By Dr. Jim Dahle, WCI Founder
Internal medicine physicians have a reputation in the House of Medicine for being very smart. Unfortunately, that doesn't mean they are any better at managing finances than the rest of us.
The American College of Physicians (ACP) came out with a survey of its membership, and it contains a lot of interesting data. Just so you're aware, there is a thinly veiled conflict of interest behind the survey, but it's relatively easy to see it and look past it.
The data in the survey still provides some important learning points. Let's go through some of it and analyze what it means.
Too Many Residents Don't Have Disability Insurance
Let's start with this point from the resident/fellow section of the survey.
This is not a complicated matter. If you have disability insurance, you're prepared. Maybe you wish you could afford a little more so you have to check “prepared” and not “very prepared,” but it's about as black and white as personal finance gets. What this data tells me is that at least 71% of resident physicians don't have disability insurance. Disability insurance is important for you, but it is also important for those who depend on you, especially since 47% of these surveyed residents are married and 17% have children. Do you think maybe you have some responsibility to them? Go buy disability insurance today.
More information here:
A Pain in the Butt – My Dental Disability Story
The Student Loan Situation Is Barbell-Shaped and Getting Worse
The percentage of doctors graduating from medical school debt-free has actually been increasing for years. In this survey of internist residents and fellows, it was 34%. Almost 50% owe less than $50,000. However, the percentage of doctors with massive amounts of student loans is also rapidly increasing, forming a “barbell” when you look at the charts.
At the lower end, I think Internal Medicine looks better than most specialties because there is such a high proportion of foreign medical graduates in the field who often do not have student loans at all, thanks to inexpensive and government-subsidized medical schools. I don't think a lot of US grads understand that many of their peers don't owe the $300,000-$400,000+ that they owe for their medical education. It might be common, and it might be the only way for you to become a doctor. But it's not normal, and you will need to take some extreme measures to get rid of it.
Retirees Are Mostly Fine
The annual Medscape survey has shown that 25% of doctors in their 60s are not millionaires. However, when you actually survey physician retirees, like this survey did, that number drops to just 9%.
Presumably, those who aren't millionaires in their 60s aren't retired. I view that as good news. In fact, 53% of internist retirees have at least $3 million just in retirement savings. Want the bad news? Here it is.
These three charts are for early-career, mid-career, and late-career doctors. This is clearly not the FIRE crowd. Only 0%-17% plan to retire before 60. Even among the millennials, the majority are expecting to work beyond age 65. Yes, these internists do eventually have enough money to retire comfortably but only because they have 40-year careers. When you look at it that way, a mere $5 million is kind of pathetic. How much do you have to invest each year for 40 years to retire with $5 million if you average 8% returns? The answer: $19,300. That's less than 10% of an internist's salary these days. My interpretation of this data? Too many internists are still broke at mid-career, and they HAVE to work until they are 70+.
More information here:
How Much Money Do Doctors Make a Year? The Average Salary Is Dropping
Intraspecialty Income Variation Dwarfs Interspecialty Income Variation
I say this all the time, but it's true and the data bears it out repeatedly. Here is what internists are making:
This shows that 6%-14% make less than $150,000, and 11%-17% make more than $500,000. That's a huge variation. Some internists are getting paid more than three times as much as others. To be fair, there are some subspecialists in this survey who are maintaining their ACP membership, but I don't think that explains much of this variation.
Know your worth. The harder you work and the better you negotiate, the more income you will have. It's dramatically easier to become financially successful with an income of $400,000 than an income of $200,000, especially if you're digging out from under a pile of student loans.
Doctors Are Dumb About Debt
People argue with me all the time when I talk to them about consumer debt. They think their car loan is making them rich or that any car without a lane departure warning system is a death trap. It's amazing how well people can justify debt, so I guess it's no surprise that they have so much of it.
Yup, that's right—21%-44% of internists have car loans. Remember, this doesn't count the ones that are leasing. Those late-career docs are, on average, about 60 years old. So, they've been making a physician-level income for three decades at this point, and they still can't buy a car with cash. Heck, 23%-29% of them are carrying balances on a credit card. Newsflash! Credit cards aren't for credit.
