Physicians, like most people, need to have financial plans in place. Actually, physicians may need more financial planning than other people because physicians often have more income, assets, and potential malpractice claims. However, according to the American Medical Association Insurance Agency’s 2013 Report on U.S. Physicians’ Financial Preparedness (“Report”), many physicians are not planning.
The Report revealed that about half of physicians who are under 50 years of age do not use a financial advisor. According to the Report, doctors’ top concern is saving for retirement and about 50% of physicians are very concerned with having enough money to retire. Also, about 50% of doctors are behind in their retirement planning and savings, with about 40% of them having less than $500,000 in retirement savings. Are you a physician identifying too much with these statistics? It’s easy to get overwhelmed. Many doctors think of themselves as care givers first and small business owners second. If you can shift this thinking even slightly, you will be better for it in the short-term and long-term. You may want to consider establishing a qualified retirement plan for your practice to help save for retirement. But this is not the only financial consideration that should be top of mind.
On the estate planning front, about 35% of doctors have no estate plans. Further, only 57% of doctors have an updated Will, 51% have end-of-life directives, 50% have medical directives, and 49% have a power of attorney. Additionally, physicians are concerned about having enough life insurance; 75% of physicians have some life insurance but, only 15% of doctors have permanent life insurance. In addition to the death benefit, permanent life insurance can accrue cash value, which can provide flexibility for estate and retirement planning purposes.
With respect to disability insurance, most doctors have some coverage. However, many doctors only have coverage through their employers. Does this sound like you? Since an employer’s disability plan may not provide doctors with sufficient coverage and only 35% of physicians have both employer and personally owned disability coverage, it’s likely that more coverage on the whole is needed.
And even when physicians already own personal disability policies, the Report revealed that many physicians have not reviewed their policies since they purchased them and don’t know if their benefits would be taxable. It’s vital that you review your disability policies to determine if additional coverage is needed.
Doctors have unparalleled medical knowledge and specialized training. That doesn’t mean they are equipped to surgically analyze their estate and retirement planning needs. Consider speaking with a financial professional to dissect your options.