Doctors’ retirement plans on life support

To gauge the impact of the financial crisis, all Dr. Maria Hugi has to do is look out the window of the home she purchased a few years ago in Dupont, Wash., with her fellow emergency room physician husband.

The couple, who also are both ER doctors in Vancouver, where they have their primary home, bought the little house to be nearer the Fort Lewis U.S. army base where they also put in shifts.

“The house next door foreclosed a few months ago,” said Dr. Hugi, “and its lack of value has affected the whole neighbourhood.” She figured her abode in Dupont, identical to the darkened building next door, has dropped by US$200,000 from the US$450,000 they forked out at the height of the housing market.

While few Canadian physicians have a totem of the financial collapse right outside their door, they do have vivid reminders of it as close as their nearest investment statement.

According to Manfred Purtzki, a Vancouver financial advisor, the average physician-held portfolio has shrunk by approximately 30% in the last year.

The Medical Post (a sister publication of Advisor.ca) has heard from many doctors, particularly those nearing retirement, who say as a result of the financial meltdown they have seriously re-calibrated their retirement plans. The majority say they are taking on more work, putting in longer hours at the office or even effectively starting second careers in medicine.

Said Dr. Hugi, “Maybe it is because my husband and I are more invested in the U.S. that we really feel it. I have noticed it in Canada, too: There is no talk of retirement among people my age.”

Dr. Hugi and others posit, tongue in cheek, that the collapse of physician investments may have effectively solved the country’s physician shortage problem.

Baby boomer doctors such as Dr. Hugi, who were thinking of slowing down in the next five years or were on the eve of ending their professional lives, in particular are feeling the economic reverberations of the financial crisis.

Baby boomers constitute the majority of Canada’s medical pool: The average doctor age in 2007, the year for which the most up-to-date data are available, is just shy of 50 years, the Canadian Institute for Health Information reported in December.

Purtzki noted doctors who retired in the last five years are the ones who are most worried, as well as those who plan to retire by the end of 2010. Especially upset by the turn of events are the doctors who “hate their job, and therefore have no inclination to continue working on a part-time basis to make up the losses.”

One doctor he knows has slumped into a depression because his net worth has fallen to $2.2 million from $3 million. Purtzki said doctors who have recently retired or are soon to retire have a tough choice to make: either downsize their lifestyle or find additional sources of revenue. Many are steadfastly unwilling to make the shift.

Dr. Hugi, one such hard-hit doctor, quipped: “To recoup about 40% to 50% of your savings or investments will probably take about 30 years.”

Doctors are fully aware of how badly their portfolios are doing, said MD Financial’s John Klaas. Based in Halifax, he’s the assistant vice-president of practice leadership; he coaches the company’s consultants. MD Financial is owned by the Canadian Medical Association through its CMA Holdings business operation. It handles the investments and other financial matters of about 42,500 doctors, as well as more than 64,000 physician family members.

Klaas and his MD Financial advisors are fielding many calls from doctors who are on the cusp of retiring — or thought they were, until a few months ago. The callers are exhibiting “a fair degree of stress,” Klaas said.

He said it’s a good notion for these doctors to consider continuing on “with some subset of what they were doing, and create (additional) income for the time being.” The decision should be seen as “tweaking the retirement plan versus abandoning the retirement plan.

“And what this might let them do,” he added, “is continue having income: They don’t have to take anything from the portfolio — they can let the portfolio go through the machinations that it will —and they feel like they aren’t selling equities at a bad time,” referring to the ongoing ups and downs of Bay Street, the heart of the nation’s financial district.

Luckily, as Klaas pointed out, while Canada is in a recession, “health care in Canada is recession-proof.” He said he could see as a demographic trend doctors shifting increasingly to semi-retirement as opposed to opting for full retirement.

Klaas emphasized that those doctors distraught about their portfolio’s collapse need to keep in mind that retirement income per se “is not the only thing that guarantees a satisfying retirement.”

Economic advantages

The recently created complications of retirement doctors are facing “are the same issues that most other Canadians of that age group are facing,” said Warren MacKenzie, president of Toronto-based financial advisor Second Opinion Investor Services.

MacKenzie agreed with Klaas that doctors can rest easy knowing their incomes from patient-care are recession-proof. But doctors don’t have employer co-sponsored pension plans to fall back on, and “they do want to retire some day,” he added.

Indeed, doctors do have many economic advantages that the average Canadian doesn’t have. The one-payer system is recession-proof; Canadians get sick, and because of medicare don’t think almost at all about the cost of a doctor visit. Also, the overall Canadian population is getting older, and its collective health will worsen with age.

In short, doctors, if they do want to increase their income, can earn more revenue in their chosen career, unlike retirees in some industries. As Dr. Hugi observed, “Doctors certainly aren’t going to be thrown out on the street starving.”

Dartmouth, N.S.-based hospitalist Dr. Chris Childs is 68 and has not yet retired. He’s worked for more than 30 years as an independent family physician in the province. In recent years he’s worked part-time in a local psychiatric hospital.

He admitted in a recent interview he doesn’t have a firm retirement date. Now he plans to keep his shoulder to the medical grindstone “for the foreseeable future.”

“I had thought of it being sometime this year when my present job — or part of it — will end,” Dr. Childs said. “However, there are other job possibilities. I enjoy what I do and it makes sense not to be depleting my savings when the markets are so depressed.”

He said, “Amazingly, the pay (from the psychiatric hospital) has been an improvement on my GP earnings,” so he’s in the uncommon position of increasing his RRSP contributions, despite his age and recent stock-market events.

Dr. Childs said he is concerned about the state of his portfolio, which “has dropped by about 25%. Throughout last summer and fall I took a moderately optimistic view of the markets and made a few (new) investments, all of which have done badly despite them being in ‘good’ companies. Now, having been bitten, I am feeling much more cautious. But, I do think we are at or close to the moment when it makes sense to re-enter the market.”

He added, “I have delayed my retirement at least partly because of the financial crisis but we (he and his wife) haven’t changed our lifestyle as, fortunately, my income is unaffected so far. In any case we have never been ‘high rollers.'”

Observing that Nova Scotia family physicians earn relatively depressed incomes and that “only the ones seeing large numbers of patients made the sort of incomes doctors are popularly supposed to make,” he said he expected “these aging family doctors will just keep working as long as they need to or can.”

Young doctors

The fortunes of young doctors, too, have been affected. Dr. Sarah Giles, who completed family medicine residency only a few years ago and now does locums in northwestern Ontario and the Northwest Territories, is one such young doctor.

While the financial imbroglio has left her worried about her own investments, Dr. Giles still contributes to her RRSPs, and is considering jumping into the housing market, since prices have come off their historic highs. She observed that while she only looks at her investment statements when she receives her monthly paper statement in the mail, older physicians she knows scrutinize their portfolios daily online.

These older physicians, she said, “are looking to delay retirement.” Canadian doctors, especially those who made long-term saving a priority or were lucky enough to be especially high earners, may feel like they’ve been kicked in the socio-economic status, but perspective is needed.

Purtzki, the financial advisor, recommends medical practitioners who are despondent over their investments should look no further than their patients for solace. Doctors would be surprised “to find out that many retirees are happy to have $200,000 in the bank.”

Dr. Simon Bryant, a Canmore, Alta., family physician, was very philosophical about losing “a few hundred virtual dollars” on his investments. The financial system will some day recover and in the mean time it’s healthy to keep reality in focus: “There is as much oxygen in the world, as much fertile ground, as much fresh water,” and then he added, with a wink to the business world, “and as much manufacturing and transport capacity.”

(02/09/09)