On average, physicians spend as many as 14 years in college and postgraduate training, including earning bachelor’s and medical degrees and serving internships, residencies, and even a fellowship. While medical school prepares young women and men to care for their patients, it doesn’t typically prepare them to run their practices or equip them with the tools they need for a lifetime of managing their family's financial security.
Physicians have unique needs as investors and face special challenges because of higher liability risks, complex financial situations, heavy student-loan debt, and above-average income. In short, physicians are not like other investors and may want to consider working with financial professionals who understand the issues they face. A recent survey shows two characteristics of physicians and professional financial planning:
A survey found that 39% of doctors and dentists realized that they are not as financially prepared as they should be for their profession. This is more pronounced against women, with 48% reporting a lack of financial preparedness, compared to 33% of men. [1] Out of the 750 U.S. physicians and dentists conducted in the survey, only 34% of them are speaking to a financial planner and 41% are reorganizing their finances overall. [1]
Physicians face an uphill battle due to several unique circumstances. They start earning later than their peers and carry an enormous burden of school debt, pushing back their financial planning goals. For example, the average physician finishes medical school at age 27 and may not finish residency until age 30. [2] High Debt. In 2020, 76-89% of surveyed medical-school graduates have educational debt. The median debt the average medical student owes is $241,600 in total. [3] Increased professional liability risks. More than 17,000 medical malpractice lawsuits are filed each year, according to recent data. A new study published in the New England Journal of Medicine shows that male doctors tend to get sued more than
female counterparts, doctors with more experience get sued more than inexperienced doctors, and doctors with osteopathic medicine degrees are sued more than MDs. [4] The increased financial risk from disability. Do not underestimate the value of sufficient disability insurance. It’s one of the most important things physicians can do to protect their income in the future. Even so, physicians often find they do not have enough disability protection. Complex personal and professional finances. Increased regulatory burdens, liability issues, and an ever-expanding tax code mean that many physicians have complex financial circumstances, making it more challenging to develop integrated long-term financial strategies.
The results of poor strategizing can be amplified for physician investors because of their higher incomes and greater debt burdens. When the complexities of your practice’s finances are involved, financial mismanagement can risk professional relationships with hospitals, universities, and other professionals. Physicians also are often under extreme time constraints and need reliable answers and quality recommendations from those with experience with physicians’ unique needs. They seldom have time to do their own strategizing and may struggle to find the right representative or professional for their needs. In our professional experience, many physicians make the same mistakes, so we have created this special report to help you identify common pitfalls and avoid them.
Medical liability is a pervasive concern for physicians not only because of the potential effects of a settlement but also because of the costs associated with fighting a prolonged and costly legal battle. While laws capping tort damages have been effective in some states, physicians often are targeted in medical liability suits, especially in states where hospitals are protected under charitable immunity provisions. There are many sources of nonmedical liability, such as liability for the actions of employees or employee lawsuits that can put you and your family at risk. While medical liability insurance is designed to protect personal and business assets from malpractice claims, there are limits to your coverage, and many policies explicitly exclude coverage for suits arising from activities that are not directly related to the patient-physician relationship. Jury awards in liability cases often are unpredictable and may exceed your coverage limits. Unfortunately, if your liability coverage is exceeded, your personal assets can be put at risk if they are not sufficiently protected. Even when physicians try to shield their assets by putting them in the name of a child or spouse—or by hiding accounts—professional investigators are skilled at discovering sensitive financial information that can be used at trial.
You’ve worked hard for what you own, and you want to keep it safe. Protect your practice from internal lawsuits resulting from an attorney filing phony lawsuits against you. Doctors are the #1 target of immoral attorneys. Some of the ways we can help you protect your assets include the following: umbrella insurance policies to expand your liability coverage, trusts and other ownership strategies, advanced risk-management techniques, and investment diversification.*
Asset protection and protecting yourself from liability are two very big pieces of the wealth-creation puzzle for physicians. The better you can protect your assets from creditors, litigators, and malpractice claims, the more assets you will have to build a prosperous future for you and for your family. *Diversification cannot guarantee a profit or protect against loss in a declining market.
Hubris is one of the most dangerous investment pitfalls, and many investors make the mistake of thinking that there is some secret formula to beating the market. While overconfidence is certainly not a trait unique to physicians, most are well above average in terms of intelligence and wealth and may fall prey to questionable ideas when they try to outsmart the market. As wealthy investors, many physicians fall under the legal definition of “accredited investors.” The U.S. Securities and Exchange Commission (SEC) considers these sophisticated investors to have adequate investing experience and wealth such that they will not need to liquidate their investments for cash needs and can withstand a total loss of their investment principles.
