MD Preferred Blog

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4 Must-Have Financial Planning Strategies for Young Doctors

Monday, January 22, 2018

By Chris Stoner, CFP®, Measured Wealth Private Client Group

1. Debt Reduction
As a result of your extensive medical education, you’ve likely incurred significant debt in the form of loans. The average medical school loan debt balance in the United States is approximately $190,000. Over a 30 year period at a 7% interest rate, this equates to a total cost of $455,048 and a $1,264 monthly payment, which can be a significant drag on your financial well being. While there is no easy solution, the best way to ease this burden is to simply allocate more per month to the loan that is owed. By increasing your monthly payment by just $200 from $1,264 to $1,464 you could reduce your loan duration by 10 years. Debt reduction is a critical step in attaining financial security and starting to build wealth.

2. Disability Insurance
As a new or early career doctor your largest asset is likely the income you will generate in the coming decades. It’s imperative that you protect this asset with coverage such as disability insurance. Should you find yourself in a position where you can no longer practice medicine you’ll need a way pay for school loans as well things like a mortgage or rent and living expenses. Disability insurance can provide you with that financial protection.  There are various forms of disability insurance but the most common is “own occupation”. This type of insurance will provide you with financial security should you lose the ability to practice medicine, through some sort of injury or disability, but does not preclude you from finding employment outside of your given field (medicine). It’s this type of disability insurance that you can and should acquire.

3. Malpractice Insurance
Let’s face it – we live in a world fraught with lawsuits. Malpractice insurance can help you ease the financial burden of medical malpractice should a lawsuit arise. While it is true that the cost of malpractice insurance has risen over the last decade, it is your best defense against malpractice lawsuits should the worst-case scenario come to fruition.

The best way to determine how much coverage you might need is to speak with a qualified financial planning and insurance professional who can guide you through the various scenarios from a cost/benefit point of view. 

4. Saving in a Qualified Retirement Plan
As a doctor, you probably have a higher salary than many other professionals, but you started to earn much later in life (8-10 years) than your counterparts in the legal or accounting fields. Because of this you are losing out on the effect of compounding. 

Consider this simple example: an accountant starts earning a salary at 23 and retires 40 years later at 63. He puts away $10,000 per year into a qualified retirement account, earning 5% per year. At the end of his career he would have $1,207,997 in his retirement account. The accountant’s friend, a doctor, starts earning a salary at the age of 33 and retires at 63 as well.  Because the doctor earns more than the accountant, he is able to put away $15,000 per year into a qualified retirement account. However, because he lost out on those first 10 years and the effects of compounding, he will end up with $996,582 in his account at age 63, over 200K less then his friend the accountant. Given this it is imperative that you start saving for retirement as soon as possible in order to ensure that you are financially secure at retirement.


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