Financial Characteristics of Physicians

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Locked
User avatar
Topic Author
gasdoc
Posts: 2000
Joined: Mon Nov 03, 2014 8:26 am

Financial Characteristics of Physicians

Post by gasdoc »

This may get shut down in short course because I am not sure it is actionable, but I am posting it because there are so many threads out there about, for, by and about physicians and their assets. This is a collection put out by AMA Insurance, and is a survey result, broken down by age group, about various financial indices as they relate to practicing physicians. I think physicians and non-physicians alike will find this interesting. You will be surprised, for example, how many physicians don't even max out their 401k's, probably as a result of continuing student loan debt. I was also impressed by how many physicians in their 50's and 60's still have debt. Perhaps someone can help me find a way to make this an actionable thread.... (now i am going to take a nap after working all night last night, and for the past 24 hours).


https://www.amainsure.com/reports/2016- ... tml?page=1

gasdoc
Last edited by gasdoc on Tue Jul 25, 2017 3:40 pm, edited 1 time in total.
Erwin007
Posts: 420
Joined: Tue Aug 19, 2008 8:29 am
Location: Intermountain West

Re: Financial Characteristics of Physicians

Post by Erwin007 »

Several astounding statistics in that literature. Hopefully WCI doesn't read it or he might have an MI.

35% of physicians that answered the survey don't max out their 401k/403b :oops:

Almost 20% are "saving for retirement" using a whole life policy :confused

And 28% have credit card debt? :shock:

I think more than anything it shows that physicians as a whole may have more financial resources at their disposal but don't use them any better than the average American worker.
DC3509
Posts: 284
Joined: Wed Jul 12, 2017 7:25 am

Re: Financial Characteristics of Physicians

Post by DC3509 »

Actually, if you read the Millionaire Next Door, none of this is surprising. Physicians are the typical Under Accumulators of Wealth -- while they have very high salaries, they also spend a lot of their money on keeping up with the Joneses -- fancy houses, cars, country club memberships, and the like. The bottom line is that it's not a bottomless pit, and when you are spending money, often frivolously, like that, you are not saving money in investments, retirement, etc. The Millionaire Next Door contrasts those folks with business owners who live frugally, invest the rest, and are truly wealthy.

It's interesting because every now and again you will read things where people say "But the Millionaire Next Door" was written 20 years ago, it's not applicable anymore, etc. This report documents the same exact trends which the book identified 20 years ago.
Carefreeap
Posts: 2929
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Financial Characteristics of Physicians

Post by Carefreeap »

Both great posts.

I'll add that unfortunately one problem many physicians have is a level of arrogance from thinking s/he is the smartest person in the room and a certain distain for those who haven't accomplished what s/he has.

That attitude leads them into situations where they get what I call "ego-sold". Sure you get the best looking house in the neighborhood but it doesn't mean it's the best investment for your goals and situation. Then they complain about how all real estate salespeople are scum. Uh, you did it to yourself because you don't listen carefully to your options.

Of course not all physicians are like this and time can have a way of humbling us all.

YMMV
Every day I can hike is a good day.
Rupert
Posts: 4122
Joined: Fri Aug 17, 2012 12:01 pm

Re: Financial Characteristics of Physicians

Post by Rupert »

Not a doctor, but I have lots of friends and acquaintances who are. Plus I often represent (as a lawyer) fraudsters who make a living ripping off doctors. My observations: Doctors are, in general, extremely busy, stressed, and often mentally distracted. (There's also the ego issue, which the prior poster mentioned, and I agree with). It's very easy for them to be convinced (by fraudsters, spouses, friends, etc.) that they deserve certain things, e.g., fancy vacations, big houses, vacation homes, luxury cars. Many are too willing to delegate basic business tasks (both at work and at home) to others. It works out okay when they are surrounded by good people, e.g., an honest business manager at work, a frugal spouse at home, but disastrously when they aren't. One of my best friends is a very busy oncologist at a university medical center. She sees patients and also does research. She lives and breathes her work. I enjoy very much watching her interact with her husband, who works but also carries most of the burdens of their home life, e.g., ferrying kids to camp, etc. She'll say something like, "Let's get a pool. We need a pool." He'll say, "Are you going to clean it?," which ends the conversation. She'll say, "Let's enroll Kid #1 in drama camp across town." He'll say, "Are you going to drive her there?," which ends the conversation. Every doctor needs a partner like that guy.
bigred77
Posts: 2042
Joined: Sat Jun 11, 2011 4:53 pm