According to the SEC, an individual accredited investor must have a net worth that exceeds $1 million, either alone or with a spouse or spousal equivalent, at the time of the sale of securities. [5]
While meeting the requirements for accredited investors can increase the range of available investment opportunities, it also means that physicians can find themselves the targets of questionable investment schemes and unqualified financial advice. Being classified as an accredited investor may mean that many of the typical investor protections no longer apply. Beware of any investment that offers guaranteed returns or promises to beat benchmark returns with a “secret” or “proven” investing formula. The reality is that physicians don’t have to hit home runs to build wealth and live the lifestyles they have worked and sacrificed so much for. As with many things in life, slow and steady may often win the race. Making savvy financial choices and sensible wealth-management decisions is more prudent for your long-term financial health than dodgy investment schemes based on “proven financial formulas.”
One of the biggest mistakes many physicians make is not developing long-term financial strategies and controlling their spending as their income increases. Many physicians falsely believe that retirement planning will be easier for them as high-income earners; however, earning a higher income does not guarantee smart money management.
In our experience, a financial strategy can help create clarity, and a regularly reviewed budget can help keep you on the path toward your financial goals. A written budget and financial strategy can help you articulate your family’s goals, manage your income and cash flow, and monitor your progress toward financial goals.
The purpose of life insurance and long-term disability insurance is to protect your family from unpredictable events. While most physicians take the precaution of purchasing life insurance, many unwittingly leave themselves and their families open to the risk of a disabling illnesses or injuries. A professional has a greater statistical probability of suffering a severe disability that impeded their ability to work, rather than to die prematurely. Most experts suggest that a physician's disability polices should cover approximately 60-65% of their after-tax income. [6] You cannot underestimate the effects a disabling illness or injury can have on your income and wealth. In some cases, Worker’s Comp, Social Security disability income, and savings are not enough to cover the gap in income, making adequate disability insurance an important part of a financial plan.
Physicians can be reluctant to ask for help when making important financial decisions. Effectively managing potentially complex finances takes skill. The right advisor can provide you with unbiased, objective information on how to maximize your money. During the bull-market years of the dot-com era, it was easy for stockholders to have confidence in their investing abilities when a few lucky stock picks quadrupled overnight. However, many of those same investors were burned in the bear market that followed because they didn’t have the experience or skills to manage their wealth in a declining market.
Long-term investing entails having the skill to achieve returns in bull markets and the discipline to keep what you earn when markets decline. This is when it pays to have a professional financial manager. One of the greatest benefits of professional financial management comes when markets are declining. We educate our clients on the opportunities that market turbulence sends our way and keep them focused on their long-term goals, not on short-term gyrations. As professional financial representatives, it’s our job to stay on top of ever-shifting economic, financial, and legal issues so our clients don’t have to.
Navigating the turbulent investing world of today requires wise management skills, and commitment to a long-term, active investing strategy. For physicians, investing is just one part of their overall financial strategies. Getting good financial guidance may spare you the angst of errors or missed opportunities and may save you money in the long term. It’s common for physicians to consult with financial representatives, accountants, insurance agents, tax-planning professionals, attorneys, and practice-management specialists. It’s critical to integrate your financial team into your overall goals so that each professional on your team is aware of what the others are doing. If each professional isn’t communicating well with the other or is unaware of your total financial picture, you may get fragmented, inefficient advice that may negate certain strategies and hamper your wealth-creation efforts. To be most effective, your investment professionals must be integrated, communicate well with each other, and work toward common, clearly defined objectives. We work with a network of experienced professionals with a wide range of skills and qualifications.
The Retirement Group is a nation-wide group of financial advisors who work together as a team.
We focus entirely on retirement planning and the design of retirement portfolios for transitioning corporate employees. Each representative of the group has been hand selected by The Retirement Group in select cities of the United States. Each advisor was selected based on their pension expertise, experience in financial planning, and portfolio construction knowledge.
TRG takes a teamwork approach in providing the best possible solutions for our clients’ concerns. The Team has a conservative investment philosophy and diversifies client portfolios with laddered bonds, CDs, mutual funds, ETFs, Annuities, Stocks and other investments to help achieve their goals. The team addresses Retirement, Pension, Tax, Asset Allocation, Estate, and Elder Care issues. This document utilizes various research tools and techniques. A variety of assumptions and judgmental elements are inevitably inherent in any attempt to estimate future results and, consequently, such results should be viewed as tentative estimations. Changes in the law, investment climate, interest rates, and personal circumstances will have profound effects on both the accuracy of our estimations and the suitability of our recommendations. The need for ongoing sensitivity to change and for constant re-examination and alteration of the plan is thus apparent.
Therefore, we encourage you to have your plan updated a few months before your potential retirement date as well as an annual review. It should be emphasized that neither The Retirement Group, LLC nor any of its employees can engage in the practice of law or accounting and that nothing in this document should be taken as an effort to do so. We look forward to working with tax and/or legal professionals you may select to discuss the relevant ramifications of our recommendations.
Throughout your retirement years we will continue to update you on issues affecting your retirement through our complimentary and proprietary newsletters, workshops and regular updates. You may always reach us at (800) 900-5867.
www.ama-assn.org, "Understanding disability insurance for physicians"
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