From working with physicians the past 12 years, I know that you, as a physician, are put in a frustrating position.  You have worked through medical school, residency and even fellowship struggling financially, sacrificing your personal and family time, and being told you are wrong all of the time by your mentors.  Upon emerging from all of that, you then have to deal with administration, RVUs, patient satisfaction scores, and so on.  All you want is to finally earn a well-deserved income and get settled with a nice car, a nice home and put your kids in a good school.

Physicians are in a unique position coming out of their training, with high debt but a steady job and income, and that requires a different mindset for investing. You should have your long-delayed gratification, but you still need to put your savings goals first. Understanding that your income does not fluctuate tremendously based on the economy or your performance, and that you have good odds of remaining capable of performing your job well into your 60s, enables you to make retirement planning decisions suited for your situation. Here is a simplified retirement formula:

retirement formula

In this formula, you cannot control inflation and you can minimize, but not avoid, taxes and expenses. Your investment gains are also out of your control, although your investment allocation and risk will likely have some impact on the variation and amount of the gains (or losses). That leaves the amount saved as the only variable that you can truly control, and you have to play catch up. Physicians are often at least eight years behind the average college graduate in terms of the number of years of potential savings. Even if the average college graduate saved $10,000 a year for ten years while you were in training, that $100,000 has compounded, and is likely worth closer to $150,000 by the time you got into practice. Just saving a little bit each year will not get the job done.

While you have outstanding odds of having a secure retirement and you do not have to take on much risk with your investments, the key is to live reasonably below your means. The difference between saving $20,000 a year towards retirement in your 401(k) and saving $50,000 a year using your 401(k), HSA, IRAs and so on, will have a far greater impact on your odds of a comfortable retirement than taking on too high of a stock allocation or other risks with your investments. There are too many physicians in their 50s and older with very little saved for retirement. Most of the time, the reason is that the physicians lived above their means, and/or they took too much risk with their investments. You did not work this hard to save every penny you earn, but you also did not work this hard to not have a reasonable standard of living for your entire life.  Think long-term, take advantage of the stability, consistency and longevity of your job and income, live below your means, and you are nearly guaranteed to have a long, comfortable retirement.