I understand why 71% of early-career doctors have a mortgage. But at what point were you going to pay that off? Instead of paying off their mortgages, doctors are using them as ATMs with HELOCs and cash-out refinances. Just because other Americans are using car loans and HELOCs doesn't mean that you should. You're making $15,000-$60,000 a month. How long does it really take to save up for a car, even a brand-new one? Buy a brand new $60,000 car every four years, trading in the old one for $40,000. You should be capable of saving up for the $20,000 difference in, what, 1-3 months? Have a little patience.
More information here:
Should You Pay Off Debt or Invest?
Doctors Are Dumb About Insurance
The insurance picture doesn't look much better than the debt picture.
A smart insurance philosophy involves insuring against financial catastrophe, but since insurance is (on average) a losing proposition, you shouldn't buy it against trivial risks that you can self-insure against. I don't know how many of those early-career docs have someone else depending on their income, but I bet it's more than 77%. So, why don't more of them have some cheap term life insurance in place?
Only 70%-79% have malpractice insurance? Seriously? Thirty-two percent of internists have been sued. 32% × 30% = 9.6% of early-career internists will be involved in a lawsuit without malpractice insurance coverage. That's nuts to not have that coverage. It isn't even that expensive for internists.
Meanwhile, only 52%-79% have disability coverage. That's probably fine for lots of those late-career docs, but only 75% of early-career docs? The only good news there is that a whole bunch of docs bought disability insurance after they got out of residency. Only 32%-65% of doctors have umbrella insurance coverage. So, you drive an $80,000 car but think $50,000 of auto liability coverage is adequate, huh? Seem like a bit of a disconnect.
Now that we've talked about the essential types of insurance, let's talk about the dumb types, like accidental death and dismemberment insurance. Between 22%-32% of doctors have been sold this coverage despite the fact that regular life and regular disability insurance takes care of all that. It's like cancer insurance. You know your life insurance, disability, and health insurance policies all cover cancer, right? It's not like it's an excluded condition or something. People treat it like it's flood or earthquake insurance that isn't covered by your homeowner's coverage.
How about long-term care insurance? This survey shows that 29% of late-career docs have less than $2 million. Thirty percent of them having long-term care insurance actually seems about right to me, but I just wonder if it's the right 30%. I suspect it isn't. I bet the ones who don't need it are buying it, and those who do need it aren't buying it.
Compare Yourself!
Everyone likes to secretly compare themselves to others. Well, I might as well include those charts so you can.
Early-career (0-16 years in practice; 30s and 40s)
Mid-career (17-30 years in practice; 40s, 50s, 60s)
Late-career (31+ years in practice; 60s, 70s, 80s)
Nope. They didn't publish this chart. Not sure why not. See the retiree chart above, I guess. But if you've got more than $2 million-$3 million by mid- to late-career, you're clearly ahead.
If You Feel Behind, You're Not Alone
A huge percentage of doctors feel they are behind when it comes to retirement savings.
Most people catch up eventually, though.
Most People Work with Their Partner
But not very often.
If you're meeting once a month with your partner to talk money, you're ahead of two-thirds of your peers. But the more frequently you do so, the more likely you are to be on track or ahead of where you need to be.
The Sandwich Generation Is Real
Check out this question, posed to late-career docs.
Remember, these are docs in practice for 30+ years. Their adult kids are still at home, and grandpa is moving in!
I Know It All but I Still Want Help
I found this combination of questions, again posed to late-career docs, interesting.
Three-fourths of them are using financial advisors despite 78% of them feeling knowledgeable about personal finance. There are lots of reasons people use advisors, so don't feel guilty if you want one. Just make sure you're getting good advice at a fair price.
More information here:
Nobody Owns Their Practice Anymore
If you haven't sold out to private equity or the hospital yet, you probably will soon.
