Consider the Value of Your Working Days

Physician's Money Digest, December31 2003, Volume 10, Issue 24

Working longer may not be all that bad an option for physicians approaching retirement age. According to Census Bureau data, the number of Americans working past normal retirement age has risen by 50% in the past 2 decades.

Consider:

This can be good for both the physician and the economy. Drawing a paycheck for a few extra years can help make up for the hit that retirement plans took when the markets dropped. Each year a physician does not draw on retirement resources, they are essentially adding the amount that was foregone to retirement savings. In other words, if your plan calls for you to draw $40,000 per year from retirement assets and you work 3 years beyond normal retirement without drawing that money, your account benefits to the tune of about $120,000.

Social Security Start

In the 1930s, Franklin Roosevelt envisioned a program that would alleviate the need for the American worker to continue performing strenuous physical labor beyond age 65. Since then, his Social Security program has become an indispensable part of the retirement plans of most Americans.

In Roosevelt's day, we had a manufacturing- based economy, and labor was strenuous for many workers. Physicians had a tough time of it, too, chugging between house calls. Today, our economy is less physically demanding. Thanks to modern medicine, we are healthier and live longer. And, according to a study recently released by Allstate Insurance, we're working longer because we enjoy doing so.

The Allstate research shows only a minority of respondents who indicated they would continue to work because they need the money. In fact, of baby boomer respondents, 59% said they would continue to work to stay mentally active, 54% because they enjoyed social interaction, 53% because it gave them a chance to do something they were passionate about, and 50% because they enjoyed feeling useful and contributing.

Fit Elderly Population

This trend bodes well for the future economy for a number of reasons. First, having an older, better-trained workforce helps hold inflation in check. Think about the medical profession, for example. There isn't a large pool of younger physicians available to take over for the baby boomers when they retire. Younger physicians put inflationary pressures on the economy since they cost more to train, earn less, and eventually have to borrow more as they start out in life.

Many practices realize that older physicians have skills that took years to hone, along with a desirable work ethic. When they find these physicians, practices often discover that the cost of training younger associates does not justify letting boomers go. If the productivity level of the general workforce remains high, business can price competitively and the economy can continue to grow.

Earlier this year, Federal Reserve Chairman Alan Greenspan told Congress that he expects the "fit elderly population" to increase its representation in the workforce. He noted, "Americans not only are living longer, but they are also generally living healthier. In addition, work is becoming less physically strenuous, but more demanding intellectually, continuing a century-long trend toward a more conceptual and a less physical economic output."

But it isn't just the economy that benefits. The "meaning of life" still figures in strongly for senior citizens. When looking ahead, the Allstate surveys show that respondents indicated they were worried about "not being productive" when they reached age 75 or beyond. A study conducted by the National Council on the Aging (www.ncoa.org) suggests that those who believe their lives matter generally perceive life to be better than those who don't.

Louis P. Ingargiola, a financial consultant since 1992, is independent with LPL Financial Services based in Dunmore, Pa. He welcomes questions or comments at 800-440-1776.