The 2021 MD Physician Retirement Readiness Study explores how Canadian physicians are thinking about, and preparing for, retirement. Carried out by Environics Research for MD Financial Management (MD), the survey included 401 physicians, representative of the general practitioner and specialist populations in Canada, by region.
Compared with our previous national survey, in 2018, a greater number of physicians surveyed expressed confidence in their ability to retire (84% in 2021 versus 77% in 2018) — but this wasn’t without some common apprehensions.
Worries cited by physicians in 2021 included concerns about health and aging (63%), getting by on a reduced income (38%) and running out of money (36%). Nearly half of physicians under 60 told us they find it hard to save for retirement due to other expenses. And four in 10 physicians (38%) agreed the COVID-19 pandemic has affected their finances and are worried about the impact of the pandemic on their retirement.
Below we take a closer look at three of the most pressing concerns expressed by physicians about retirement and suggest ways to improve — or even reset — your view of retirement.
What’s my number? How much do I need to retire comfortably?
About a quarter of physicians surveyed did not know, or weren’t sure, what level of assets they would need to retire comfortably, according to the 2021 MD Physician Retirement Readiness Research Study.
How much I will need to retire?
According to a popular guideline, one can live comfortably on 70% of pre-retirement income. This back-of-the-envelope calculation rarely applies to physicians, however, because they don’t fit the mould of typical high-earning professionals.
Physicians’ finances are complex, thanks to an almost universally late start at earning income, after medical school. Many carry substantial debt going into practice, or delay saving for retirement until later in life. It takes careful planning for physicians to develop a strategy that makes up for lost time, manages liabilities and prepares them to draw on savings, investments and government benefits tax-effectively in retirement.
Start by deciding what your retirement will look like. Rather than focusing on a dollar amount, MD’s retirement planning process begins with finding out what matters most to you and defining each step that’s required to reach your goals. Retirement is typically a progression of events that will unfold differently with each individual physician. Your practice may transition gradually over time, or you may ease into semi-retirement, rather than abruptly stopping. This all changes the shape of your savings strategy and your approach to short- and long-term goals.
Set a retirement savings strategy based on your goals. Just over half (54%) of pre-retirement physicians said they have a general notion of what they might like to do in retirement — without specific plans. One-third (36%) said they’ve already created goals and a path to work toward their desired retirement lifestyle, but that leaves two-thirds of those surveyed saving for retirement without any set target in mind. However, defining more concrete goals will help you identify financial planning and tax-saving opportunities to make better use of every dollar you’ve saved or invested.
Look ahead in terms of potential cash flow. When considering the level of assets needed to retire comfortably, a majority of physicians surveyed expect to need $2 million or more (52%), while one-third (36%) expected to need $3 million or more. However, without a plan, these are just random targets. The planning process can help you set an achievable and realistic number, projecting the cash flow you need for the lifestyle you want, while planning how to withdraw funds tax-efficiently in retirement.
What if the unexpected changes my retirement plans?
Physicians surveyed place great importance on ensuring their money will not run out in retirement — this was an active worry for more than a third of those surveyed (this question was asked for the first time in 2021).
While the majority of pre-retirement physicians said the COVID-19 pandemic has not affected their preparations for retirement (55%), a significant number of respondents agreed the pandemic has either affected finances in some way or had an impact on their preparations for retirement.
COVID-19 impact of retirement preparations by current assets
COVID-19 impact of retirement preparations by current assets
| Impact on retirement | Less than $1 million | $1 million to $2 million | $2 million-plus |
|---|---|---|---|
| COVID hasn’t affected my retirement preparations at all | 36% | 61% | 62% |
| I’ve had to delay contributions to my retirement savings and am going to have to retire later than I’d planned | 27% | 19% | 14% |
| COVID has negatively affected my finances and I’m worried I won’t have enough money to retire comfortably | 23% | 11% | 6% |
| COVID has improved my ability to save money toward retirement; I am on track or ahead of schedule | |||
| I came out of retirement because I wanted to help | 1% | 0% | 3% |
| I had to come out of retirement because I needed additional income | 3% | 0% | 0% |
| Don’t know/not sure | 13% | 7% | 6% |
Impact of COVID-19 on retirement preparations
Nearly one in five physicians (18%) said they have delayed their retirement dates or scaled back their contributions to retirement savings. Fortunately, with goals and a strategy defined, unexpected circumstances are less likely to derail your retirement plans and adjusting for any unexpected financial obstacles becomes much easier.
