Why Are Many Physicians Poor Planners?

December 10, 2005

Christopher M. Gregory, Chartered Financial Consultant

Randy L. Flink, Registered Investment Advisor

Championship Financial Advisors

WWW.CHAMPIONSHIPFINANCIAL.COM

Reed Tinsley, a nationally-known Houston CPA, author and lecturer who works exclusively with physicians around the country, recently included the following item on his blog (http://rtacpa.blogs.com/):

“As someone who has worked exclusively with physicians over the past nearly 20 years, I continue to be amazed what a wreck most physician personal finances are. Recently a surgeon unexpectedly died of a heart attack; the physician was only in his 40’s. To make a long story short, he left his unemployed wife and two children with basically NOTHING except for the value of his medical practice (which as you can expect declined in value like a rock in water after his death). No life insurance, no savings, a mortgaged up homestead – basically nothing. I also continue to be amazed at how many physicians “have to work.” In other words, they cannot retire when they want to retire. No personal retirement planning at all.

Why is this I often ask myself. As try as I might with my clients, most simply do not have the time to spend on personal financial planning. The result is either no planning at all or “patchwork” financial planning. The end result can be and sometimes is disastrous.

If you are a physician or anyone else for that matter reading this, ask yourself these simple questions:

1. Do I save money each month?

2. Do I contribute money to a retirement plan product each year?

3. Do I have life insurance in place and is it enough?

4. Will I be able to put my kids through college?

5. Do I have a will?

6. Are all my non-exempt assets protected from creditors?

7. How much money will I need to retire on?

8. What happens to my personal finances should I be incapacitated with a disability?

These are just a few of MANY questions and issues that must be addressed by every physician on a personal basis – RIGHT NOW. Remember the old saying: “People don’t plan to fail, they just fail to plan.”

Frankly, we refuse to believe that physicians intend to have financial misfortunes befall themselves or their families. The problem?  The typical physician just doesn’t have the time to devote to mapping out his or her financial future.  As a result,  matters like the transfer of wealth to heirs, the accumulation of assets, and the enjoyment of assets during retirement can suffer.

The Looming Retirement Crisis

The world’s financial landscape is going to look much bleaker 10-15 years from now as the United States and most of the industrialized world (including Japan, Western Europe and Canada) are swept toward a retirement waterfall of epic proportions.  It is a crisis unfolding.  What exactly is precipitating this crisis? Here are some of the important elements:

  • The first wave of Baby Boomers is only 3 years away from retirement.
  • Social Security and Medicare are in deep trouble, and we won’t have to wait long to find out how bad the problem is – unless one chooses to believe the Government’s version about the solvency of the entitlement system.
  • The combined public and private pension plans in this country are approximately $600 billion short on funds needed to keep promises they’ve made to around 45 million covered participants.
  • In 2004 alone, the increase in corporate pension funding deficits alone was $75 billion – an increase of 27% over 2003, despite a rising stock market.
  • Few individuals appear to have an idea of how much it will take to live comfortably in retirement. Only about 4 in 10 have taken rudimentary steps to calculate how much they need to save in order to live comfortably in retirement, and one-third of those say they don’t know or can’t remember the result of the calculation. (source: Employee Benefits Research Institute on the 2004 Retirement Confidence Survey)

It is conceivable tens of millions of aging Baby Boomers will be forced into survival mode because their income needs will not be met in their retirement years.  If so, what will happen to domestic and global economies as the North American, European and Japanese consumption engines begin to sputter in unison?   Will any of us be immune to the consequences?

Calling All Physicians

As advisors, we’ve heard all of the excuses. “I’m too busy.  I can’t take the time now.  I don’t want to think about that now.  I’m going on vacation.  I’m building a new building”… and so on.

Are physicians really immune to the scenario that we have touched on above?  If you think so, please look harder at the facts and remember that we all are part of a financial eco-system that is evolving in ways that we never imagined.

What Must Be Done

If you can’t or won’t do the requisite financial, retirement and estate planning for yourself, admit it now and hire someone who will make it happen.  Then make yourself listen.  That is what we do for our physician clients – we get their attention.  In many instances, it isn’t that a physician needs sophisticated planning. It is just the basics that need to be addressed.

As always, physicians won’t be hurt because they’re unable to marshal the resources to get things done. They’ll be hurt because they didn’t take the time.

Stop the excuses.

Mr. Gregory and Mr. Flink can be reached at (214) 365-6015 or  (972) 839-7395.

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