Re: Financial Characteristics of Physicians

Post by bigred77 »

I just think with doctors there are 2 big challenges facing them these days:

Student Loan Debt
Not making that large salary until their 30s.

With those 2 things working against them (plus their tax burden once that large salary kicks in), yes they do have to allocate a larger percentage of their income to saving and debt payoff. Another alternative is doing what WCI advocates for which is keep your lifestyle static for a few years after you achieve that big salary in order to clean up your finances (which is obviously great advice).

You can save appropriately for retirement as a physician by saving 25% and still have the McMansion and Mercedes in the vast majority of locals. You just can't do it if you buy the McMansion and Mercedes right after you become an attending if you still have significant student loans and/or have any desire to retire early.
SGM
Posts: 3100
Joined: Wed Mar 23, 2011 4:46 am

Re: Financial Characteristics of Physicians

Post by SGM »

I tried to spread the gospel a little bit by referring others to the WCI and to this site. Very few to none of the physicians had any interest in low cost investing. One had almost no savings at age 60+. Others were with advisors and many had no idea how much their advisors were costing them.

Many are saddled with debt and go into subspecialties that they may not have picked if they had no debt. A lot seem to burn out early.

The physicians that find the BH site and WCI are the lucky ones. :beer
Carefreeap
Posts: 2929
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Financial Characteristics of Physicians

Post by Carefreeap »

Rupert wrote:Not a doctor, but I have lots of friends and acquaintances who are. Plus I often represent (as a lawyer) fraudsters who make a living ripping off doctors. My observations: Doctors are, in general, extremely busy, stressed, and often mentally distracted. (There's also the ego issue, which the prior poster mentioned, and I agree with). It's very easy for them to be convinced (by fraudsters, spouses, friends, etc.) that they deserve certain things, e.g., fancy vacations, big houses, vacation homes, luxury cars. Many are too willing to delegate basic business tasks (both at work and at home) to others. It works out okay when they are surrounded by good people, e.g., an honest business manager at work, a frugal spouse at home, but disastrously when they aren't. One of my best friends is a very busy oncologist at a university medical center. She sees patients and also does research. She lives and breathes her work. I enjoy very much watching her interact with her husband, who works but also carries most of the burdens of their home life, e.g., ferrying kids to camp, etc. She'll say something like, "Let's get a pool. We need a pool." He'll say, "Are you going to clean it?," which ends the conversation. She'll say, "Let's enroll Kid #1 in drama camp across town." He'll say, "Are you going to drive her there?," which ends the conversation. Every doctor needs a partner like that guy.
Lol, I liked your post however your friend's husband might be a little too frugal. :wink:

Another approach might be "in addition to the cost and hassle of the pool there are on-going maintenance duties. I'm busy with xyz. Are you prepared to pay to have someone do this work and how much it will cost? Or there's a community pool at X. The kids are only going to use it for Y years. Do we really want this hassle in our empty nester years?"

I do think that if you work hard and are financially stable a few luxuries make life more enjoyable. You just can't have (nor is it wise to have) everything you want. There's a reason for the expression "The trappings of wealth". It's a lot of work, money and time to take care of all of that stuff! :oops:
Every day I can hike is a good day.
clutchied
Posts: 678
Joined: Mon Jan 05, 2015 12:11 pm

Re: Financial Characteristics of Physicians

Post by clutchied »

I have 3 physicians in my direct family and that jumps to over 10 in my extended family.

Most don't care about finances and their income generally shields them from bad decisions. I have worked tirelessly to educate my younger brothers (doctors) and it appears to be working.

It took me over a decade to redirect my father (doctor) but that has turned out better than expected.


