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 ER 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,” says 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 adviser, the average physician-held portfolio has shrunk by approximately 30% in the last year.
Many doctors, particularly those nearing retirement, 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.
“Maybe it is because my husband and I are more invested in the U.S. that we really feel it,” says Dr. Hugi, “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 notes that 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.
Doctors who have recently retired or are soon to retire have a tough choice to make, says Purtzki. Either downsize their lifestyle or find additional sources of revenue. Many are steadfastly unwilling to make the shift, he says.
“To recoup about 40% to 50% of your savings or investments will probably take about 30 years,” explains Dr. Hugi.
Doctors are fully aware of how badly their portfolios are doing, says 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, and handles the investments and other financial matters of about 42,500 doctors and more than 64,000 physician family members.
Klaas and his MD Financial advisers 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 explains. He says 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 adds, “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.”
Luckily, as Klaas points out, while Canada is in a recession, “healthcare in Canada is recession-proof.” He says 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.”
The recently created complications of retirement doctors are facing “are the same issues that most other Canadians of that age group are facing,” says Warren MacKenzie, president of Toronto-based financial adviser Second Opinion Investor Services.