Doctor, Got $5 Million?

“I know the price of success: dedication, hard work, and an unremitting devotion to the things you want to see happen.”—Frank Lloyd Wright

How much do you need in your retirement kitty to finance your golden years? It's a vexing question, one that many busy physicians tend to ignore. If you're curious about whether you'll be living on Easy Street or Skid Row when you hang up your stethoscope, it pays to do some math.

One rule of thumb is to multiply your current income by a factor that takes your age into account. If you're younger than age 40, multiply by 40. Multiply by 30 if you're between ages 40 and 50, and by 25 if you're over age 50. The formula shows that a 45-year-old primary care physician (average annual income of $173,000) will need nearly $5.2 million to retire. For the 45-year-old specialist doctor ($274,000 average annual income), the need climbs to $8.2 million. That’s if you plan to have the same lifestyle after retirement as you do in the years just before retirement.

If you plan to live on about 80% of preretirement income, you'll need somewhat less—about $4.2 million for the primary care doc; $6.6 million for the specialist. Although that kind of money isn't exactly loose change, the average self-employed American (with a net worth of about $1 million) has a head start, By maxing out on retirement plans, including 401(k)s and IRAs, our 45-year-old doctor could be in shouting distance of the goal by age 65.

Although the figures may be daunting, they are a wakeup call to the fact that you may need to save more aggressively to be able to finance the retirement you're working toward. To run your own numbers, take a look at T. Rowe Price's retirement calculator.

43%—Percentage of physicians who say their current work schedule doesn’t allow for adequate sleep.(ScienceDaily, 2008)