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Advisors May Help Cure Doctors’ Retirement Income Shortfall



Financial advisors prospecting for new clients might want to check with their doctor. Even physicians, some of the highest paid salaried professionals in the U.S., could use help when it comes to retirement savings projections, a new Fidelity Investments study finds.

Doctors, who earn an average of $299,000 annually, are on track through their employer-sponsored retirement plan, personal savings and Social Security to replace only 56 percent of the income they need in retirement, a study by Fidelity Investments has found.

That’s 15 percent short of their target income replacement rate of 71 percent of preretirement income, the report said. The study has implications for other high-paying professions, a Fidelity expert said.

“This analysis reveals that physicians are not as financially prepared for retirement as one might think, which is a clear indication that employees at all income levels need financial guidance,” Rick Mitchell, executive vice president of tax-exempt retirement services with Fidelity Investments, said in a news release.

Doctors are not ignoring sound retirement habits. But their income streams in retirement aren’t going to cover all their needs, Fidelity said. The results are based on an analysis of data on 5,100 doctors and as many as 95,000 other health care professionals.

School debt, limited access to nonqualified retirement plans and contribution restrictions imposed by clause 402(g) of the Internal Revenue Code make it more difficult for doctors to replace 71 percent of preretirement income, Fidelity found.

For example, while some doctors save up to the IRS limits, only 40 percent of doctors under age 50 did so, the Fidelity analysis also found.

“This illustrates an opportunity to provide financial guidance to these physicians,” the Fidelity policy insights report said.

Replacing 71 percent of income means that a doctor earning $299,000 at the peak of his or her career -- between the ages 60 and 67 -- would have to find annual income of $212,290 to meet his or her needs in retirement.

Income from personal retirement savings, employer-sponsored savings plans and Social Security provide $167,440, leaving a 15 percent replacement gap of $44,850.

Non-physicians, who earn an average annual salary of $60,000 at their peak – also between the ages of 60 and 67 -- have an income replacement guideline of 85 percent, or $51,000.

Between employer-sponsored benefits, personal retirement savings and Social Security, they can expect $37,200. Their 23 percent income replacement gap comes to $13,800.

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Because doctors are often highly compensated, their Social Security income relative to their needs is a much smaller portion of total income than for non-physicians, the report said.

is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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