Less Than Half of Physicians Reach Recommended Retirement Savings Rates

by Emily Geitner on Apr 6, 2016 8:10:00 AM

Med_School_Grad_Cap_Diploma_Money.jpegHow things look on the outside, does not necessarily correspond to how things look on the inside. The perfect example—the financially comfortable lifestyle. All the visual trappings of financial success, as seen by others, is often deceiving. External financial comfort in no way indicates long-term success in terms of a physician’s recommended retirement savings.A December 2015 Fidelity® study shows 45 percent of physicians believe they cannot afford to max out their workplace retirement savings plan.

The analysis of 13,330 physicians' workplace savings plans revealed physicians are saving on average a healthy 19.8 percent (employer and employee contributions).

The good news is this percentage is up from 15.3 percent revealed in a study from 2012.

However, the 2015 study reveals where physicians' recommended retirement savings rate may fall short:

  • Many physicians aren't saving enough for retirement; 48 percent are not reaching the recommended retirement savings rate of 15 percent; in fact, they average only 9 percent.
  • Almost half aren't taking full advantage of retirement savings opportunities they have available through their employer: 48 percent are not maxing out their contributions to a qualified workplace plan, such as a 403(b) retirement savings plan.
  • 71 percent are not contributing to a non-qualified retirement plan, such as a 457(b).
  • Older and mid-career physicians are more likely to have a mix of investments that may not be aged based: 39 percent are very aggressive in their equity allocation making their savings more susceptible to market fluctuations.
  • At the same time, more than one-third of physicians in their 40s are conservatively allocated, thus limiting their potential for growth during their longer-term savings horizon.


Although they are among the most highly compensated professionals, industry research reveals some plausible explanations:

  • 84 percent of medical students graduate with student debt averaging more than $180,000, with many also juggling expensive practice-related costs.
  • 61 percent of physicians are at least a little confused about how to navigate their financial path for the future.
  • 21 percent would rather keep more money now than put it toward their recommended retirement savings.
  • 16 percent say that their employer doesn’t match their contributions, which may or may not be true.
  • 11 percent don’t know the maximum amount they are allowed to contribute.
  • 29 percent of physicians aren’t aware that their employer offers guidance through the workplace plan provider.


The White Coat Investor offers a scenario which drives home the need for achieving recommended retirement savings.

Choosing to skip on retirement plan contributions, especially early on when compound interest has plenty of time to work its magic, can devastate a retirement plan. 

Consider this:  One physician saves $50,000 a year for his first 15 years of practice, then saves nothing until he retires 25 years later ($750,000 total saved). A second physician saves nothing his first 15 years of practice, then saves $75,000 a year for the next 20 years ($1.5 Million saved).

Which one ends up with more money?

The physician who saved early ends up with $2.86 million and the late-saving physician, despite saving twice as much the other, ends up with $383,000 less. 

The longer you wait until you start saving, the more you need to save. Likewise, saving just 5 or 10 percent your income isn’t enough. With savings rates like that, you’ll end up with a much lower standard of living in retirement than while in practice. 

Another benefit of a high savings rate is that you’re used to living on less money. A doctor earning $200,000 a year and saving $50,000 a year only needs 75 percent of his pre-retirement income to have the same standard of living in retirement that he or she had while working. A doctor earning $200,000 a year and only saving $20,000 a year would need 90 percent of his pre-retirement income to maintain his standard of living. 

If you’d like more information on how to reduce your monthly medical student loan payments so you can save more money each month or decrease the length of your loan period, call us today at (844) 226-LINK (5465). We’re here and happy to help.

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This post was written by Emily Geitner

Emily is Director of Operations & Marketing for LinkCapital and responsible for managing the company’s day-to-day operations as well as leading strategy, marketing, and user experience for all Link consumer products.