When Physicians Plan for Retirement, Saving Is Only One Consideration

You'll need a strategy, whether you’re a year or decades away from your final day. An important factor: Really think about what your lifestyle will be like.

The changing health care landscape is a major reason why more physicians say they will retire over the next few years, as compared with physicians questioned several years ago, according to a 2016 survey of more than 17,200 doctors conducted for the Physicians Foundation, a national not-for-profit organization.

More than 14 percent of physicians from across the United States said they planned to retire by 2019. Of those who planned to retire soon, nearly half, or 46.8 percent, said “changes in health care are accelerating my retirement.” The 2016 figures are up from 9.4 percent compared to 2014.

Whether you’re a year or decades away from retirement, you need a strategy.

“Get a plan in place and do your due diligence,” says lawyer Christopher Mann, a retirement and business law partner at Dawda Mann Mulcahy & Sadler, a Michigan firm. “Retirement can be a smooth process and all it requires is pre-planning.”

Here are some things to keep in mind.

Have Enough Money to Retire

It’s important to know how much you will need to live on. “It’s a matter of looking at your more recent living expenses, minus anything you won’t have moving forward, like a mortgage, but adding any extra vacations or a second home somewhere,” says Robert Scroggins, consultant and principal of Scroggins Grear, a health care-focused consulting and accounting firm in Ohio.

Also, the cost of health care is typically — and sometimes substantially — higher in retirement. “Really try to decide what that lifestyle will look like in the retirement years,” Scroggins says. “Doctors sometimes think they’ll spend less in retirement but sometimes spend more because they have more time.”

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Indeed, longer lifespans mean retiring at age 65 may entail another 30 years. “It’s probable that one or two spouses can live into their 90s, so they should be financially planning through retirement, not just until retirement,” he said.

His best advice is to save as much as you can, as early as you can, using a combination of employer 401(k) plans, IRAs, a deductible health savings account, and a separate after-tax standard investment account. “The primary driver of building a retirement net worth is not investment selection — it is saving money,” he said. “If you are behind, it is difficult and risky to make it up in investment returns.”

Look Closely at Contracts

Sometimes, retirement specifics can be addressed early, such as in the employment contracts physicians sign when they join a medical practice or begin working for a medical center, hospital or other group.

“Make sure the agreements are in place with the practice that address retirement, slowing down or going part time, which can vary by specialty,” Scroggins says. “One of the first requests we see is the ability to drop out of the call schedule. If that is allowed, what does that mean financially?”

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Another retirement issue that can be covered in an employment contract can cover how the practice can recruit a replacement for the retiring doctor, particularly if it covers how the practice will free up dollars to bring in the next generation of physicians, he says.

“It makes sense to have it all handled in a hiring contract,” he says. “It’s important, in the beginning, to see a copy of that so that the physician will know what will be in place” and understands it.

Scroggins says it’s common that a doctor coming into a practice has one idea about how things will run while the organization has another.

Mann says senior-level physicians thinking about retirement “have a duty to your partners, and if you know the end is in sight, you should let them, as well as any others such as accountants, attorneys and personal financial advisors, know at least 12 to 24 months” in advance. Doing so helps the departing physician leave with affairs fully sorted out, and also gives the practice enough time to hire a sufficient replacement.

What to Do Once You Retire

How will you fill your days once you aren’t working regularly? Maybe you’ve long dreamed of spending your days on the golf course, pursuing other long-neglected hobbies, traveling, or moving closer to or spending more time with family members and other loved ones. Some physicians are happy to leave medicine completely behind, but many aren’t.

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For them, easing into retirement through part-time or locum tenens work, or using their medical expertise in a nonmedical setting such as consulting, teaching or healthcare administration, is more appealing. Indeed, the Physicians Foundation survey found that, by 2019, 21.4 percent of respondents said they planned to cut back on hours, 11.5 percent said they planned to work locum tenens, 13.5 percent said they would seek a nonclinical job within health care, and 9.8 percent said they would work part time.

Volunteering while in retirement is another way to continue to use your career knowledge and skills to help others learn aspects of being a physician. Staying up to date on contemporary medicine and leadership issues will help ensure your lifetime of medical wisdom and experience can help others if you know you want to keep a hand in medicine while transitioning to retirement.

Cheryl Alkon is a freelance health care writer based in Massachusetts.

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