[Editor's Note: Today's guest post is written by The Physician Philosopher (TPP), an anesthesiologist who blogs to physicians about finances and wellness. We have no financial relationship. Note that this post is all about fellowships for physicians. The calculation of doing a residency for a dentist is completely different. Not only is there an opportunity cost, but dentists actually PAY TUITION during residency.]
I remember when I was trying to decide between doing a fellowship or not. It can be an agonizing decision as you have finally started to see the light at the end of the tunnel. It is difficult processing the idea that the tunnel may grow dark again before you begin to see the light. There are many ways to think through this decision process, but today we are going to focus on the financial aspect of completing a medical fellowship: Does a fellowship produce an adequate ROI?
What Is an Adequate Return on Investment for a Medical Fellowship?
Before we can determine if there is an adequate ROI, we must first define what exactly constitutes “adequate.” My definition from here on out will be the following: If you break even (or better) after performing a fellowship with the opportunity cost involved, I consider this an “adequate” ROI. I hear you asking, Why do I feel this way?
It's simple. Presumably, you chose to pursue a fellowship because you felt that particular subspecialty would accomplish one of a few things:
- Allow you to spend more time with family.
- Provide you more enjoyment than a generalist position.
- Allow you to be an “expert” in your particular niche (i.e. research or teaching).
- Access to a job you might not otherwise have received (i.e. often necessary in academia or filling a private practice need).
- Job Security from the future prevailing evils of a changing world in health care.
If your reasons for choosing fellowship fall into one of the categories above, then really all that needs to be accomplished to meet an adequate ROI is to break even on your Opportunity Cost. Part of your decision involved secondary gain, which was successfully obtained in one of the items above. Making more money wasn't necessarily your end goal with fellowship.
If you chose to do a fellowship because you felt it would be more profitable in the end, then “adequate” means you need to make up substantially more than your opportunity cost. If choosing a fellowship for profit, an adequate ROI for profitability's sake = 2 x your Opportunity Cost. You can still apply the following conversation and just double the opportunity cost as the goal number.
How do You Calculate the Opportunity Cost of Fellowship?
A Brief Caveat
Before we get into the following example to calculate opportunity cost, some comments must be made:
1) This example assumes a one-year fellowship. You may have to double (or triple) the math for multiple year fellowships.
2) These examples are from anesthesiology. Adjust the anticipated salary for your particular field.
3) This assumes a PGY-5 salary for a one year accredited fellowship. If you pursue a non-accredited fellowship or earn income moonlighting on the side, your income can often be much higher (mine was $110,000 in my fellowship year).
Three Things to Consider in the Opportunity Cost Calculation
1. Lost Salary as Attending Physician
One of the common misconceptions of opportunity cost when choosing a fellowship is to simply determine your first year's salary (including benefits such as quarterly or annual bonuses) as an attending and subtract that from your fellowship salary. It may look something like this in my field, Anesthesiology:
(Wrong perception)
Opportunity Cost = 1st Year Attending Salary – Fellowship Salary
Opportunity Cost = $250,000 – $60,000 = $190,000
There is an inherent problem with this line of thinking. In academia (and private practice) the first day that you step onto the job as an attending physician you start a timeline. In academia, that timeline is to your next promotion (From Assistant Professor to Associate Professor). In private practice, this is usually a track to partnership (i.e. a “two-year partnership track”).
By choosing to do a fellowship, you are delaying this by a year. So, the opportunity cost isn't really at the beginning of your career (1st year's attending salary), but on the last year of your career that you would have been paid at your anticipated top rank (Associate or Full Professor or Partner). In reality, it looks like this (again, in anesthesiology):
Opportunity Cost = Anticipated Peak Salary – Fellowship Salary
Opportunity cost = $400,000 – $60,000 = $340,000
Now, that we are thinking about things properly we can see that an anticipated opportunity cost of $190,000 and $340,000 are two vastly different numbers. And, yet, it still isn't that simple!
[Editor's Note: I'd argue that number should be adjusted downward for taxes.]
2. Missed Investment
The lost salary doesn't account for the increased money you'd likely put away into investments in your first year as an attending physician that would compound over the next 20 prior to your early retirement. So, let's add that in! Assuming you are saving 20% as a fellow (I saved less) and first-year attending here is the difference:
20% of Fellowship salary =$60,000 x 0.2 = $12,000
20% of 1st year attending salary = $250,000 x 0.2 = $50,000
Difference = $38,000
When you compound that $38,000 over your 20 years to early retirement that turns into $177,166. If you don't invest during fellowship at all, that number is even higher ($50,000 compounding on interest).
