Around 2 in 3 physicians expect or hope to retire from medicine by their mid or late 60s, according to Medscape’s retirement report released in December 2023.
Here are some interesting findings from that Medscape report:
Nearly 70% of physicians in their 40s want to retire in their 50s or early 60s, compared to doctors overall (19%).
On average, men stated that $4.1 million would provide a comfortable retirement, with women stating $3.6 million. Overall, the average for physicians was $3.9 million.
About three-quarters of the men surveyed believed they would meet their goals by retirement, while only 58% of women agreed, and 32% of all were unsure.
Reasons behind physicians’ planned age of retirement include wanting more family time (45%), desiring time to pursue other passions (61%) and when they expect to reach their monetary goals (68%), with burnout being the most commonly cited reason (74%).
As burnout weighs heavily on physicians, many are seeking ways to retire early and achieve financial independence. Unfortunately, a high percentage (32%) of physicians are unsure of whether they’ll be able to achieve early retirement.
Despite their high-income levels, many doctors are frustrated by the limitations of traditional retirement strategies, such as stock-heavy portfolios. That is why many are exploring alternative investments like real estate and private equity that offer physicians a path to early retirement, financial security, and lifestyle flexibility.
Physicians Falling Short of Retirement Goals
Many physicians face significant financial hurdles when planning for retirement. On average, doctors believe they need $3.9 million to retire comfortably – substantially more than the typical American employee.
These figures suggest that many physicians are still seeking ways to close the gap and retire on their own terms. The traditional investment route, which relies heavily on stocks and bonds, may not be sufficient to achieve early retirement goals, especially when considering market volatility.
To achieve early retirement, physicians must adopt investment strategies similar to those used by the ultra-wealthy, who diversify away from Wall Street’s high-risk volatility.
Real estate and private equity stand out as two powerful alternatives. Both provide the potential for consistent, passive income, capital appreciation, and portfolio diversification, which can reduce risk and accelerate the path to financial independence.
Why Real Estate and Private Equity
The ultra-wealthy consistently allocate more than 50% of their portfolios to real estate and private equity. Compare this to the average investor who allocates a majority of their portfolios to traditional assets like stocks and bonds.
The Real Estate Advantage
Real estate has long been a favorite asset class among wealthy investors because of its ability to generate steady cash flow through rental income and appreciate over time.
For physicians, investing in real estate can be a game changer for several reasons:
Stable Cash Flow. Rental properties, especially in the commercial or multifamily sectors, offer regular income, which can replace or supplement a physician’s salary.
Tax Advantages. Real estate investors benefit from tax deductions on mortgage interest, property depreciation, and other expenses. These deductions can help lower a physician’s taxable income, thus increasing their net earnings.
Appreciation. Over time, real estate tends to appreciate, providing a potential capital gain when properties are sold.
Real estate investing allows physicians to create passive income streams that don’t require their active involvement once the property is acquired and managed. This is especially true especially when partnering with seasoned experts through syndications or equity investments. Passive income provides physicians freedom from their primary occupation, allowing them to reduce working hours or retire early.
The Private Equity Advantage
Private equity, which involves buying ownership stakes in private companies, is another key investment vehicle used by ultra-wealthy individuals. It offers the opportunity to generate higher returns than the stock market by investing in income-producing businesses.
For physicians, private equity investments can be particularly attractive for the following reasons:
Higher Returns. Private companies often offer better growth opportunities than public companies, translating to higher long-term returns.
Less Volatility. Unlike stocks, private equity investments aren’t traded on the public market, which means they aren’t subject to the day-to-day fluctuations of Wall Street.
Access to Unique Opportunities. Physicians can leverage their professional networks to invest in healthcare-related businesses where they have specialized knowledge.
Private equity investments can also be structured to pay out profits, providing physicians with another form of passive income. By combining private equity with real estate, physicians can build a robust investment portfolio that supports early retirement.
The heavy allocation by the ultra-wealthy to real estate and private equity reflects the value of these investment assets and how essential they are for creating wealth and achieving financial independence. By following this blueprint, physicians can benefit from the same strategies that ultra-wealthy investors have used to accelerate their retirement timelines.
Hedge Against Volatility
The principal risk of stocks and bonds is their volatility and susceptibility to broader market downturns. However, real estate and private equity are not vulnerable to the same forces and can offer the following diversification benefits:
Real Estate as a Hedge Against Inflation. Real estate is an excellent hedge against inflation, as property values and rents tend to rise in line with inflation.
Private Equity for Non-Correlated Returns. Since private companies are not publicly traded, their returns are less correlated with the overall stock market, providing diversification and protection during market downturns.
Both of these asset classes are critical to mitigating the risks of overexposure to stock market volatility, which can threaten a physician’s retirement plan.
For physicians, achieving early retirement is about more than just saving – it’s about creating multiple streams of passive income insulated from market volatility. Real estate and private equity offer the opportunity to do just that.
By diversifying into these alternative investments, physicians can achieve their goals of retiring earlier.