60% of Doctors Would Retire Now If They Could

I was reading about a survey by the Physicians Foundation recently which had some rather sobering findings.  They sent out these 48 question surveys to 630,000 doctors and only heard back from 13,575, and skewed heavily toward docs over 50 (65% of respondents as opposed to 47% of physicians) so perhaps we shouldn’t read too much into them.  But let’s take them one at a time and try to draw some conclusions from the findings.

Patient Access Issues

Several findings from the survey were interesting with regard to patient access issues.  The surveyors note that doctors are working 5.9% fewer hours since 2008 and are seeing 16.6% fewer patients per day.  I suspect the fewer patients per day statistic reflects the widespread adoption of EMRs decreasing physician productivity.  52% of physicians have limited the number of Medicare patients in their practice and 26% have closed their practices to Medicaid patients.  In the next 3 years, over 50% of respondents plan to cut back on patients, work part-time, retire, switch to concierge medicine, or take other steps that would reduce patient access.  The respondents also indicated they spent 22% of their time doing paperwork. When you add all these factors together, it’s the equivalent of losing hundreds of thousands of doctors a year (and there’s only about a million of us in the US).  At a time when there is already a known doctor shortage, docs are working less, seeing fewer patients while they are working, and accepting fewer payment options.  All that will add up to decreasing patient access and probably increased demand for physicians.

Pessimism Abounds

Yet despite this apparent increased demand for their services, 77.4% of physicians are “very pessimistic” about the future of medicine and 84% believe the medical profession is “in decline.”  57.9% would not recommend medicine to their children.  Over a third wouldn’t choose to go to medical school again.  82% of physicians believe they have little ability to change the healthcare system.  92% of physicians are unsure how they will fit into the medical system in 3-5 years.  Surprisingly, practice owners and specialists are more pessimistic than employees and primary care docs.  Perhaps this is a reflection of decreasing income levels, but it doesn’t look like they asked about that.

Uncompensated Care

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62% of docs surveyed reported they provided $25,000 or more in uncompensated care a year.  My first thought was, “That’s it?”  ACEP reports the average emergency doc provides around $150K a year in uncompensated care.  If I were only providing $25K that’d be like a $125K per year raise.  I guess I’m surprised that 38% of docs are doing less than $25K worth.  Really?  I’m not sure whether to say good for you or shame on you.

Retirement

The statistic in the survey most relevant to the mission of this website, however, is that 60 percent of doctors would retire now if they could.  That makes me very sad for two reasons.  One, it means the majority of doctors are only practicing medicine for the money.  There’s no way I could go to work just for the money each day.  Obviously financial motivation is part of it for all of us, but if that were the only reason I was practicing medicine I’d have quit long ago to do something I enjoyed more (which hopefully would at least provide a similar income.)  The second reason it saddened me was that there are an awful lot of doctors who seem to have squandered an opportunity for early retirement.  Let me explain.

If you really hate your job that much, on an average physician income, you could live a middle class lifestyle and still retire in your 40s.  Do the math.  Take a physician making $200K starting at age 30.  Have him live off a solid middle class income of $60K a year.  Assume another $40K in taxes.  So this doctor puts $100K a year toward retirement.  At what age can he retire off his portfolio?  If you assume 5% returns, the answer is age 42.  So why haven’t these hundreds of thousands of doctors who apparently would retire now if they could retired?  I’ve got a few hypotheses:


1) They refuse to live that frugally now (consciously or subconsciously.)

2) They refuse to live that frugally in retirement.  Remember that with this “extreme early retirement” plan you don’t live on $60K a year while working then magically have $200K a year to live on in retirement.  It’s still just $60K a year.

3) They are saddled with debt.  Debt is like an anti-investment.  It’s pretty hard to retire with student loans, credit cards, car loans, and a mortgage.  If you come out of medical school with $400K in debt at 6%+, you may not actually have a positive net worth until you’re nearly 40.  It could be longer if you were a non-traditional student, practice a less lucrative specialty, or had a few extra years of post-graduate training.

