Physicians and Money: July 2020

How To Reassess Your Retirement Priorities Post COVID-19

How much money do you need to retire? You may have a number in mind, but COVID-19 has turned that number into a moving target.

Jonathan Ford Hughes

June 28, 2020 ( – Financial planners sometimes use the income replacement ratio (IRR) model to determine how much a person needs for retirement in order to maintain their current standard of living. IRR requirement estimates gathered by the Social Security Administration range from 60-110%, depending on life circumstances (single vs. married) and income sources, including things such as rent and social security.

With physicians, traditionally it has been safer to aim for the higher end of that scale. For example, if you’ve been a doctor for a while, you probably don’t want to go back to living like a resident when you retire. Your husband, wife, or significant other likely won’t be into that, either. It’s also safe to assume that the cost of living will continue to rise over time and that, like your patients, you’re going to need more medical help as you age.

The problem is that the economic volatility of 2020 has driven the average IRR down by 7 percentage points for older Americans, according to a recent report from the New School’s Schwartz Center for Economic Policy Analysis (SCEPA). Researchers say the current recommended IRR is 70%. However, due to market declines, actual median IRR will be between 48-55%. That means retirees will have less money on hand at the time of retirement.

Which physicians are affected?

In short, no physicians get out of this unscathed. New or early career physicians may have a harder time finding work if hospitals and other physician-employers close due to COVID-19 revenue declines. Less time working means less time saving for retirement.

Mid-career physicians may feel the downturn most acutely. Not only will their IRRs take a hit along with the stock market, but they also likely will see revenues decline. Early in the pandemic, we saw non-COVID-19-related hospital visits decline, and only recently have we seen hospitals resuming elective procedures. But, heart attacks, strokes, and lacerations didn’t disappear. People likely have been avoiding hospitals and doctors offices to lower risks of COVID-19 exposure. Who’s to say when this trend will correct itself.

Though physicians nearing retirement will also feel the portfolio pinch, if they’ve done everything right, they likely have the least to lose. Under ideal circumstances, they’ve met their target IRR and have transitioned to less vulnerable assets as they’ve neared retirement. Furthermore, financial advisors will point out that you don’t need to have ALL of your retirement money to retire. A sound retirement plan will continue to generate investment returns as you move through retirement.

What to do

In short, moving on from COVID-19 — from a financial perspective — means making a plan.

Step one of the plan is covering your basics. If you haven’t done these things already, you must: Build a budget, create an emergency fund, tackle your student loan debt, acquire disability insurance, and set retirement goals. Start here.

It’s possible that COVID-19 and subsequent revenue declines temporarily derailed your retirement strategy. For example, perhaps you had to make retirement account withdrawals to cover expenses, or raid your emergency fund. When things have stabilized, it’s time to recommit to your retirement plan. Don’t have one? Then you need to get planning — either alone or with a professional.

Ask yourself, what do you want to accomplish? This is a critical question for anyone planning for retirement in a post-COVID-19 economy, says Brian Hartmann, Certified Financial Planner at Knox Grove Financial. For many of his clients, Hartmann says the accomplishment isn’t just having a pile of cash. Instead, it is what your savings allow you to do with your life. It’s travel, offsetting grandkids’ college tuition, or maintaining standard of living.

“COVID-19 has humanized a lot of financial planning,” Hartmann says. “We’ve all learned what’s really important to us, and lifestyle has been more important than money for my clients. Finances have more to do with human emotion than the actual size of the pile of money.”

And proper planning, Hartman says, removes the emotional impulse to act from the equation. For those with thoughtful retirement plans, COVID-19 has largely been a non-event, he adds. Portfolio values are about level with values on January 1.

“If you have a solid plan and something like COVID-19 comes around, you don’t need to do a thing because good plans are built to withstand difficult times,” he says. “Staying on course and not making changes is not a lazy transaction. Sometimes staying the course is the most difficult, disciplined course of action.”

COVID-19 (or whatever else comes along) then becomes a matter of statement pain, not long term financial pain, Hartmann says. Moving on from COVID-19 is actually quite simple.

“The key to recovery has nothing to do with a financial change, an investment strategy change, or a holding change. It’s about realignment to your long-term goals.”


  • Traditional financial guidance suggests that you aim to replace about 70% of your income in retirement.
  • A recent report from the New School shows COVID-19 may knock actual income replacement ratios down to around 50%.
  • Getting back on track is a matter of setting goals, creating a plan to achieve them, and sticking to that plan.
  • Good financial plans are meant to withstand financial volatility. Sometimes sticking to one is more difficult than changing course.
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