This is a real shame in my opinion. Only 32% of late-career doctors own their practice or group, but that's a whole lot better than the 19% of early-career docs, only 2% (one-ninth as many as late-career docs) of which are in solo practice.
Physicians Are Marrying Each Other More and More
This is a trend in our society that high earners marry other high earners and increase household income and wealth disparities dramatically.
We Don't Start Out Very Good with Money, But We Can Learn This Stuff
Financial literacy and confidence go up over the course of our careers—or at least we think they do.
Many of Us Are Doing Retirement Accounts Wrong
As a general rule, solo 401(k)s and Roth IRAs are right, and traditional IRAs and SEP-IRAs are wrong.
But lots of people have them. Fewer and fewer pensions are out there as you look at younger doctors. Check out that annuity percentage among the late-career docs, and I imagine most of those aren't competitively priced SPIAs. I have to wonder about the people putting together this quiz who felt mutual funds and stocks should be in the same category but mutual funds and ETFs should not be.
Overall, I thought the survey was pretty interesting. Some of that data is new to me, but most of it reinforces other physician surveys I have seen and my own anecdotal experience of interacting with thousands of doctors over the years.
What do you think? What surprised you the most in this survey? Comment below!
Hi Jim. Interesting analysis. I don’t think you mean “don’t” in the first sentence of who has disability insurance 52-79%.
Can you be more specific? I found 14 “don’t”s in the article and I think they’re all right. You seem to be talking about the subtitle here:
Too Many Residents Don’t Have Disability Insurance
I agree with that one.
Or maybe this one:
What this data tells me is that at least 71% of resident physicians don’t have disability insurance.
I also agree with that.
What am I missing?
I believe your point about residents is correct. And you do regularly say people should get disability insurance during residency. Nothing wrong with what you said.
But it’s not the whole story: page 28 of the report says that 75% of early career attendings and 79% of mid career attendings have disability insurance. Those are quite good. This is almost opposite of the residency stat you used.
So I think the report is saying people are waiting to make the big bucks before buying disability insurance. Yes they are paying more but I suppose they can “afford” it on top of everything else they have to buy now.
Three issues with that. # 1 they’re buying it too late. Residents get disabled. # 2 It’s still only 75%. # 3 The number should be HIGHER for early career docs than mid career docs. Early is when your need is greatest. I had it early in my career. I don’t now at mid career.
I’m a bit shocked at the data on how little people have saved. I am 14 years into my primary care role and thanks to you and my East Coast thriftiness, I can retire by 50. (48 now) So happy that I am in this position. I love doctoring, but I’m over the institutional stress. When I’m 50 I’m gonna do it my way and not worry about what I get paid because I can. this is super empowering.
I’ve never heard of “East Coast thriftiness.” Tell me more about that. Is it a thing?
Frugal Yankees…
Again, that’s a thing? I’ve seriously never heard that phrase. It would be a good band name though. Google pulls some stuff up on it though.
https://www.nhmagazine.com/notes-from-the-front-yard/
I sent you an email, but since this is already posted, this one is wrong by my read of the charts.
“Meanwhile, 52%-79% don’t have disability coverage.”
Okay, I think I have it fixed now. 52-79% have disability insurance.
Enjoyed this article.
So many of my mentors were late career internists, some retired and didn’t get to enjoy much before health issues settled in. Eye opening. Inspires one to plan and save, push for work life balance early on, etc.
Interesting deep dive here, would be interesting to see family medicine data with a similar survey. Often we think in academics FM and IM may be close from an income perspective, so how much is approach and culture within each specialty? Would also be interesting to see about moonlighting and side gigs. With pensions as a rare benefit now a days more incentive to watch lifestyle creep and prioritize savings and investing early career.
I wonder if the 21-30% without malpractice insurance are primarily VA employees (would fall under “employed by hospital” I guess) or maybe active duty military (“other?”) who don’t need it. Might also explain the prevalence of pension plans.
When I worked either those places I would report that I HAVE malpractice insurance, but yeah, some such docs might make that error. I doubt that would include >20% all doctors though.