At least in my family there is a reticence to acknowledge that there are other expert professions out there and being an expert in medicine does not qualify one to be an expert in finance or law or whatever else...
WL2034
Posts: 488
Joined: Tue May 21, 2013 10:36 pm

Re: Financial Characteristics of Physicians

Post by WL2034 »

I found the data interesting. I do think it seemed to stray into indirect advertisement and maybe was sponsored by the "strategic partner" who runs a financial advising firm for physicians.

"67% of physicians who are 'ahead' use a financial adviser, while only 44% of physicians who are 'behind' use an adviser."

'Ahead' and 'behind' are defined as whether the physician considers themselves ahead or behind goal--no net worth calculation included that I saw. It's certainly conceivable that physicians with advisers tend to feel more 'ahead' because their advisers provide reassurance. "Portfolio looks great, keep sending me money!" Not saying it's wrong in all cases (and obviously, it's better to have an adviser than not even max your 401k like a large percentage apparently don't), but the advice about hiring an adviser could have been more broad and included investing in diversified low cost mutual funds.
PFInterest
Posts: 2684
Joined: Sun Jan 08, 2017 12:25 pm

Re: Financial Characteristics of Physicians

Post by PFInterest »

Carefreeap wrote: I'll add that unfortunately one problem many physicians have is a level of arrogance from thinking s/he is the smartest person in the room and a certain [disdain] *typo fixed for those who haven't accomplished what s/he has.

That attitude leads them into situations where they get what I call "ego-sold". Sure you get the best looking house in the neighborhood but it doesn't mean it's the best investment for your goals and situation. Then they complain about how all real estate salespeople are scum. Uh, you did it to yourself because you don't listen carefully to your options.

Of course not all physicians are like this and time can have a way of humbling us all.

YMMV
wow.
DC3509
Posts: 284
Joined: Wed Jul 12, 2017 7:25 am

Re: Financial Characteristics of Physicians

Post by DC3509 »

The "ahead/behind" point is a good one and likely means that the study overestimates financial security. People (especially doctors and other highly paid professionals) are loathe to admit that they are "behind" or "failing" or anything of the sort. So, you can have folks who answered the survey by saying they are "ahead" but are actually far, far behind, at least when compared against a benchmark of how much they should have accumulated (not even how much they actually accumulated, which is different).
User avatar
goingup
Posts: 3971
Joined: Tue Jan 26, 2010 1:02 pm

Re: Financial Characteristics of Physicians

Post by goingup »

WL2034 wrote:I found the data interesting. I do think it seemed to stray into indirect advertisement and maybe was sponsored by the "strategic partner" who runs a financial advising firm for physicians.

"67% of physicians who are 'ahead' use a financial adviser, while only 44% of physicians who are 'behind' use an adviser."
Yes, I agree that there seemed to be an agenda by the broker sponsor of the survey. It was interesting data however.

I noticed was that the only options for retirement savings (page 13) beyond 401K/403B were IRA, Whole Life, SEP and Profit Sharing. What about good ole taxable brokerage account? Or CDs, savings accounts, etc. I found that really curious, because many high-earners, physicians or not, end up putting the bulk of wealth in taxable as they phase out of tax-advantaged options.
WL2034
Posts: 488
Joined: Tue May 21, 2013 10:36 pm

Re: Financial Characteristics of Physicians

Post by WL2034 »

goingup wrote:
WL2034 wrote:I found the data interesting. I do think it seemed to stray into indirect advertisement and maybe was sponsored by the "strategic partner" who runs a financial advising firm for physicians.

"67% of physicians who are 'ahead' use a financial adviser, while only 44% of physicians who are 'behind' use an adviser."
Yes, I agree that there seemed to be an agenda by the broker sponsor of the survey. It was interesting data however.

