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Physicians face unique retirement saving challenges

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Physicians should be saving at least 15 percent more for retirement than their current levels, according to a new survey by Fidelity Investments of 5,000 physicians nationwide.

aging doctor

Physicians who want to live a financially comfortable retirement should save enough to replace 71 percent of their income, the study said. Current savings levels are at 56 percent.

Part of the reason achieving retirement is more of a challenge for physicians, the study found, is that doctors have more student debt than many professions, as well as a shorter savings horizon because many are in their 30s by the time they finish their residencies.

Many physicians also do not have adequate savings opportunities in their defined contribution plans because of IRS contribution limits, the study said.

For example, a physician specialist earning $300,000 annually and seeking to reach a 15 percent savings rate, should save $45,000 a year. But IRS 402(g) contribution limits for qualified plans are $17,500 for taxpayers under age 50 and $23,500 for those over age 50 making catch-up contributions.

So, physicians need access to additional savings opportunities, such as non-qualified plans.

Because of these factors, some physicians feel “they have to hit a homerun” when it comes to retirement planning and become overly aggressive in their investments. This mentality can be dangerous for pre-retiree aged physicians, the investment group said.

Key questions physicians should ask themselves are:

  • Are you saving up to the 402(g) limit ($17,500 in 2014) in your qualified savings plan?
  • Are you taking advantage of additional savings opportunities, non-qualified plans, or personal retirement savings accounts that enable you to save 15 percent or more of your income for retirement?
  • Are you adjusting your asset allocation according to your age and risk profile?
  • Have you created a retirement income plan with the help of an adviser to help make sure you are on?

Because of the unique career circumstances facing physicians, they require financial planning guidance throughout their careers, Fidelity said.