By Jarrett Suddarth
The journey from med school to becoming an attending physician is a big achievement, marked by years of dedication and hard work. However, as you step into your new job, a new set of challenges emerges. In this article, we explore three financial areas that require your immediate attention after your graduation from training to ensure a successful transition to attending physician: student loans, disability insurance, and prioritizing your savings.
Form A Student Loan Payoff Plan
Most graduating physicians are going to have a massive student loan burden. They could be from undergrad, med school or both. According to Education Initiative Data, the average medical school graduate owes $250,995 in total student loan debt. That’s not chump change. For most, it’s a major monthly expense that without proper planning could end up costing tens of thousands more than they needed to. Because of this, it’s extremely important to have a student loan plan in place as graduation nears.
Here are some questions a student loan plan might help you answer:
Does my new job qualify for Public Service Loan Forgiveness (PSLF)?
If it does, am I in the right income-based repayment plan?
If it doesn’t, should I refinance?
How much should I save each month to prepare for taxable forgiveness in 20 or 25 years?
All of these are important questions, and the answers are going to vary greatly between physicians, depending on circumstances.
In addition, the student loan industry has seen rapidly changing the rules as the topic has become a political chess piece. These circumstances have made it especially easy for borrowers to be caught unprepared and left paying extra. With so much at stake, it’s important to make planning for your student loans a priority. Companies like Student Loan Planner or Student Loan Advice provide excellent objective advice at a GREAT price to help provide a path forward with your student loans. With a student loan plan, you can be confident that you are making progress towards paying your student loans off and not just spinning in place.
Get The Proper Disability Insurance
Securing disability insurance should also be a top priority for new attending physicians. Disability insurance provides crucial protection by replacing a portion of your income if you are unable to work due to illness or injury. This is especially important for young, attending physicians. At the start of your career, your largest asset is your future income. All your long-term goals hinge on your ability to continue making a high income. If that changes, it can disrupt everything you have been looking forward to.
While you are still in training, most private disability insurance companies will offer you a $5,000/month benefit. Plus, you are still young and healthy, so your premiums will be lower too! Most companies will also waive the financial document requirement, as well as the medical exam.
These policies can even be written to grow as your income does. Any future benefit increases won’t require additional medical testing. That can give you a great deal of peace of mind if you are concerned about something changing in your health.
Acting on this as you leave training means that you’ll have a low-cost, high-quality disability insurance policy in place as you start your career. Most companies have a small window after you graduate to still get these discounts, but it doesn’t last long – usually 90 days. You will have more than enough stuff to think about after you start your job, so if you haven’t purchased a disability policy during residency, now is the time to do it!
As always, you need to make sure any disability coverage you add is “Own Occupation“ coverage, not “Any Occupation.” Own Occupation policies cover physicians based on the occupational duties they’re performing at the time of claim. On the other hand, Any Occupation will only pay if you cannot work in any occupation. For young physicians, this makes a huge difference over your career.
Prioritize Your Savings
A lot happens when you transition from training to your first attending job, to say the least. You might even be moving across the country! Amidst the demands of a new attending physician role, it's imperative to establish the habit of paying yourself first.
The best way to do this is to automate your savings each month, rather than trying to save what’s left over at the end. Your income is likely to increase by 4x or more and it’s important to save a good chunk of it before spending it. It might seem hard at first, but your future self will thank you! Even if you max out your retirement plan, Health Savings Account (HSA), and put away for any short-term goals, you’ll still have way more money left over to spend each month than you did when you were on a trainee’s salary. So, you can pay yourself first AND still feel like you’re getting a substantial raise!
Let’s look at a quick example.
In residency, your salary was $65,000, which equates to roughly $55,600 after taxes.
Your salary at your first attending job is $250,000. After maxing out your 401k ($23,000) and HSA ($4,150) pre-tax, that means your taxable income is $222,850, or roughly $172,706 after taxes.
Even after maxing out your 401k and HSA, your monthly take home pay is more than $10,000 more per month when compared to residency. There should be plenty left to build up an emergency fund, save for other short-term goals like buying a house, or even plan a much deserved vacation!
IMPORTANT NOTE: It’s easy to get caught up in your new income and spend it without realizing where it’s going. If you aren’t intentional about paying yourself first, you might find yourself struggling to find extra money for increasing your savings in the future.
By systematically addressing student loans, securing essential disability insurance, and prioritizing your personal savings, you can navigate the initial stage of your career with financial confidence. These proactive steps not only address immediate concerns but also establish a robust financial framework for the years ahead. Remember, the choices made in the early stages of your career can have a profound and lasting impact on your financial journey.
This list isn’t an exhaustive list of financial topics to address during your transition from training to attending physician. Panoramic Financial helps new attending physicians address these topics and much more. Please click “Work With Us” at the top of the page to learn more.
