidelity Investments. “Health care employers can play an important role in addressing physicians’ financial health by actively promoting the opportunities to get guidance through their workplace retirement savings plan and encouraging annual financial checkups.”

The findings draw on research conducted online in 2014, which can be accessed on the Fidelity website, and are supplemented by analysis of 13,330 physicians’ workplace savings plans recordkept by Fidelity.