Financial Advice for Residents and Fellows: A Crash Course

The path to becoming a physician is a long, arduous, and even financially-challenging journey. Many newly minted MDs find themselves saddled with hundreds of thousands of dollars in educational debt, even as average salaries have plateaued or declined in many specialties. In the current environment, residents and fellows should remain cognizant of the financial challenges they face and take appropriate action early in training. Here are a few tips to stay ahead of the game and to remain financially savvy during training and beyond:

Save early and often. Success is a habit. And like any good habit, investing in your future should eventually seem automatic. One psychologically helpful approach is to reserve a small portion of your paycheck for automatic deduction. If you never see the money, you can’t spend it! Moreover, having less at your disposal will force you to adopt more frugal habits earlier in your career. That way, when the big paycheck arrives later, you can continue to live beneath your means and save aggressively for retirement rather than be bound by “golden handcuffs.”

Open a Roth IRA. Residency and fellowship is a perfect time to invest in a Roth IRA for the simple reason that your lower income places you in a relatively low tax bracket. The opportunity to pay taxes up front and allow the remainder to grow tax-free over the course of your working career is simply too good to pass up. Because all contents of a Roth IRA are after-tax dollars, you can also withdraw the contributions penalty-free, serving as an “emergency fund.” This option is not available in most 401(k) employee plans in which withdrawals are more tightly regulated. Roth IRAs generally afford more flexibility in investment options as well.

Take advantage of employer 401(k)/403(b). This allows further tax-advantaged savings up to approximately $18,000. Fully contributing to a 401(k)/403(b) plan is obviously difficult, if not impossible on a resident’s salary. However, it’s imperative to at least contribute up to the maximum employer match, if this is offered — otherwise, you’re simply leaving free money on the table.

Get a roommate. You don’t need to shoulder living costs alone. Having a roommate may not be ideal, but it’s certainly better than your mom’s basement.

Moonlight. In addition to providing valuable “real-world” experience, moonlighting puts extra cash in your pocket, allowing you to make meaningful contributions to retirement while still in training.

Avoid the “I deserve it” trap. After years of delayed gratification, many physicians fall victim to the newfound attending cash burning a hole through their pocket. Some may feel they’re entitled to a new luxury car, an exorbitant vacation, or other frivolous expenditures because of the long hours and sacrifice required to reach that point. While minor splurging is certainly understandable, continuing to “live like a resident” will pay massive dividends for retirement savings.

Explore career options in affordable areas. Densely populated urban centers on the coasts are perennially favored among many job seekers. But these places come with possible drawbacks, such as elevated costs of living, a high overall tax burden, tough state malpractice laws, and other factors that are important when considering your practice setting.

That’s it! Do just a few of the highlights on this list, and you’ll be well ahead of your peers in preparing for a successful retirement.

John Gilbert is a radiologist in Boston, MA and a 2016-17 Doximity Fellow

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