It's every mother's dream that their child becomes a doctor, according to the old stereotype you see onscreen in TV and movies. But be careful what you wish for, because that career brings financial challenges all its own.
While offering prestige and high earning potential, becoming a doctor means contending with thorny money issues: Student debt, delayed savings, complex taxes, and liability concerns. While their education prepares them for dealing with the complexities of the human body, handling money is another matter altogether.
Typical questions that are top-of-mind for medical professionals:
How do I deal with high levels of student debt?
Medical training is not cheap, which is why those graduating from medical colleges report a median student debt of $215,000. Even if it is federal debt that is fixed at a relatively low rate, that is the kind of amount that can hang around your neck for decades. An income-driven repayment plan can make it manageable, but certainly work towards Public Service Loan Forgiveness, the federal plan that eliminates debt after a number of years for those in certain professions (such as medicine). Be wary about refinancing with private loans, which will eliminate borrowers' federal protections.
How can I catch up in my retirement saving?
The training process for physicians is so lengthy and arduous, that specialists typically do not graduate until well into their 30s. That means that they have got a relatively late start in retirement saving, compared to others in the workforce. That definitely means a tougher hill to climb, but it does not mean it cannot be overcome. High income means that physicians can max out their 401(k) plans during prime earning years, and take full advantage of so-called catch-up provisions after age 50, which are significant. As well, medicine is one of the few areas where traditional defined-benefit pensions still exist – in particular at larger hospital networks, and in academic environments attached to university health systems. Doctors have a reputation of being poor investors – perhaps because they are targets for those with dollar signs in their heads, in the same way that athletes are – so working with a trustworthy planner is always a good idea.
How can I run my practice effectively?
There are a number of ways physicians can structure their work – perhaps as part of a large hospital system, or perhaps as independent practitioners. In particular when running their own practice, that creates a host of oversight problems: From administration, to compliance, to staffing, to finances. The challenges are so numerous that the American Medical Association has a suite of learning tools devoted to exactly this subject. Perhaps the biggest financial hurdle of all: Reimbursement, which as anyone who has ever dealt with insurance companies knows, can be a byzantine and unpredictable process.
How do I protect myself with insurance?
It is the nature of the business that physicians will be exposed to liability issues, whether deserved or not. That means securing proper coverage, which can be costly, and has been rising for years. Indeed, depending on the specialty and the region of the country, insurance can be difficult to get at all. Defending against malpractice can take significant time and resources, but you definitely want a sufficient level of coverage so that everything you have worked for is not put at risk. Another key insurance issue to consider: Disability. If your own health issues eventually affect your ability to practice medicine, income replacement – especially important for high earners – will help protect you and your family.