4) Government programs are not available at an early age.  The vast majority of Americans, including physicians, rely at least partially on Social Security to provide their retirement income.  You just can’t get it before age 62.  More importantly, spanning the gap between early retirement and Medicare eligibility is a real issue with the rising cost of health insurance.

5) They didn’t know it was possible.  You’ve probably noticed that financial ignorance is not uncommon among physicians.  More likely, they didn’t realize they’d want an early retirement until it was too late.  Even if early retirement is possible in 12 years, it still takes 12 years from the time you make the commitment to do it, more if you’re saddled with debt.

6) They are unable to achieve adequate growth on their savings.  I assumed a 5% real growth rate on investments.  After taxes, fees, and poor investment choices, that can be a tall order.

7) They’re lying and don’t really want to retire.  It is just a survey after all.  Perhaps our reflex answer is that “Sure, I’d retire if I could,” but when it really comes down to it we don’t actually want to quit practicing.  It’s okay to dream of some idealized version of retirement where you enjoy decades of excellent health, travel, and good times with friends and family.  We all know that’s pretty rare.

What do you think of the results?  Comment below.

 

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Comments

60% of Doctors Would Retire Now If They Could — 12 Comments

  1. I enjoy the blog, but what is with article images lately? I realize the current article image is a passe (or retire) in ballet, but it seems like half the articles have nonsensical or unrelated images. Example 1, 2, 3 (which leads me to believe that Louisiana has the best 529), 4 and 5. I realize I’m nitpicking, just my $0.02.

  2. Why were you surprised by 25K of uncompensated care? Of course it’s not going to be anywhere near the amount in emergency medicine. Comparing EM to other specialties is apples and oranges in regards to uncompensated care.

  3. You know I love your blog, but i have a few “beefs”

    Here we go:

    ” I guess I’m surprised that 38% of docs are doing less than $25K worth. Really? I’m not sure whether to say good for you or shame on you.”

    What’s your angle here? Are you talking about uncompensated care when they KNOW they are doing charity or when they get stiffed on the bill?

    I’m fine with charity if I know i’m doing it. What i don’t like at all is the unintentional charity, which we do at least 20K of every year.

    OK – let’s be real about this survey.. I think a very small % of people would NOT retire if they could live financially the way they wanted to for the rest of their remaining days.

    I think it’s ok to say: “I like what I do COMPARED to other jobs I could be doing. But if given the choice between doing a root canal or laying on the beach… well both the patient AND I would choose the beach.”

    You can put me in the camp that if asked right now I wouldn’t work one day past the day where i’ve achieved enough money to live reasonably for the rest of my days without work… and i’m 35.. only 11 years in.

    My outlook for dentistry is as bleak as the average surveyor was for medicine.

    The problem is that every day there are better and better treatment modalities we learn about on how to fix things. Our ability to restore people with horrible mouths is unbelievable.

    But our treatment options outstripped the average to even above average person’s ability to pay for them years ago.

    so most of the time I leave the office knowing I didn’t do the best service available for someone because when I gave them their 3 options: “best way” “good way” and “cheap way” to fix them, they almost always pick “cheap” or “good” and almost never “best”

    and even worse is when someone says.. “i’d love to do best, hell, i’d love to do cheap… but i can’t afford ANY of it”.. depression city and I’m the mayor

  4. Well you can put me in the camp, that will still provide medical care even after i have enough to retire. Could that change in the future? Perhaps but i doubt it.

    I like this article just bc it spices things up but the truth is that the study mentioned is crappy research and not worth a dime. Its impossible to draw any real conclusions from the data.

