Young Doctors Need To Step Up Savings and Financial Planning Efforts

Posted on: May 24, 2017 by Chuck Krugh, CFP

The American Medical Association has just released its 2017 Report on Resident Physicians’ Financial Preparedness, and things aren’t looking great. Researchers surveyed over 50,000 residents and got 1,573 responses from residents in a variety of medical specialties from across the country.

young doctorsNearly two-thirds of residents report being ‘behind’ when it comes to preparing for retirement, and only 4 percent say they are ahead of the game. That leaves 34 percent of them reporting that they believe they are ‘on track’ for retirement. But a lot of them are apparently deceiving themselves, because according to the same survey, 32 percent of resident physicians responding say they haven’t even started saving yet!

36 percent of residents report that they carry a credit card balance – at anywhere between 14 percent and 29 percent interest, that’s not a great way to get ahead. Furthermore, another 35 percent of residents say they carry a car loan. While the AMA report doesn’t break it down, chances are there is a lot of overlap between the credit card and car loan debtors. Add to that the fact that 8 out of 10 residents carry at least $100,000 in education debt (50 percent carry more than $200,000) and we have a lot of residents who already have a big student loan burden starting their careers on a very poor financial foundation.

That said, if we cast a wider net looking for data, there are some bright spots. The overall average savings rate among physicians has increased from 15.3 percent in 2012 to 19.8 percent in 2014, according to a study from Fidelity Investments.

But even then, 48 percent of doctors surveyed were falling short of their recommended 15 percent retirement savings goal. 48 percent of physicians are not maximizing their available contributions to their 401(k) or 403(b) plans at their workplaces.

45 percent of those physicians surveyed by Fidelity said they couldn’t afford to contribute the full 15 percent right now, whether due to student loan debt servicing or because they were plowing earnings right back into their medical practice.

It’s always worthwhile for young doctors to review the basic principles of financial success, which are the same for any profession:

  1. Don’t get seduced by the temptation of trying to match the lifestyles of people who have been in your profession much longer than you. You don’t need to drive the same car, or visit the same vacation spots, as the medical director at your local hospital, for example.
  2. Live on less than you make.
  3. Avoid consumer debt of any kind, other than a mortgage on a home and maybe in investment property, or debts invested in your education as a physician or other high-income earner. Don’t carry credit card balances.
  4. Buy life insurance, disability insurance and long-term care insurance while you’re young. (Actuaries have this figured out… you don’t save much by waiting, since premiums are lower when you are young and healthy, and waiting could be disastrous.)
  5. When you buy disability insurance, make sure to buy ‘own occupation’ disability insurance, rather than ‘any occupation.’ The ‘own occupation’ variety is much more likely to pay benefits for an injured or sick doctor or dentist.
  6. Keep an emergency fund. Three to six months expenses in ready cash is a good start. And credit cards don’t count as an emergency fund.
  7. Pay off high interest car notes as fast as you can. Own, rather than lease, and take care to maintain your vehicles.
  8. Know the rules when it comes to student loan repayment programs, including income-based plans and forgiveness procedures.
  9. Save or invest something every month.
  10. Maximize employer matches in 401(k) plans
  11. Maximize tax-advantaged retirement plans, while preserving your assets from potential trial lawyers by practicing sound asset protection techniques.


At Doctor Disability Insurance, we understand that you have had to make sacrifices to get to where you are. We are committed to helping you protect your most valuable asset: your ability to earn an income.

Doctor Disability Insurance, Inc. is an innovative, one-stop service that makes disability insurance shopping quick, affordable, and easy to understand. Physicians save time and money by comparing plans and prices from multiple insurance companies. The site provides free quotes from leading names in the disability insurance industry along with friendly and knowledgeable customer support. The best values in the insurance industry are located in one place and are available any time doctors are ready, including late at night and on weekends.

Based in San Clemente, California, President and CEO Charles Krugh is a Certified Financial Planner with more than 15 years of experience working with people in the medical industry.

Call us toll free at 866-899-7318 to speak to one of our disability insurance professionals.

Posted in: Financial Planning Money Management Physician Money Management Retirement Uncategorized