Sometimes here in WCI-land, we think all doctors make a gazillion dollars, save 75% of them, earn 25% returns, never pay taxes, and retire as decamillionaires. Back in the real world, none of that is the case. Every month, I'm shown data that indicates that many regular doctors don't save all that much for retirement.
Where does that data come from? Two places. First, I'm on the retirement committee for a large group of hundreds of docs. Second, my little division of these docs has open books, so I can see what my partners are making and what they're sending to our excellent retirement plans down to the cent. So, I decided to do a few calculations on the data.
My Group Is Not Unique
Some of you will look at this completely anonymized data and conclude that many of my partners should save more money for retirement. That's probably a fair criticism. But you should not conclude that there is anything unique about my partners. In fact, I find most of them to be quite frugal and reasonably well educated about personal finance. The more limited data for the much larger group of the entire organization (as well as my experience interacting with tens of thousands of doctors over the years) suggest my division is not unique in any way.
Limitations of the Study
The data also has some limitations. For example, having money withheld from distributions is NOT the only way to get money into our retirement plans. In fact, I generally write two checks a year to our 401(k), one in January for my employee contribution and one the following April for my “employer” contribution, once the max contribution has been calculated. While it will be pretty obvious which one of the partners is me, my actual savings rate for this income is probably over 55% when you include those checks. Maybe one or two of my partners will also write a check during the year. But I know most of them don't.
This analysis also doesn't include any IRA or HSA contributions they may be making—just the contributions to our two retirement plans. They may also be investing in a taxable brokerage account, real estate, or something else. The most significant reason why my percentage is the highest is that, unlike most of my partners, my clinical income is a less significant source of income for us. I only work part-time and all day shifts (I actually have the lowest income of all the partners), have plenty of investment income, and earn more at WCI than I do clinically. Unlike me, they actually have to pay taxes and live off of what they're making. So, don't focus so much on my savings rate as on the others. Besides, a few of them may actually be putting more dollars into our retirement plans than I am since they're earning so much more. It might be a lower percentage but actually a higher amount. This is also only a two-month snapshot, not an entire year. But I still think you'll find it interesting.
More information here:
Real Life Examples of How WCIers Live, Worry, and Withdraw Money in Retirement
How Much Money Physicians Actually Need to Retire
How Much Do Doctors Save?
Here are the savings rates for my partners:
- 0%
- 3%
- 3%
- 3%
- 7%
- 10%
- 12%
- 14%
- 17%
- 22%
- 25%
- 26%
- 29%
- 38%
- 43%
- 46%
The dollar-weighted average for the group is 16%. Not too bad. It's certainly close to the 20% I typically recommend. However, the average is incredibly misleading. In reality, 1/3 of the doctors are saving less than 10%. Over half (56%) are saving less than 20%. Less than half are on track to max out the 401(k) ($72,000 in 2026 for those under 50 [visit our annual numbers page to get the most up-to-date figures]). Only 62% are contributing at all to the cash balance plan, and only 38% are on track to contribute more than $10,000 to it. And to be honest, I think my little division is doing GREAT compared to most doctors.
The Reason Many Doctors Don't Become Millionaires
This little demonstration pretty much stacks up with what we see when we look at net worth surveys of doctors in their 60s. I have no idea of the net worths of my various partners, but we can look at the Medscape surveys from back when they used to report this information for thousands of doctors.
For doctors in their 60s, 10%-12% have a net worth < $500,000, while 25% are not millionaires, 52% are not multimillionaires, and just 12%-15% are pentamillionaires. It's not that hard to look at the savings rates of the various partners and figure out which ones may not retire as multimillionaires as well as which ones are likely to retire with $5 million+.
More information here:
Why Physicians Should Retire as Multi-Millionaires
5 Ways to Retire with $5 Million by Age 55
Roth vs. Traditional 401(k) Contributions
Want to know something else interesting? On this website, we debate Roth vs. traditional contributions for 401(k)s all the time. Sometimes it seems like more WCIers are doing Roth, even in their peak earnings years. That's not the case with my partners. At least for the two months included in this analysis, every dime that went into the retirement plans from our division was pre-tax (except for the check I wrote for my employee contribution). That's certainly the right move for those with the lower savings rates and probably the right move for most of the others, too. Most doctors should be saving in pre-tax accounts during their peak earnings years.
If you want to have more money in your retirement accounts when you retire, you need to contribute more money to your retirement accounts now. That's really the secret. Getting rich isn't complicated:
- Make a lot of money.
- Carve out a big chunk of it to invest.
- Make sure your money works as hard as you do.
All of the docs in my group are accomplishing Step 1 by any reasonable comparison. Our committee has ensured these plans are filled with nothing but excellent investments, so Step 3 is completed. But there's an awful lot of variation in Step 2.
What do you think? Were you surprised by this real-world data? Why or why not? What has your savings rate been over the years? How much did it go up when you became financially literate?