Financial Benefits During Residency That Are Vastly Underrated and Overrated

During my intern year, I noticed that some financial benefits have mattered more than I expected, while my excitement (or concerns) about other benefits have been overblown. While fit matters more than anything related to finance during residency, financial factors could be a cherry on top or salt in a wound.

In this column, I ranked some of those benefits in residency based on how much they are overlooked, underutilized, and not as universal as they should be.

Underrated

PSLF Qualification (Residency and Beyond)

The Public Service Loan Forgiveness (PSLF) program will be the most underrated benefit until every trainee understands it. Most trainees are fortunate in that the majority of residency or fellowship programs qualify for PSLF by their affiliation with a 501(c)(3) organization or government entity, so ignorance often does not matter. If you are uninformed, stop now and read this in-depth explainer on PSLF.

Some trainees should at least imagine working with one of the PSLF-qualifying employers where they train. They include those who are planning on a long residency (e.g. neurosurgery), long fellowship (e.g. cardiology), or moderate-paying subspecialty fellowship (e.g. pediatrics). If the majority of their 120 required payments occur during training, they should not rule out PSLF.

The problem for many trainees is that PSLF-qualifying employers tend to offer lower compensation than their for-profit counterparts. Just as many medical students consider their “home” residency program to be a “safer” option, I suspect that many residents’ first instinct (or backup plan) is to work for one of their training program’s affiliated hospitals. But if the majority of graduates leave their institution after residency or their first attending job at the institution, the pay disparity is probably too much.

Asking the faculty or resident who is interviewing you about the employment and financial prospects of graduates might seem risky. But in addition to “non-financial” topics (e.g. training sites, call schedule, etc.), we already ask the current residents or fellows about the cost of living, moonlighting opportunities, and free parking when we attend a “trainee-only meet-and-greet.” The recent graduates probably shared with the current senior residents and fellows about their job offers, and if they want you in their program, they might want to give you that info. If the setting is appropriate, you could frame your question with their interests like this:

“I am interested in research/medical education/underserved populations/etc. and would like to continue to live in city “X” and work with institution “Y” after training. I am curious what proportion of residents continue to work with the institution, and what are some of the barriers that keep them from working with the institution 5-10 years after graduation?”

If the idea of asking such questions sounds risky, one can at least search online for the salary of any state or government-employed faculty and compare their salary to the local median salary for their specialty (even though the faculty might have other income sources).

More information here:

Is Public Service Loan Forgiveness Worth It for Doctors?

How to Ensure Student Loan Forgiveness Through the PSLF Program

Vacation and Paid Leave

A program’s culture of encouraging and allowing trainees to maximize their time off is as important as the number of paid days off. The COVID-19 pandemic has influenced many healthcare providers’ perception of sick days, but the cultural change is ongoing. Parental leave has been shown to be vital for parent-child relationships. Although increasing numbers of male and female residents have taken parental leaves (so will I), many feel the pressure to return to work as soon as possible, even in specialties like pediatrics and OB/GYN. Family and friends announce weddings and pass away after our schedules are created, but some programs are not as flexible about allowing a long, golden weekend after their schedule is set. Vacation and paid leave, which are integral to surviving residency and preventing burnout, are unfortunately not fully realized everywhere.

More information here:

Should I Feel Bad About Taking Time Off? Auntie Marge Explains It All

Orientation Compensation

Many medical school graduates are riddled with student loans and credit card debt. Moving expenses (a deposit for their new residence, furnishing their new home, etc.) further pile on their financial misery. Then they realize that they have to undergo a week or two of orientation without pay and work for another couple weeks before they receive their first paycheck.

Residency is an apprenticeship, which by definition combines training and employment. Orientation is a part of the employment, and the trainees deserve compensation. This might seem short-sighted because, by the end of training, one might not even remember the injustice of unpaid orientation. But the orientation compensation alleviates some stress as we start residency and provides a much-needed boost for paying off credit card debt or starting an emergency fund. Until every resident earns what they deserve, orientation compensation is underrated.

Properly Rated

Health Insurance

My wife’s pregnancy is reminding me of how expensive healthcare is, so I cannot discount how much health insurance matters to each person. If adequate health insurance coverage is necessary to maintain their physical and mental health, they should not compromise their health for their training. After all, 1 out of 7 doctors use their disability insurance (get some if you don't have any!).

