Top Ways to Build Wealth at Every Physician Career Stage

When it comes to wealth-building, physicians walk a unique path. Most physicians entering the workforce in their late 20s and early 30s start earning later than those in other professions. Still, if wisely spent, physicians’ often-substantial salaries allow them to accumulate substantial savings, afford a stable lifestyle, and live a comfortable retirement.

But without strategic money management, physicians run the risk of not only earning less than their potential, but also experiencing long-term financial strain.

So as a physician, it's important to hone your approach to money management. While you can experience the positive financial impacts at any time in your career, the earlier you start, the better. Whether you’re early, in the middle years or towards the end of your career, you can take steps to achieving the financial future you aspire to.

Let’s examine the circumstances of three hypothetical physicians at various life and career stages to uncover ways you can build wealth as a physician, no matter your age, life stage, or circumstances.

Note: The following case studies represent fictional people and were created for informational purposes only. The wealth-building strategies discussed do not constitute personal financial advice, nor do they guarantee investment returns.

Residents/Early-Career Physicians (0–6 Years After Medical School)

Resident Ray earns $100,000 as a PGY-3 practicing emergency medicine. He is refinancing $350,000 in undergraduate and medical student loan debt on a 20-year term at a 5% interest rate. He has no other debt and $9,000 in cash. Once he’s out of residency, he’s hoping to get engaged to his partner and start saving to buy a home.

At this point in his life, Ray’s priorities are two-fold: build up his cash savings and get his student loan debt under control. Let’s explore five strategies Resident Ray can use to get him where he needs to go.

1. Create a Realistic Budget

$100,000 is a lot of money, but it can easily be squandered if not appropriately budgeted. Ray has been working for three years and accumulated $9,000 in that time, which is a solid start. With $2,300 in monthly student loan payments, it’s hard to focus on anything else. But as his income continues to grow, he should ensure his budget reflects his intentions to build wealth.

It’s important that Ray track his actual spending and compare it to his budget using a tactic like the 50-30-20 rule of budgeting. He’ll likely spend the next few months tinkering with his budget before he settles on a reasonable spending plan.

2. Establish a Robust Emergency Fund

Before Ray can start saving for any other purpose, he needs to make sure he has a healthy emergency fund — cash kept in a high-yield savings account that can cover unexpected, one-time expenses, such as a medical bill or pricey car repair, or a temporary loss of income. Ideally, an emergency fund can cover three-to-six months of can’t-miss expenses, including rent, food, and student debt payments. He’s been contributing $250 per month to his emergency fund for the past three years.

After reviewing his current spending, Ray decided to reduce his food spending to add an extra $200 each month to his emergency fund. With this plan, he should have enough saved within the next six months.

3. Create a Plan to Pay Off Debt

After bolstering his emergency fund, Ray will want to focus on making a dent in his debt load. He’ll redirect his $450 monthly emergency fund payment to his student loans. Doing so will shave off nearly four years off his 20-year student loan repayment term.

4. Take Advantage of Employer-Sponsored Retirement Benefits

Ray doesn’t have a ton of extra cash, but he might consider taking advantage of his employer’s 401(k) match as a way to begin his retirement savings. Your employer may offer a 401(k), 457(b) or 403(b) plan depending on your place of work. Typically, employers provide a 1–2% match on retirement contributions up to 4–6%. Ray shouldn’t forget to invest his contributions, perhaps in a target-date retirement fund.

5. Open a Brokerage Account

Ray isn’t ready to start saving for a house, but he may want to get in the habit of making monthly investment account contributions. He can get in the swing of it by opening a taxable brokerage account and setting up automatic $25 monthly contributions to a low-cost, broad-based index fund.

Mid-Career Physicians (6-20 Years After Medical School)

Attending Mandy earns $450,000 as an ophthalmologist in private practice. She’s a few years into her post-residency practice, and she’s set on eradicating her $60,000 in remaining student loan debt and shifting her attention to saving to start a family. She has $250,000 in a combination of retirement and non-retirement investment accounts.

These years are Mandy’s prime wealth-building years. With a substantial income and many years until retirement, now is the time for her to firmly establish her financial footing and grow her investments before she starts ramping down as she approaches retirement.

Here are four tactics Mandy, and many mid-career physicians, can use to maximize wealth and prepare for retirement.

1. Revisit Your Budget

After years of scraping by on a resident’s salary, Mandy lived the high life for her first couple of years as an attending physician. She rented a luxurious high-rise apartment, hired weekly housekeeping services, and took lavish vacations. Now that she’s joined a private clinic, she’s ready to downsize her lifestyle in favor of accomplishing her financial goals.

As stated, she wants to start saving for a family. She’ll adjust her budget to accommodate these new costs, including fertility expenses and a down payment for a home in the suburbs.

2. Focus on Paying Down Debt

By trading champagne for prosecco, so to speak, Mandy has extra funds available to eliminate her debt. She considers how much she wants to invest versus directly pay off debt. Her new budget frees her up to spend $5,000 per month on her student loan debt payments, which means she’ll have fully paid off her student debt in about a year.

3. Double Down on Retirement Savings

Due to the amount of schooling and typical student debt load, physicians are at risk of falling behind when saving for retirement. Now that Mandy has a substantial income, she’ll want to prioritize her retirement savings.

She can maximize her retirement savings by:

• Contributing the maximum to her employer-sponsored 401(k) plan
• Doing a mega backdoor Roth conversion
• Contributing the maximum to a health savings account (HSA)
• Earmarking funds for retirement within a taxable brokerage account

4. Meet With a Financial Advisor to Prioritize Capital Growth

It’s a good idea to meet with a financial advisor at any age and life stage, but it can be particularly helpful when you have the financial wherewithal to get serious about your investment goals. Now that Mandy has sufficient income and plans to start a family, working with a fiduciary financial professional who can help her select investments that can help her grow her $250,000 investments into even more is the wise choice.

Financial advisors can help with, or connect you with the right people to help with, the following:

• Estate planning
• Life and disability insurance
• Tax planning
• Investment rebalancing

Not sure which type of financial advisor is right for you? Check out our explainer here.

Late-Career Physicians (20+ Years After Medical School)

Larry has been practicing radiology for nearly three decades and would like to retire within the next five years. He earns $550,000, holds $3.5 million in investments, and owns a $1.5 million paid-off home. He’s also a partner in his medical practice, with an ownership stake worth $750,000.

What can Larry and other late-career physicians do to maximize wealth at this stage?

1. Prioritize Capital Preservation

Larry’s financial advisor has been helping him rebalance his portfolio over the past 20 years. In the beginning, Larry’s goal was growth, so he invested in risky assets that offered the chance at outsized returns. As he approaches retirement age, Larry’s risk tolerance is decidedly different, preferring safe investments with limited volatility.

2. Create a Transition Plan

Larry is a partner in his medical practice. In the twilight years of Larry’s career, he might choose to inform his partners of his desire to retire so that they can make the necessary plans to pay out his $750,000 investment, whether that be by replacing him with a new partner or some other means.

Join the Discussion

What has been the most challenging financial decision you’ve faced in your career thus far? What advice would you offer others based on that experience? Let us know in the comments below.