6 key thoughts on the state of retirement planning in healthcare

Many Americans — physicians and healthcare professionals included — are nervous about retirement. Part of this is juggling different financial responsibilities, such as paying off student loans and saving to buy a home or send children to college. However, part of the tension is the fear of the unknown, determining how much to save based on future costs of living, healthcare needs and other shifting factors.

Here are six key thoughts on the state of retirement planning in healthcare.

1. Physicians feel behind in saving for retirement. Concerns about retirement are top-of-mind for physicians, according to a survey from AMA Insurance Agency. About half of physicians said they felt behind schedule in saving for retirement, and by significant amounts. Forty-four percent of physicians between ages 60 and 69 said they would ideally have $1 million more in retirement savings at this point. The majority of respondents said they wished they had spent more time learning about financial planning early in their career.

2. Many physicians are still paying off student loans. The AMA Insurance Agency survey found more physicians are graduating with student loan debt than before. About half of physician respondents ages 60 to 69 graduated with student loan debt, but 73 percent of physicians under age 40 said they graduated with debt. Seventy percent of physicians under age 40 who graduated with debt left medical school with $100,000 or more in student loan debt. A quarter of physicians ages 40 to 59 are still paying off student loans.

3. Female physicians are more concerned than males about saving. Despite the fact that women generally save more than men, many women in healthcare doubt their abilities to invest and manage their finances, according to a study from Fidelity Investments. Half of female healthcare professionals — 51 percent — worry they don't have enough saved for retirement and 39 percent do not feel confident in investing for retirement, compared to 29 percent of men.

4. Physicians and healthcare professionals are not alone in struggling to save. A recent report from London-based bank HSBC found 75 percent of working-age people in the U.S. are saving for retirement, yet 13 percent of Americans feel they will never be able to retire. More than half of American retirees surveyed — 51 percent — said they did not start saving for retirement soon enough.

5. Healthcare expenses are the No. 1 concern. A survey released last month from Bankrate found more than one in four Americans — 28 percent — rank medical expenses as their top financial worry in retirement. High medical expenses are likely a top concern because they are difficult to predict. The survey cites a figure from Fidelity Investments, estimating a couple retiring in 2014 will need $220,000 to cover healthcare costs through retirement. Unsurprisingly, households earning more than $75,000 a year and respondents over age 65 were most concerned with this issue. With retirement looming and solid day-to-day finances, these groups are likely more concerned with healthcare because they are able to be more forward-looking than those who need to focus their finances on daily expenses.

6. The age-old rules of saving for retirement apply now more harshly than ever. For healthcare professionals moving toward and past middle age, many are observing a savings environment entirely different than what they may have grown up with. The same holds true for much of the American population nearing middle age. "This may be part of what is driving the increasing tension in America about retirement savings. Professionals in their 30s, 40s and 50s likely know someone older who is not sufficiently prepared to retire. This may be because their spending habits grew with their incomes mid-career, or they simply didn't save enough when things were going well. Some people took on more debt than they could pay down long-term or they were ill-prepared for stock market fallout. Low yields from CDs and other traditional savings vehicles make it difficult to live off a portion of savings without drawing down on retirement savings. All these factors mean people will have to go back to the basics: Many will have to downsize, attempt to save ferociously, balance risk in their investments and work longer if they can.

 

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