A prescription for advisers seeking to heal doctors with retirement woes

The doctor is in … need of some retirement planning help.

It’s a common practice for doctors to be so busy focusing on their patients that they end up neglecting their own long-term financial health. Not helping the medical community is the fact that doctors typically have different learning and earning curves than other professionals. Very often they're saddled with extensive student debt early in their careers and don’t hit their earnings peak until much later in life.

InvestmentNews caught up with Kamilah Williams-Kemp, vice president of risk products at Northwestern Mutual, to learn how doctors can improve their financial wellness so they can ensure themselves long, healthy retirements.

InvestmentNews: What are the unique challenges facing medical professionals when it comes to financial planning?

Kamilah Williams-Kemp: Medical professionals invest significant time and money into their career upfront. Financially, this means starting their working lives with an overwhelming amount of student debt, while their earnings don’t reach full potential for another decade or more.

Understandably, this debt often shapes how they approach financial planning, driving many to put every available dollar to debt repayment as their top priority and delaying other critical financial goals, such as retirement. But waiting until your debt is entirely paid off to start saving and investing is not the most prudent plan.

IN: Doctors typically get disability insurance as soon as they start working. Are they more likely than other groups to experience a disability that could prevent them from working?

KWK: Illness that commonly results in long-term disability, such as cancer or autoimmune diseases, can occur among individuals in any occupation. Moreover, many people don’t realize that musculoskeletal disorders, including arthritis, back pain, spine and joint disorders and fibromyitis, are the leading cause of disabilities, not accidents. Unlike other professions, doctors’ and dentists’ ability to perform their jobs can be impacted more severely by illness or injury. Given their higher earning potential over the span of their careers, this exposes them to the risk of financially devastating consequences of a long-term disability on financial goals, including retirement.

IN: The topic of disability insurance seems to always invite a lot of discussion about what it means to be disabled when you are a doctor. Why?

KWK: It’s for good reason because policy details will vary by company and it's important that the policy protects the income you earn specifically from what you do in your job at the time of claim. The contract's definition of total disability can have a huge impact on how much an individual doctor may be able to collect if the need arises. It is important for these policies to evolve with the client so that they can be specific to what they are doing now and what they will be doing five, 10, 20 years from now as their career evolves.

Our physician clients have told us that their top priority is to have choices available in terms of continuing with aspects of the medical career they have invested so much in. Would they still be able to work in some capacity as a medical professional, or would they be forced into early retirement due to the impact of the disability of illness? Advisers need to make sure that clients in this area understand how their policy would work at the time of claim, because incurring a disability can be life-changing event physically, psychologically and financially.

IN: What’s an example of how a difference in definition could lead to a difference in outcome for the doctor?

KWK: Consider the difference between Northwestern Mutual’s True Own Occupation and Medical True Own Occupation definitions. Either one can be a good choice for the doctor, depending on their life plans and personal preferences.

In the case of True Own Occupation, a specialty surgeon that becomes unable to perform their material and substantial duties as a surgeon would receive their full disability benefit to protect their likely income loss from no longer being a surgeon. They could also still work in another profession, like teaching at a medical school, without that income impacting their disability payments.

Medical True Own Occupation provides all the benefits of True Own Occupation, but also gives doctors additional choice at time of claim. Consider an OB-GYN who does a majority of work delivering babies, but also has substantial duties in regular office visits and patient care. If a physical disability impacted their ability to deliver babies, but they were still able to work with patients, they would have the choice of continuing to work in their practice and the policy would pay a partial benefit to cover income lost from not being able to fully participate in the practice, or if it were not even practical or desirable to continue in the patient care work, they could stop working and receive their full disability benefit.

IN: If a doctor does become disabled, what do they need to do to get their retirement plan back on track?

KWK: Long-term financial goals — be it retirement, paying down debt, saving for college, owning your own home or creating a legacy to leave for the next generation — are all anchored in the ability to earn an income. One of the most important steps for retirement security is taking steps to protect the risk of losing this income.

Incorporating both protection and growth at the outset is the essence of integrated financial planning. Advisers who adopt this approach with clients in the medical field enable these clients to be free of the fear of getting off track by a loss that cannot otherwise be avoided.