Measure the effects. Financial fallout from the pandemic has affected Canadian physicians in vastly different ways, our survey findings suggest. Almost as many reported positive financial impacts (10%) —improving their ability to save for retirement — as negative (12%) — worried about saving enough money to retire comfortably. Notably, one in 10 physicians told us they don’t really know the real impact. Any change in circumstances, or doubt, is reason enough to revisit your retirement planning strategy.
Review risks and asset allocations. It may make sense to review the amounts you usually move between accounts, and the mix of assets you hold, depending on the impact of any changes to income you may have experienced this year. It’s a good time to reassess risk tolerance and future goals, to consider the current investment climate and to decide whether you should adjust exposure to equities in your portfolio. Your MD Advisor* can help.
Refine your financial plans. It’s never too late to get back on track or adjust plans to refocus your priorities at any stage of your career. You could opt to save more, spend less, adjust expectations or push back your retirement date.
Could I retire sooner than planned — or will I need to work part time?
Top factors that may influence the timing of retirement remained unchanged from our 2018 survey results, led by the state of health/energy (77%) and the size of the retirement portfolio (54%). General practitioners were more likely to say their road to retirement will also be impacted by when they can find another physician to take over their practice (28%) compared with specialists (6%).
What factors might influence the expected timing of your retirement?
What factors might influence the expected timing of your retirement?
| Factor | 2021 | 2018 |
|---|---|---|
| The state of my own health/energy | 77% | 73% |
| The size of my retirement portfolio | 54% | 54% |
| Needed to pay for my child/children’s education/help with their lifestyle | 27% | 31% |
| When I have decided what I want to do once I am in retirement | 26% | 23% |
| The timing of when my spouse/partner plans to retire | 26% | 26% |
| Needing to pay off a mortgage or other debt | 20% | 20% |
| When I can find another physician to take over my practice | 19% | 15% |
| Other | 3% | 3% |
| Don’t know/not sure | 5% | 4% |
Factors influencing retirement timing
Build flexibility into your plan. Having the freedom to retire when you’re ready is one of the greatest benefits of forward-looking financial planning. Your decision won’t likely be based just on how old you are: 60% of pre-retirement physicians surveyed did not provide a specific retirement age, including one in five (20%) who do not have an age in mind.
Revisit retirement goals. Our 2021 survey found that physicians are significantly less likely to plan to continue working part time as a physician compared with the 2018 results (39% versus 47%) — a changing goal that could prompt a reset or readjustment of financial plans.
Identify gaps in protection/estate planning. You may think of insurance and estate planning primarily as measures for taking care of others, but this part of the financial planning process can also help protect wealth during your lifetime and set you up for retirement. It is also a way to address a growing interest in charitable giving/philanthropy: our survey revealed this is “very” or “somewhat” more important to physicians in 2021 than in 2018 (62% versus 55%). Life insurance is the most common form of financial protection cited by pre-retirement physicians (82%), while one-third (33%) use a trust for tax and estate planning.
In a physician’s life, the best retirement advice isn’t only about money
Our national survey exposed common financial concerns about life after practice, and it also highlighted how non-financial aspects of retirement — such as your health, personal relationships and quality of life — are important to consider in your overall plan. Your individual values and circumstances can guide your most important decisions about investments, tax planning, estate planning and the transition into retirement.
Our personalized approach to retirement planning encourages you to envision the life you want at the end of your practice, and provides a structure that keeps you on track, even through changing circumstances. Contact an MD Advisor to help map out your most important goals, your desired lifestyle and the strategies that need to be put in place and adjusted regularly to get you there.
Sources: Environics Research, MD Physician Retirement Readiness Study, 2021 and 2018.
*MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.
The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.
