Doctors and dentists are some of the most educated people around with most attending school for an average of 8 years followed by 5 to 7 years of residency before entering practice. Those years typically pay off in the care they give their patients, but not in the care they give to their own financial health.
Why should doctors and dentists take better care of their money? Because both often have special financial situations that they can leverage to their advantage – or that can come back to bite them if they’re not careful. Certified Financial Planner and author of Heal Thy Wealth: How Doctors Are Misdiagnosing Their Own Financial Health and What They Can Do About It, John J. Moakler, Jr., BMath, CFP, CLU has come up with what he calls Financial Health Care for Doctors™ to assist those in the healthcare profession take better care of their finances. “Many people in these professions don’t know enough about managing their wealth and it can end up hurting them,” Moakler says. “Management consists of creating wealth and protecting it, and lots of doctors and dentists don’t take the protection aspect seriously enough.”
Healthcare professionals are in a unique position in that they often hold other people’s lives in their hands. In order to continue to do this, they need to make protecting their own lives a priority. Risk management products, such as life insurance, can be customized to protect their families, create a living legacy for the ones they love, and can provide a tax-free pay cheque in retirement. In addition to this, there are “peace of mind” insurance products that can be put in place so that healthcare professionals can be protected in the event of an injury or illness. Moakler notes that insurance coverage is a crucial part of a doctor’s financial profile and an important step toward protecting their wealth.
Another aspect of wealth protection is keeping one’s money safe from undue risk. Like other professionals, doctors and dentists have to prepare for retirement and those in private practice, in particular, are often left to plan for their post-work years on their own. While stock investment is attractive because of the potential returns, the reality of market fluctuations means accrued funds are often at risk. Moakler warns: “All investments have to be assessed from a risk management viewpoint. The initial returns may be a bit lower on the safer investments, but peace of mind is priceless and it feels good to know that a market drop won’t wipe you out.”
In addition to building and protecting wealth, it is important to plan for how it will be distributed after retirement. The accumulation period leading up to retirement is only half the story—understanding how the funds will be dispersed is the other central, yet often discounted, aspect of the financial planning process. As a part of his written “Financial Treatment Plan,” Moakler encourages the creation of a personalized individual pension plan that will help ensure even disbursement of their accumulated capital. Although the nature of their practice means doctors and dentists can potentially continue to work indefinitely, they shouldn’t be forced into working forever because they don’t have enough money to last. “People in these professions often put in very long hours away from their families,” he says, “Once they reach retirement age, they should have a choice of continuing to work part-time because they love what they do or moving on to the next chapter in their family life.”
Legacy planning for their practices is another aspect of financial planning that doctors and dentists must think through. While these two professions have many similarities, legacy planning can differ significantly between them as dentists can often sell their practices and patient lists when they retire whereas doctors typically cannot. Because healthcare is universal in Canada, a new doctor can potentially just open his office and get an influx of patients through the system and there is no incentive to purchase an existing practice. Dentists, on the other hand, whose services are not covered by the national healthcare plan, can benefit from purchasing an existing practice, so the earning potential of the sale of a practice is another unique consideration for dentists as they look toward retirement.
Despite the aspects of their professions that make their circumstances unique, like everyone else, healthcare professionals have a lot to consider as they seek to save, protect, and distribute their money back to themselves after retirement. As Moakler sees it: “Doctors devote enormous amounts of their time and energy to the health of their patients, and for that, we can all be grateful. The key is to help them ensure that they can live comfortably when that important work is done.”
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