Can Physicians Work Less, Make More, and Have a Larger Retirement Portfolio?

June 27, 2014
Setu Mazumdar, MD, CFP

Could cutting down work hours actually result in a larger retirement portfolio down the road? It may seem unlikely, but overworked physicians might be surprised if they do the math.

A common complaint I hear from many physicians is that we’re spending too much time in the hospital, clinic, or ER and not enough time doing other things we enjoy in life.

I was guilty of this when I first started practicing medicine. I was a demon, working 20-plus emergency medicine shifts per month. But later I realized that I’d last longer by cutting down—so within 5 years of graduating from residency I cut down to just 8 shifts per month. Maybe that was a bit drastic, but I was much happier with less income.

Here’s what I suggested to the physicians who recently contacted me: “Cut down your workload immediately by 20%. You might actually make MORE money and end up with a higher retirement portfolio.”

Those 2 statements seem to contradict each other, but let me show you some visuals to explain.

Let’s take 2 physicians—we’ll call them Dr. A and Dr. B—who are the same age and in the same specialty, and who work in the same group.

Maybe they are emergency medicine physicians, anesthesiologists, surgeons, or another type of physician. Dr. A makes $300,000 annual income and Dr. B decided to cut his workload by 20% and makes $240,000. I’ll assume Dr. A saves $60,000 of his income in a retirement portfolio and Dr. B saves $40,000 annually. Both get a 7% average annual rate of return on their investments.

Here’s where it gets interesting.

On the surface it looks like Dr. A should end up with more additional income and a higher additional investment portfolio value.

But suppose that because Dr. A works harder than Dr. B, he ends up getting burned out from practicing medicine and decides to call it quits after 10 years.

And suppose that Dr. B, who has a more balanced work-life mix, is able to last 15 years more.

Which doctor really made more additional income?

By year 10, Dr. A clearly made more additional income ($3 million vs. $2.4 million) but he got burned out shortly after. Dr. B chugs along for 5 more years.

By year 15, the total additional income each has made in medicine is:

What about the additional retirement portfolio value?

Even in that category, Dr. B wins by almost $150,000:

Obviously there are some flaws and criticisms with this simple analysis such as:

1. Dr. A might still work part time rather than quitting completely after 10 years. In that case he might generate some income and some savings even after 10 years.

2. Your income as a physician might not be nearly as high as what I’ve shown here. That will affect your total additional income and total additional retirement portfolio value. However, it still doesn’t change the central message I’m making here.

3. In some specialties, it might not be possible to cut down on the workload due to the nature of the specialty. For example if you’re an emergency medicine physician, you can generally specify the number of shifts you want to work. But if you’re a spine surgeon, you probably can’t cut down on the number of days.

But despite the flaws in this analysis, it still illustrates a point—if you work a bit less now, you’ll likely have a better work-life balance, be happier practicing medicine, and last longer without getting burned out.

And you might even have a higher retirement portfolio value.

So let me ask you—is there a way you can cut down on your workload right now by working less shifts or less days so that you can enjoy more of your life now and have a longer and happier career in medicine?

Let me know your thoughts.