  5. @ Samuel and Z- I don’t know. I guess I just assumed the number was higher for everyone. I mean there are lots of docs on call for an emergency department who have to take care of patients without compensation due to EMTALA- Ortho, general surgery, neurosurgery, trauma surgeons, neurology, hospitalists/other admitting primary physicians, intensivists, cardiologists, even pediatricians (although its rare to see a kid that is truly uninsured- most seem to be able to get medicaid.) I assumed there was a fair amount of charity care going on as well. I certainly didn’t expect the numbers for most specialties to be as high as emergency medicine. For us EMTALA is both the bane of our existence and our badge of honor- to be the white knights of medicine if you will. Sometimes it is nice to be able to take care of people without regard to their ability to pay. I understand that many primarily outpatient docs don’t have that luxury as their overhead is much higher than ours. They’re not only donating their own time, but paying for the clinic expenses and staff salaries to donate theirs too.

    @Z- You know a lot of docs would like to see more of a cash-only fee-for-service model in medicine like we see in dentistry. I think your perspective about just how often even well-to-do people choose the “cheapest” or “good-enough” options would be really valuable for them to see.

    I think it’s important to realize that the study asked merely if people would retire if they could, not whether they would retire if they had as much money as they could possibly spend.

    @Rex- Come on man, cut me a little slack. You’re never going to see anything on this subject that would stand up for ten minutes at a journal club in July that was attended only by brand-new interns. You just have to take what you can get.

    @Colin- I just can’t win on the images. I’m impressed that you picked up on the “retire” actually. I thought it was pretty subtle. First I get told I need to add photos. Then I get told I need more images. Then I get told I need better images. I found out I could spend twice as much as this blog generates on purchased photos every month. It also can require a lot of time to find them. There aren’t exactly a lot of finance and investing images out there. Between organizing the site, writing material, editing guest posts, and managing photos, it can get pretty time consuming. So which is worse- no images or marginally related ones? Feel free to send me some good ones and I’ll use them! That goes for anyone else too. Better images would definitely improve the site, but I doubt using purchased images would increase readership sufficiently to justify the expense. I could also replace the images with ads- that’s pretty easy!

    • Late to the party, as usual, but I wanted to give you a couple of picture resources:
      1. Microsoft images has a lot of good selections, including finance and investing.
      2. I began using 123rf.com for our newsletter a few months. They have a freebies section but I bought a package of about 80 shots for less than $1/picture. You just decide what you want and download it. The site deducts a credit each time & must use up w/i a year. Cheers, Johanna

  6. The tax assumptions in many of your posts seem downright low
    Or maybe my tax status (w2 employed, property taxes, high state taxes) make me different.
    But at just under 400k salary my total, all in tax rate (payroll+fed+state+property+sales) is right around 35% (125k). I guess 200k might see only 40k in taxes in certain situations, but that seems quite low for the majority of mds. I would think 50-60k is more like it.

    Ultimately it is lifestyle choice though. I do agree there. Where I don’t agree is that debt, which most of us have, taxes, and some semblance of a smoothed consumption curve can all come together to provide a rewarding (very) early retirement for most physicians.

    Oh and kids?

    And where exactly are these magical 5% real returns?

    200k salary, two kids, 3% real saving growth, 50-100k student loan debt, 50k in taxes, saving 100k/ yr let alone have it grow at a sufficient rate would be downright impossible (and improbable).
    retire by 55, especially given soaring health care coverage costs, seems possible. 42? Only as a hermit!

  7. Foss-

    I agree there is a big difference in effective tax rate between a doc earning $400K and one earning $200K. A lot of folks though don’t realize just how low your effective tax rate can be even at an income of ~ $200K. That was about where I was last year and my federal rate was 8%. Add another 8% for state and payroll taxes and there I was at ~16% or so. It’ll be higher this year, but 35%? I’m a long, long way from there. It usually takes pretty high state tax rates to get to 35%. I also usually don’t include things like property and sales taxes in these assumptions.

    I don’t think 5% real returns are all that ridiculous of an assumption. I began investing in 2004 (that lost decade everyone talks about) and my overall annualized after-tax/after-expense/after-inflation return is ~ 4.5%. One more year like this one and I’ll be well over 5%.

