Am I Prescient, Lucky or Just an Observant Trend Reporter?
By Dr. David Edward Marcinko MBA CMP™
[Publisher-in-Chief]
A few years ago I was involved in a Physician’s Money Digest report that showed the average physician reader (ie, 47 years old and $184,000 in annual income) would need about $5.5 million to retire. This was in 2007-08, right before the infamous financial “meltdown”.
Lifestyle Preservation
Now, that’s if they planned to have the same lifestyle after retirement as in the years just prior to retirement. In other words, to live on 80% of pre-retirement income, my doctor colleagues would need about $4.4 million. Although that isn’t exactly loose change, the average PMD reader at the time, had a head start, with a net worth of $1.1 million. By maxing out on retirement plans, we reckoned the average reader could be in shouting distance of the goal by age 65.
Although the figures were daunting, they were a wakeup call to the fact these doctors, now age 52-53, still needed to save more aggressively to be able to finance the retirement they were working toward. But since then, their home worth and practice value, savings, investment and retirement accounts are probably down in 2012; as is their net worth. Down - and I mean way down!
Link: http://www.physiciansmoneydigest.com/issues/2005/92/3951
Fast Forward to 2012
Today, some pundits posit that doctors in America are harboring an embarrassing secret: Many of them are going broke. This quiet trend and seeming reality, which is spreading nationwide, is claiming a wide range of casualties including family physicians, cardiologists and oncologists. Sadly, it is a trend that I have professionally observed and personally seen.
Link: http://money.cnn.com/2012/01/05/smallbusiness/doctors_broke/
Doctors list shrinking insurance reimbursements, changing regulations, rising business and drug costs among the factors preventing them from keeping their practices afloat. And, no doubt, these are all true reasons – in part. But, some experts counter that doctors’ lack of business acumen is also to blame.
So, that’s why we started our physician focused financial planning firm www.MedicalBusinessAdvisors.com - and - our online educational program for their managerial consultants and financial advisors www.CertifiedMedicalPlanner.com These firms were conceived and launched more than a decade ago; to much derision and haughtiness at the time. Not some much today, however! Why?
Assessment
A decade ago, Forbes magazine ran an article about doctors making six figure salaries and still wanting a medical union to bargain collectively. This was a bit difficult for the average man or woman in the street to imagine about such learned professionals, formerly considered affluent and a cut above the rest. So, where is medical union clout today? Where is MD salary clout? And, where is physician net worth now – and in the future? Doctor – what’s in your wallet?
Conclusion
And so, your thoughts and comments on this ME-P are appreciated. Are doctors really going broke? Are they OWS…ers? Was I prescient, lucky or just an observant reporter of this trend, early on? Please review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.
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Filed under: Career Development, Financial Planning, Investing, Retirement and Benefits Tagged: | Are Doctors Really Going Broke?, doctor salary, Dr. David Edward Marcinko, physician income, physician net worth, physician's money digest
Michael’s Doctor,
Conrad Murray MD, cardiologist for Michael Jackson, filed paperwork last month indicating he is indigent.
Abe
Financial Planner Bankruptcies Rising
[CFP Board Tackles Issue]
Even certified financial planners [CFPs] are falling prey to bankruptcy, and the CFP Board is looking at changing its rules so a bankruptcy filing doesn’t have such punitive consequences for licensees.
http://www.fa-mag.com/fa-news/9703-certified-financial-planner-board-tackles-bankruptcy-in-its-ranks-.html
Maybe these guy were advising the broke doctors?
Xavier
Small Steps to Physician Financial Independence
Doctor – What would it take for you to become financially independent? It’s a common goal, and it means different things to medical professionals and all people. I define financial independence as maintaining a lifestyle that supports wellness without having to earn an income.
Happiness and wellness are not necessarily the same, but recent studies suggest an income of around $60,000 is optimum for producing happiness. This is an average, so the equivalent amount might be around $50,000 in areas like the Black Hills and $100,000 in places like New York City.
How much of a nest egg do you need to save to produce an annual income of $60,000? To maintain the purchasing power of your portfolio throughout your lifetime, you will want to limit your annual withdrawals to 3% of the principal. This assumes you’ve invested for the long term in a diversified portfolio with the majority in stocks and alternative investments. To throw off the needed income, you will need $2,000,000.
While two million bucks sounds like a lot of money, accumulating that amount can be done if you start saving early by living on less than you make. A couple who start contributing $10,000 a year to their ROTHs at age 22 and who stop making those contributions at age 29, assuming they invest in equities with an average annual return of 8.5%, will have a reasonable chance of having $2,000,000 by age 65. Similarly, a couple who start saving $10,000 a year in their ROTHs at age 29 and continue to save until they are age 66 will also have $2,000,000.
So, how do you save money? The most common denominator among my clients who have accumulated wealth isn’t the career they chose or the investments they made. It’s their ability to understand, apply, and enjoy frugality.
I asked a friend of mine, a self-made multi-millionaire, how he would explain frugality. He responded, “How would you feel if someone paid you $180 an hour to walk?”
Then he told me this story:
“When I travel on short business trips I often leave my car parked at the airport. It’s more convenient and cheaper than the airport shuttle. I got used to parking in the short-term lot because it’s closer to the terminal than the long-term parking. The short-term parking costs $9 a day, while the long-term parking is $8. Many people might figure on short trips they could easily afford the extra $2 or $3 and reap the benefit of reducing their walk to the car.”
However, a frugal person might wonder just how much that benefit would be. So, I figured out how long it took me to walk the extra steps from the long-term lot to the short-term lot—30 seconds. Walking the same distance on my return makes my extra round-trip walking time 60 seconds. On a three-day trip, my total savings for this one-minute walk is $3, which adds up to $180 an hour.
To my brain, saving $3 seems trivial and meaningless, but being paid $180 an hour is significant enough to interest me. I’ll sign up for that in a heartbeat. Now, I park in the long-term lot.”
For a successful businessman to care about saving a couple of bucks on parking might seem silly or even miserly. But my friend’s story is an example of a frugal mindset. Frugality is choosing not to spend more than necessary on things that don’t matter, so you can spend on things that do matter … lLike saving for your future.
Then someday, when you’re financially independent, people can wonder why you think frugality matters.
Rick Kahler CFP® MS ChFC CCIM
http://www.KahlerFinancial.com