Investing for Physicians

No matter where you are in your medical career, it’s important not to overlook the health of your finances. Residents and practice-owners alike should consider their short-term and long-term goals when giving their financial plan a checkup. Are you working towards financial independence and retiring early (FIRE)? Doing so requires having a plan and sticking with it. Below are some questions you may have as you consider your financial plan.

How can physicians build their nest eggs for retirement?

You may be wondering how to make the most of your high-income potential given your “late start” in investing. Due to the impact of compounding returns, an early start is one of the biggest factors in building your nest egg.¹ Even if you can only contribute a little at first, the compounding returns will make it worth your while. To effectively build your nest egg, you need to know how big it needs to be to reach your goals. What are your yearly expenses and when do you wish to retire? Figuring this out will help you decide how aggressively to contribute to your retirement.

Should doctors invest or pay off medical school student debt early?

Deciding whether to invest or pay off your debt more aggressively is a decision that depends on many factors, including your student loan interest rate and risk tolerance. A competitive debt interest rate often makes investing a better long-term strategy for building wealth.² Given the importance of investing early, contributing at least part of any extra money in your budget can help you avoid falling behind in retirement savings.³

What types of retirement accounts are available to doctors?

Depending on your employer, you may have different tax-advantaged accounts available to you, such as a 401(k), 403(b), or a 457(b). You should always take advantage of any employer match options. Even if you are still carrying a large student debt burden, maxing out your employer match options is generally a good idea. You can also contribute to a Traditional or Roth IRA. Work towards meeting the contribution limit on any tax-advantaged accounts available to you. As you move further into your career and can exceed those limits, you can invest in a brokerage account as well.

The average doctor works over 50 hours a week and spends almost a quarter of that time on paperwork.⁴ Having an advisor you trust on your team can help preserve your most precious commodity: time. A fiduciary financial advisor from One Day In July can help you evaluate your options, stick to your goals, and manage the administrative aspects of investing so you can spend more time with your family, both now and in the long run.

1. https://money.usnews.com/investing/investing-101/articles/2018-07-23/9-charts-showing-why-you-should-invest-today
2. https://www.debt.org/students/pay-off-student-loans-or-invest/
3. https://www.forbes.com/advisor/student-loans/pay-off-student-loans-or-invest/
4. https://physiciansfoundation.org/wp-content/uploads/2018/09/physicians-survey-results-final-2018.pdf