Is it truly an error? As I understand it there is no individual liability since any suit is a federal tort claim, so there should be no policy insuring an individual or group at all. “Insurance” in the sense of protection, sure, but not an insurance product.
No financial liability but you can still be reported to the database for anything paid out in your behalf.
True, but this reporting is not something you can insure against.
Maybe. But if someone asked me if I had malpractice insurance when I was in the military I think I’d say yes…I’m insured by my employer.
Actually the data on the retirement savings for Physicians looks promising. I know the writer calls $3 million “meager savings”, but I think $3 million is a decent retirement savings to live on not counting your social security. It almost sounds like we increase the goal as more and more people are closer to the prior goals. It’s human nature to increase the bar all the time. A bigger population of non medical professionals are retiring with less than $1 million and are actually feeling optimistic. Someone once asked what it takes to satisfy an average human, and the answer was “Just a little more!”.
All I’m saying is the data is encouraging for Physicians. While sloppiness and laziness is not encouraged, the future is looking bright actually with the savings data. More importantly is trusting God for the more important riches – Life, good health, tranquility (nothing to do with Net worth) and happiness.
The only “meager” found on this page is in your comment. Here’s what I actually wrote:
Yes, $3 million is a lot of money. But it’s less than most doctors should have by retirement given their income.
If a doc makes $250K and saves $50K a year and makes 8% on it, that doc should have $5.7M after 30 years. $3M is about half of that.
Yes, I should’ve said “Mere” not “meager”.
Not attacking your comment. Just pointing out that despite taking 40 years, it’s good to know u arrive at a decent goal.
That $19,300 saved per year is less than the $22,500 annual employee contribution limit for a 401(k) for someone under age 50. No employer match, not maximizing the employee 401(k) contribution, no contribution to a spouse’s workplace retirement plan, no IRA contribution or spousal IRA contribution, no HSA savings. $19.3K per year is less than a 10% retirement savings rate for most physicians and is far from maximizing all tax advantaged retirement accounts. You’re paying more in taxes now than you need to and you’ll have less to live off of (and take out potentially at lower tax rates) in retirement. Seems like needlessly shooting yourself in the foot.
A very enjoyable article summarizing IM financials. I do think that $3M is a reasonable amount of savings when accounting for changing incomes over a 30-year career. When I started practice in the mid-90s, my starting salary was $140K, and it eventually grew to 3-4 times that amount. My ability to save grew significantly over a multi-decade career.
That’s a good point. But remember that in this survey half the folks didn’t even have that.
Nice article. However, aren’t you sweeping with too broad a brush when you say” solo 401k and Roth good, SEP and traditional IRA bad.” Sure solo 401 and Roth are better in most cases – when available, but SEP and rollover IRAs are pretty good plans for the most part. As an analogy, Lexus and Toyota are both good cars – maintain them well and fuel them, and either car will get you to where you want to go.
The issue with them is that they keep you from doing a Backdoor Roth IRA. I mean, I guess it’s better than not saving but it’s not optimal.
Hi Jim,
I think your point about intraspecialty income is not necessarily borne out by the chart you show. For instance, you say
“This shows that 6%-14% make less than $150,000, and 11%-17% make more than $500,000. That’s a huge variation. Some internists are getting *paid* more than three times as much as others. ” (emphasis added)
But the title of the chart is about household income (HHI).
Another reasonable interpretation is: Some internists are married to surgeons/high-earners, while others are married to a stay at home spouse. Thus some dual-income households have three times the household income of single-earner households.
I don’t doubt or deny that intraspecialty income disparity is real, but I don’t think a chart about household income bears that out. Especially since you can add investment income etc. to get to HHI so it is not even limited to earned income.
Sorry for the nit. Overall I appreciated the article and the data.
Fair point.
This is a great article. I was a late career compared to my colleagues. I started my career at 38 and am now 62. I wish you had been around when I was first starting out.