I noticed was that the only options for retirement savings (page 13) beyond 401K/403B were IRA, Whole Life, SEP and Profit Sharing. What about good ole taxable brokerage account? Or CDs, savings accounts, etc. I found that really curious, because many high-earners, physicians or not, end up putting the bulk of wealth in taxable as they phase out of tax-advantaged options.
Yes I noticed the absence of taxable savings / brokerage upon my first reading, as well. Seems peculiar--definitely with income well over the 401k max and Roth limit, much savings will be taxable for most employed docs. Does the study not consider taxable a "retirement" vehicle?
afan
Posts: 5381
Joined: Sun Jul 25, 2010 4:01 pm

Re: Financial Characteristics of Physicians

Post by afan »

Those physicians who do not have 401(k) plans or who have them but do not max out may be behaving optimally.
For those who are self employed or in small groups, a 401(k) is relatively complicated and costly to set up and run.
For those who have them, one factor in whether it is worth investing is time to retirement. As one gets older, the time to required distributions goes down and the value of deferring taxes decreases. If one does not have a Roth option, and many 401(k)'s do not, there is also a matter of optimizing estate tax situations. For some docs, still working past 70 and already with large retirement fund balances, it could be quite rational to reduce contributions to pretax accounts.

I would have been interested in what docs are doing about estate planning, beyond just having an estate plan. It would have been interesting to hear about asset protection strategies.

I found the high proportion who use financial advisors depressing. The survey did not distinguish between those who might use them for advice about insurance, taxes, etc and those who pay someone to manage investments for them. The latter is a waste of money, so I like to think that most physicians do not use them.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
afan
Posts: 5381
Joined: Sun Jul 25, 2010 4:01 pm

Re: Financial Characteristics of Physicians

Post by afan »

Re: arroagnce. I have long found that the smartest people are the least arrogant. Perhaps this because they are less intimidated by the idea of learning something new and they actually do constantly study and learn new things. That makes them aware of how much they don't know.

I took several courses from Nobel laureates and National Academy members in college and have worked for years with a number of National Academy members. None of them felt/feels it necessary to tell people who smart they are. The docs I know who love to tell people that they are really smart have something in common: No one would have thought they were particularly bright unless they announced it. Getting people to believe them is another matter....
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama
User avatar
VictoriaF
Posts: 19544
Joined: Tue Feb 27, 2007 7:27 am
Location: Black Swan Lake

Re: Financial Characteristics of Physicians

Post by VictoriaF »

afan wrote:I found the high proportion who use financial advisors depressing. The survey did not distinguish between those who might use them for advice about insurance, taxes, etc and those who pay someone to manage investments for them. The latter is a waste of money, so I like to think that most physicians do not use them.
I agree. The survey linked in the OP implies that using advisers is an advantage; the likely purpose of the survey is to intimidate physicians into using advisers.

The problem most physicians have is that their income is not smooth: in school and residency they earn very little, and then both their income and taxes skyrocket. Many become overly concerned with reducing their taxes and make disastrous investments such as real estate, business ownership, trusts, and annuities. These investments are very complex and require advisers; advisers push these investments as an alleged tax benefit to the physicians.

Victoria
WINNER of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
lernd
Posts: 92
Joined: Thu Apr 14, 2016 10:20 pm

Re: Financial Characteristics of Physicians

Post by lernd »

I heard or read somewhere (in a medical context) - "never mistake confidence for competence." I like the quote and remember it daily in my own medical practice.

Looking at the methodology, I would note that the results are self-reported surveys and consist of ~2,300 responses from an initial email to 125,000 physicians. That's a response rate of < 2%. Seems like drawing any conclusions would be based on questionable (self reported) and limited (< 2% response rate) data.
SGM
Posts: 3100
Joined: Wed Mar 23, 2011 4:46 am

Re: Financial Characteristics of Physicians

Post by SGM »

I worked solo and had only one employed family members. Additional help was paid for by others and I had a few very intelligent dedicated volunteers who were retired nurses. Setting up a solo 401k at a low cost brokerage company was free and easy to do. I could choose from any stocks or ETFs. If I wanted Vanguard funds I purchased an ETF. Mutual funds were available some had additional costs to purchase others did not. Some ETFs could be bought or sold without a fee. Paper work was minimal. 5500EZ forms were required yearly once the account reached $250k.