    I agree that an early retirement at 55 is far more reasonable than at 42. But if your only goal was to not have to work, the extreme early retirement approach (frugal lifestyle now, frugal in retirement) might be worth it to you. It’s not for me, but I’ve met a few that want that. Most of them don’t have kids either, as you might expect.

  8. 8%?
    Payroll taxes have to be counted right?

    8%? Effective rate on 200k? Really?

    In California the top marginal rate is 9+% and its for most of income…

  9. im not blaming you for the study problems. I think you did the best you could with finding a study to talk about instead of just creating evidence out of thin air. With that said, while i enjoy the conversation, i wouldnt draw any conclusions from the research.

  10. Foss-

    Yea, 8%. It was half that when I was in the military. Remember that marginal rates are not effective rates. Just because you get into the 28% bracket doesn’t mean 28% of your income is paid in taxes. Also remember that the 8% was my federal income taxes only, not payroll or state income taxes. That total was 16% (and will be higher this year.)

    I’m often surprised by people who don’t understand how to keep taxes low. The government approves of certain activities (like making little money, buying a house, giving money away to charity, getting married, having kids, investing, and saving for retirement.) It disapproves of other activities. If you do the ones the government approves, your tax bill will be lower.

    Consider a doc who makes $200K as an employee. He’s married and has four kids. He put $40K into his 401K. He put another $20K into a defined benefit plan. He gave $20K to charity. He spent $25K on mortgage interest and property taxes. He paid $10K in state taxes. What is his effective federal tax rate? Let’s calculate it out:

    $200K-$40K-$20K-$20K-$25K-$10K= $85K of taxable income. He then deducts $3700 for him, his wife, and his 4 kids, or another $22,200. Now his taxes are calculated on $62,800 of income. He first fills up the 10% bracket, so pays $1740 on his first $17,400 in income. He then goes into the 15% bracket, paying $6810 on his next $45,400 in income. $1740+$6810=$8550 in taxes. This particular doctor gets $4000 in child tax credits, leaving him with a federal income tax bill of $4550, or about 2.3% of his $200K income.

    Sure, that might be a bit of an extreme case (I suppose his state tax bill should be lower for example), but my 8% bill was almost 4 times that big on similar income.

    Your taxes might not be that low because you don’t do the things that can make them that low. That’s okay as long as you realize why you’re paying more than someone who does do those things.

    Let’s look at a single doctor without kids who prefers to spend his $200K income instead of give it away and save it. Let’s say he paid that same $25K in mortgage interest and property taxes and that same $10K in state income taxes. Add in his $3700 exemption and his taxable income is $161,300.

    First he fills the 10% bracket, paying $870 on the first $8700. Then he fills the 15% bracket, paying $4028 on the next $26850. He fills the 25% bracket by paying $12,525 on the next $50,100. He finishes in the 28% bracket, paying $21,182 on the last $75,650 in income. Total tax bill adds up to $38,605, or 19.3%. Huge difference. Your lifestyle choices have tax consequences.

  11. To me a moderately stunning # is that 47% !!!??? of physicians are over 50. This
    bodes poorly for the 2020s when a huge chunk of these will be gone, just top of the
    head numbers, if 900k is total number of MDs now, in 15 yrs 450k will have aged over
    65 and at a generous 28k new finishing residents/yr that is only 420k more. It is unclear how the economics of 2028 will work out but if MD incomes flatten out, taxes go up as expected due to enormous govt shortfalls and new grads are looking at $200k and up in loan payoffs, then the incentive to become an MD will diminish significantly by 2025. A variety of unincentives reduce the effective supply of MD: lower productivity from EMR, increased regulation worsened by obamacare, 50% of new grads are female, and a general trend toward a less arduous lifestyle. NP will make up some of the difference, will it be enough? (FMG are accounted for in the variance
    between #of US med school graduates and numbers of MD finishing residency training each year.)

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