I had always had the approach that any nonessential dollars had to earn something (even if it was a penny) before it left my wallet. I did not always do it right when first starting out, but now my net worth is over 5 million with my savings/retirement at over 4 million. I work because I want to, not because I have to. My coffers increased greatly when I found you and Bogleheads.
Thank you, Sir!
While I agree that there is huge intraspecialty variability in income, the study notes that 58% of respondents are internal medicine, 15% hospital medicine, and 27% subspecialty. Subspecialties within IM include cardiology/gastroenterology/hematology-oncology who tend earn more income, so the income data maybe difficult to interpret.
Agreed.
Yes, lots of confounders in this data as far as income. Makes you wonder why they phrased the questions the way they did eh? All I have to comment on is their data though.
I have maybe 10 friends who are internists who are part time, have quit medicine, or have focused on other priorities in life. Even many of the people we are trying to hire in my group who are IM want part time work and want to focus on lifestyle.
However, I agree that some people are just terrible with money. I also have an IM friend who thought he was going to move out of state, tried to sell his house, then changed his mind last minute and spent about $80k on getting out of his new house purchase, staging his current house, and getting his old job back. What a waste of money.
Nice article
I would not draw the same conclusion about residents and disability insurance.
“If you have disability insurance, you’re prepared.”
Well, no. Particularly if you are a resident. The amount you can buy and can afford, depends on your income. As a resident you may NEED that attending salary you will start receiving when you finish training. But no one is going to sell a $500,000 annual benefit to a first year resident. That resident may have all the DI they can buy or all they can afford, but still correctly believe that they need far more income than that policy will cover.
And it is not only to pay back debt. They may have an idea of how they plan to live their lives and know that the DI on a resident salary will get them nowhere close.
As for late career attendings having mortgages- I hope so. Many have low interest rate mortgages that they should hold as long as they can. I have a low rate mortgage that I will probably hold past retirement. When rates hit their low point I investigated refinancing at an even lower rate. Unfortunately, the fees were too high to make it work. If I could have found a low enough rate I would have taken out a long term loan and planned to hold it until death.
Really a blunt way of bringing out how docs are taking financial lessons. I could retire at age of 38 . Thanks to my calculations. But It was not a wise decision. Inflation in India is taking it all out ! Forcing me do job again (Business needs higher investments).
Stimulating analysis—eye opening on how many physicians carry consumer debt. I understand your points, but there is a little hyperbole that you can get $40K back from a $60K used car, more like $25K (eg 2019 BMW 530) and many might earn “only” 6 or 7% on retirement savings, depending on the starting time period. I also do think many (me), work until 70’s from an interest in practice rather than financial need, though, you may be right for 40% and a lot of physicians might not have the financial security to ease back and only do the fun stuff in late career.
Hi! Great post. I had a question about “Thirty-two percent of internists have been sued. ” Unless I’m remembering incorrectly, don’t several of your podcasts have you saying that the chance of being sued in one’s career is very low? Any clarification would be great 🙂
No no. The likelihood of being sued in your career is actually pretty high. Most emergency docs should expect to be sued once. Internal medicine is a little lower risk, so 32% sounds about right.
What is VERY low risk is actually losing personal assets in a lawsuit. I calculate it at about 1 per 10,000 years of practice in EM.
You’re absolutely right! I remembered incorrectly – your comments were in regards to asset protection and how retirement accounts can be shielded in worst case scenarios. And those “worst case scenarios” actually going into your personal assets is very rare. Thank you for the clarification!
Thank you WCI for the excellent work .
I just want to make a tiny correction to the notion that FMGs don’t have debts. They do, it’s just not to the degree of prevailing student debts on the USA. We are talking tens of thousands to the 50s-80s depending on a host of individual circumstances. I know about myself and many others. Our debts are mostly related to the early years of transition. Many have to spend thousands to augment their education, for example while waiting to get their USMLE stuff completed.
Respectfully ,
David
Good point. I’m just amazed how many docs come to the US as residents and have no debt at all though. 75% of US grads are indebted but it can’t be more than perhaps 10% of FMGs (aside from maybe some credit card debt while taking the USMLE etc.)