Medical Professionals and Money: How to Plan a Financially Successful Future
For medical professionals, taking stock of financial realities and goals can be a complex process. Here are four financial planning topics to help you evaluate your situation.
This article is the first in a four-part series exploring the unique financial planning needs of medical professionals. Starting today, we will publish one article each week through November 2.
It’s no secret that America’s medical professionals are stressed and overworked. In addition to the pressures that physicians, nurses, and emergency medical personnel already face in their careers and personal lives, the constant risk of COVID-19 exposure and longer, busier shifts have piled on more responsibilities to their already overflowing plate.
What’s worse, the hobbies or activities that once provided relief are no longer viable. Many medical workers have restricted their visits with other people to reduce the risk of transmission.
Finances can be another sore spot for medical professionals, who have to juggle student debt and high malpractice premiums with savings and retirement goals. As any health care worker knows, these stressors can lead to irregular sleep, high blood pressure, and depression. Based on a 2018 survey conducted by Everyday Health, just over half of Americans report feeling stressed about their finances. But even though medical professionals are aware of the tangible, negative impacts that financial worries can have on health, it can be difficult for them to recognize their own symptoms.
While relief from the COVID-19 pandemic won’t arrive until a viable vaccine is widely distributed, medical professionals do have the power to alleviate the stress they feel from personal finances. When good financial health means good physical health, it might be worthwhile to partner with a financial advisor. An expert supporting medical professionals can offer guidance on debt management, create a balanced investment portfolio, and recommend savings goals.
Before making that choice, consider your current reality. As you take stock of your financial stressors, let’s explore the challenges that most medical professionals face in their careers.
In 2018, the average medical student’s debt was $192,000 at the time of graduation. The average dental student’s debt was $280,000, and the average pharmacy student’s debt was $166,000. Doctors, dentists, and pharmacists wishing to pay off loans within the standard 10-year period face monthly payments well over $1,000. For new medical professionals who have to manage the cost of living with three to seven years of a low residency salary, this debt burden can result in years of stress and poor financial choices.
Of course, plenty of alternate payment options exist. Does a 15- or 20-year repayment plan sound more feasible? Should you refinance your loans, and if so, when? Should you bother paying your federal loans that are in forbearance due to the CARES Act? Are there financial goals you’re willing to sacrifice if it means an earlier pay-off date? Do you qualify for Public Student Loan Forgiveness?
Financial planning for medical professionals can help navigate these loaded student loan questions, all while keeping savings, retirement, and investment options in mind.
According to Medscape, more than half of physicians will be named in a lawsuit at some point during their careers. As of 2015, 64 percent of physicians experienced at least one malpractice lawsuit by age 54. Understandably, many medical professionals choose to protect themselves from devastating legal fees by purchasing medical liability insurance, also known as malpractice insurance.
Like all insurance, malpractice insurance doesn’t follow a one-size-fits-all model. There are a handful of factors to work through before selecting the right coverage for your profession. Certain medical professionals are at a higher risk of getting sued by a patient than others (at the top of that list are neurosurgeons, who have a 19 percent chance of getting sued each year). Thus, those different specializations need to pay varying rates for insurance. Different states, their court history, and their laws will also play a role in the cost of your insurance rates. Asset protection strategies are important considerations in your overall financial picture.
Savings and Retirement
Going from 11 to 16 years of post-secondary schooling and a meager residency salary to a full-time doctor’s salary of over $200,000 will feel as though more financial doors have been opened for you than ever before.
You might consider using your newfound independence to support a more comfortable lifestyle, begin family planning, or grow your portfolio. But remember: getting a late start on savings and retirement can seriously damage your retirement plans down the road. The instinct to pay off all debt before starting any sort of 401(k), investment portfolio, or emergency fund can be misguided and may hinder financial stability down the road.
How much of that new salary should you put away each month? The White Coat Investor estimates 20 percent, based on the standard retirement age due to the late start in saving for retirement. But what about those loans you intended to pay off that have been accruing interest since you graduated? Should you start a separate savings account for life emergencies? Budgeting helps you stick to a schedule, but saving is difficult when you’re juggling investments, debt, and costs of living.
Managing a Practice
Many experienced, specialized, and business-minded medical professionals have the goal of establishing their own private practice during their careers. The idea of being your own boss, managing others, and having complete control over the personalization of care you provide is enough to compel 17 percent of physicians to open their own practice (as of 2017). But this doesn’t mean that your financial life will be simplified. As the owner of your practice, you’ll need to invest some of your own capital into your business and make tough decisions on small business loans, office space rental, and office-wide liability insurance.
Financial planning for medical professionals is no simple task. At Brighton Jones, we understand the intense pressures you face. The next article in our series will detail where you can go for resources and guidance to make sure you’re planning correctly for the financial future you’ve envisioned for yourself.
Financial Planning for Medical Professionals