Retirement Planning for Early-Career Physicians

Becoming a physician has great financial potential, but we don’t exactly get off to a running start.

People who learn skilled trades in high school basically have 45 years to save for retirement. And folks who choose lucrative majors in college are right behind them. But us? It’s four years of college, then another four of med school, and then three plus years of living on some very thin margins.

What I’m trying to say is that by the time we’re bringing in the big bucks and feeling ready to start saving for retirement, it’s actually not that far away. So if you take nothing else from this blog, let it be that it’s never too early to start planning (and saving) for retirement as a physician.

Getting started on retirement planning for physicians

So you made it through school and training, and you’ve landed your first attending gig. Time to put on the long white coat...and time to start planning for retirement.

Here are some tips to get started.

• Meet with a financial planner. A financial advisor who has experience working with physicians can help you put together a solid plan for retirement. From student loan management to your investment portfolio, they’ll help you bring down your debt while you build up your assets. To find a peer-recommended professional in your area, check out our map, NextStop.
• Embrace the stealth wealth way. Okay, so you’re not Warren Buffet, but maintaining a resident lifestyle (or something close to it) on an attending salary is a great way to gain some momentum on retirement. In contrast, many young attendings make the mistake of overspending. They take on a mortgage and new car payment, start planning flashy vacations, and get real comfortable eating out. Don't do this. Instead, aim to save about 20 percent of your income from the get-go. I know that number seems high, but because physicians get such a late start, it’s rarely going to be enough to save the 10 or 15 percent that's often recommended.
• Consider renting. Doctors move…a lot. And that doesn’t magically stop when training ends. In fact, some say that the attrition rate for attendings in their first position post training is as high as 50 percent. Renting can spare you a capital gains tax should you need to move quickly. It can also help you save up for a 20 percent down payment, which can sometimes be preferable to taking on a physician mortgage.
• Max out any and all retirement accounts. This one might seem like a no brainer, but it’s important to say it because it’s easily put off. As an early-career physician, you’re already late to the retirement savings game, and you really cannot afford to neglect your 401(k). Every year you do so has massive ramifications for your net worth at retirement. Remember all that stuff about simple and compound interest in high school? You see my point.
• Try the 50/30/20 rule. This is a simple way to break down your income into manageable chunks to get you on track for retirement. Here’s how it works. Fifty percent of your after-tax income covers your living expenses. That includes your rent/mortgage, food, clothing, and other necessities. Thirty percent goes to savings. This includes your investment and retirement accounts as well as your regular old savings account. The rest—20 percent of your income—goes to discretionary spending. That's your Thursday night taco night, your Peloton membership, and whatever else your heart desires, as long as it's within budget.

So there you have it. Some tips for smooth sailing to retirement as an early-career physician. We also have a blog on general financial planning for young physicians that you might find helpful. Good luck!!