My wife and I have no chronic illness, so we have been on my wife’s high deductible health plan (HDHP). But had we needed a different health insurance through my institution (and we may, given that she is expecting), we would have good options. Even the HDHP at my institution has a reasonable deductible and out-of-pocket maximum, and it would have deposited money into our health savings account (HSA) monthly. If your institution opens an HSA for you, make sure to invest the money in it!

401(k)/403(b) Employer Match

I initially considered this to be overrated and a problem of financial illiteracy. If one does not have enough after-tax income to fully fund their Roth IRA or HSA, they would—in theory—benefit from a higher salary rather than an employer match. But I realized that the idea of earning “free” money in a retirement account often jumpstarts one’s journey to financial independence. One might also forgo retirement savings altogether if an employer match is not available.

I have heard senior residents sharing stories about how they were surprised to learn about the employer contributions 2-3 years into their training. Any “wellness” effort should include financial literacy, and programs should adopt practices such as automatic enrollment and employer match that have proven to encourage retirement savings early in one’s career.

More information here:

The Perspectives of an Older Investor vs. a Younger Investor

Slightly Overrated

Moonlighting

In my specialty, psychiatry, PGY3 and PGY4 residents mainly train in outpatient clinics, and they can moonlight on weekends and weeknights. Recent surveys—despite the selection bias and low response rates—show that at least half of psychiatry residents moonlight if they are allowed. One survey indicated that 13% and 40% of moonlighting residents earn >50% and 25%-50% of their monthly income from moonlighting, respectively (that is, some residents more than double their income by moonlighting). The percentage of moonlighting residents is somewhat lower in other specialties, such as emergency medicine and pediatrics. I assume it is even lower in surgical specialties.

I am slightly concerned that my colleagues in psychiatry might expect too much from moonlighting opportunities. Senior residents in my program shared that some applicants were less interested in applying to our program because moonlighting opportunities are relatively limited (we cannot moonlight as a PGY2). When I heard this, I felt defensive about my program, so I am biased. But the majority in this WCI Forum thread would also not consider moonlighting as one of the most important factors in choosing a residency program. Ultimately, moonlighting is like health insurance—its importance likely depends on one’s circumstances.

Overrated

Salary

In absolute terms, salary is the most important financial benefit. Paying a liveable, comparably reasonable salary to residents and fellows would relieve so much stress during residency and fellowship. Training programs should annually increase their trainees’ salaries to at least match, if not exceed, the rate of inflation.

On this list, salary belongs under “overrated” because our discontent with salary is like a proxy for our struggle as trainees. During training, we wish we had more supervision for challenging cases, while we experience slights from other staff despite our education. We inevitably compare our salary (and work-life balance) to those of other professionals and feel grossly underpaid, especially now that NP and PA “fellows” are paid more than residents. Our resentment is often condensed into the saying, “We earn less than the minimum wage.”

And considering there's not much variation in resident's salaries across the US, whether you're in a college town or a big city, we're all stuck in a similar situation.

Any fight for better pay must be a part of comprehensive efforts to reform graduate medical education both institutionally and nationally. Systemic issues, such as limited residency positions, increase work hours and give an excuse for healthcare businesses (which happen to be hospitals) to replace physician positions. If we are only focused on our salary as trainees, we are likely to think of our current issues as the succeeding residents’ problems once we have an attending salary.

At the same time, how much of a raise would be enough? Even in my metropolitan area which has some of the highest cost-of-living in the US, a PGY1 trainee earns more than a median individual. As much as I support any colleague who asks for better pay, I cringe inside when I hear complaints from those whose lifestyle choices seem excessive on a resident salary.

More information here:

From Fourth Year to the Real World: Transitioning from Med School to Residency

From Fourth Year to the Real World: An $80,000 Wedding Causes a Downward Spiral

No State Income Tax

This is another issue of math and financial illiteracy. Too many residents are excited about not paying state income tax without comparing the after-tax income between programs in different states. They might be disappointed to learn about how marginal tax rates work.

That's what the late Charlie Munger once said. He continued by saying, “If you have unrealistic expectations, you’re going to be miserable your whole life.”

I have been content, if not very satisfied, with my residency training. A reasonable expectation likely helped. As much as I am a personal finance nerd who considered financial factors as a tiebreaker for my rank list, I did not expect to feel richer during residency or become much wealthier after residency. At the same time, much more important factors for my contentment have been: being a “white cloud” on call days, working with attendings who are great teachers and role models, and matching together with amazing psychiatrists who have already become family friends.

What do you think? What do you believe is overrated, underrated, or properly rated when it comes to financial matters in residency?