Setting up a 401k for a larger group would likely be more expensive and might have some restrictions for highly paid individuals. I suspect it would be more difficult to manage.
deltaneutral83
Posts: 1773
Joined: Tue Mar 07, 2017 4:25 pm

Re: Financial Characteristics of Physicians

Post by deltaneutral83 »

People with book smarts (Dr's , Lawyers, PhD's, etc etc) are the biggest targets to ingest the "investing is complicated" myth and that you need 20+ mutual funds because "this is super duper top secret stuff that only super duper smart people have the chance to invest in". I mean for goodness sake, the adviser used terms like "beta" and "cash value policy" so this must be brilliant and only available to us smart guys. I imagine these types of clients (not just Dr's) pat themselves on the back every time they get that quarterly statement from their adviser which excludes the 1.25% AUM and 1% ER funds for a total of 2.25% (or sometimes worse) only to trail the corresponding benchmark that the mechanic invests in for less than 10 basis points. I would at least let these physicians use my lake house one weekend each year since they paid for it over 15-20 years if I were an adviser.
NotWhoYouThink
Posts: 3273
Joined: Fri Dec 26, 2014 4:19 pm

Re: Financial Characteristics of Physicians

Post by NotWhoYouThink »

Sounds like a target rich environment for wealth management professionals. Which is not news, but maybe confirmation of long standing observations.
mptfan
Posts: 6358
Joined: Mon Mar 05, 2007 9:58 am

Re: Financial Characteristics of Physicians

Post by mptfan »

deltaneutral83 wrote:People with book smarts (Dr's , Lawyers, PhD's, etc etc) are the biggest targets to ingest the "investing is complicated" myth and that you need 20+ mutual funds because "this is super duper top secret stuff that only super duper smart people have the chance to invest in". I mean for goodness sake, the adviser used terms like "beta" and "cash value policy" so this must be brilliant and only available to us smart guys.
I once met a guy who identified himself as a vice president of a well known brokerage firm. I asked him "What do you do?" and he responded "We bring alpha to your portfolio."
mnnice
Posts: 510
Joined: Sat Aug 11, 2012 5:48 pm

Re: Financial Characteristics of Physicians

Post by mnnice »

Maybe the actionable part of this is medical school is not worth it. :?

It is a bit mind blowing to me that my household has more retirement savings than the average 50 something doctor's household. Since DH and I have never combined made what most doctors make individually.
User avatar
Topic Author
gasdoc
Posts: 2000
Joined: Mon Nov 03, 2014 8:26 am

Re: Financial Characteristics of Physicians

Post by gasdoc »

WL2034 wrote:I found the data interesting. I do think it seemed to stray into indirect advertisement and maybe was sponsored by the "strategic partner" who runs a financial advising firm for physicians.

"67% of physicians who are 'ahead' use a financial adviser, while only 44% of physicians who are 'behind' use an adviser."

'Ahead' and 'behind' are defined as whether the physician considers themselves ahead or behind goal--no net worth calculation included that I saw. It's certainly conceivable that physicians with advisers tend to feel more 'ahead' because their advisers provide reassurance. "Portfolio looks great, keep sending me money!" Not saying it's wrong in all cases (and obviously, it's better to have an adviser than not even max your 401k like a large percentage apparently don't), but the advice about hiring an adviser could have been more broad and included investing in diversified low cost mutual funds.
Yes. I don't particularly trust the data as it pertains to using/needing a financial advisor- the study was conducted by an insurance company after all. I love the basic info though, especially as it breaks out the various age bands.

gasdoc
User avatar
LadyGeek
Site Admin
Posts: 68654
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Financial Characteristics of Physicians

Post by LadyGeek »

This thread has run its course and is locked (not personal nor actionable). General comment threads are off topic in the forums with "Personal" in the title. See: A reminder that non-investing general comment threads are OT
- It must be personal. In other words, you must be asking about your own situation. You can also ask on behalf of someone specific, such as a family member.

- It must be actionable. You must be able to do something specific with the replies that will make a difference in your situation.
If you have a specific question, please ask directly and provide sufficient information for members to supply appropriate advice.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
Locked