[Editor's Note: This is good to think about, but I'd argue this should be included under # 1. You can't count the same dollars twice- once as salary and again as invested salary. A better way to do it would be to adjust upward the increased salary to account for the time value of money. Whether you invest it or spend it, it has the same value, which is higher now than it will be later.]
3. Unpaid Debt Accumulating on Compounding Interest
Many people also do not pay loans during residency or fellowship. If that fits you, then you are also missing out on paying down debt as it continues to accumulate. The most simplified way of thinking about this is to consider the amount of debt you have and interest at which it compounds. If you have $200,000 in debt compounding at 6.8% interest daily some complicated math is involved, but it turns out to cost you about $14,000.
A Calculator to Run Fellowship ROI!
Don't be overwhelmed because of the math! I've created an easy to use TPP Opportunity Cost Calculator . Simply download the excel sheet and plug in your numbers to find out your opportunity cost.
Total Opportunity Cost of a Medical Fellowship
So, now combining the three numbers above, in this anesthesiology scenario, your opportunity cost for pursuing a fellowship is $531,166. Now THAT is a big number. If your fellowship is more than one year, you can double or triple that number. Can you ever really catch up on that and break even for an “adequate” ROI?
Breaking Even on ROI
Promotion (Academic Medicine)
In anesthesiology (at least where I work), it is often easier to promote from a subspecialty where you can focus your research and networking efforts. A typical promotion in academia is around 10%. So, if you were making $250,000 you can expect that the next step will be between $20,000 and $25,000. If you promote two years earlier secondary to pursuing a fellowship than you would have as a generalist, that is making up some ROI.
Making More Money: Academic Bonus, Higher Pay
Many academic centers provide productivity bonuses involving research and education. This can range from a few thousand dollars to tens of thousands of dollars. While it is possible to do research as a generalist in most fields, it is often easier to perform research if you have a niche where your research can be performed. Additionally, your subspecialty group may have a different set of resources that facilitate research and make it easier.
In both academics and private practice, specialists sometimes make slightly (or a lot) more than their generalist colleagues. Some examples are obvious (a cardiologist compared to a general IM hospitalist; or a pediatrician who chooses to do peds EM). Fellowship can provide significant increases in your annual salary. This helps you catch up on your opportunity cost quickly.
Let's say that you anticipate making an additional $10,000 each year that you wouldn't have otherwise made without the fellowship. We will further say that you, the smart investor, plan to invest that $10,000 you wouldn't have otherwise made each year (or put it towards debt, both accomplish building wealth). With your twenty-year retirement timeline, and at 8% compounding interest this would amount to: $494,229. If you think you'll earn an extra $20,000 per year, then you can double that! That's $988, 458. Compounding interest is wonderful, isn't it!
In the scenario where you earn an extra $10,000 per year and invest this money in addition to the money you may have made through early promotion, you will easily make up your opportunity cost and achieve an “adequate” ROI.
So, Is A Medical Fellowship Worth It?
Looking back at our original calculation, you will have to decide for yourself. There certainly is an opportunity cost to be calculated. This is often easier to calculate than the possible reward of doing a fellowship unless you are in a field with a substantial and obvious increase in salary that will pay dividends in compounded interest over your career. The ROI calculation has a lot of moving parts, maybe I'll make a calculator for that at some point, too.
[Editor's Note: Bear in mind that we're attaching a financial value to what may not be a financial decision. For example, in emergency medicine, fellowships pretty much never increase your income and often decrease it (Peds EM anyone?) Everything in life isn't about the money. If you'd be happy doing nephrology but not general internal medicine, that may be worth “spending” a lot of money on even if the income doesn't increase much. In addition, the financial value of doing something you love for 30 years versus something you hate for 15 should not be discounted. Longevity of career matters more than income in many instances, even when looked at purely from a financial standpoint.]
My Fellowship Story
I ended up doing a non-accredited Regional Anesthesia and Acute Pain Medicine fellowship. The opportunity cost for me was $290,000 in salary alone + $288,979 ($60,000 at 8% interest for 20 years) + my accumulated interest on student loan debt (180,000 at 6.8%) = $591,644
My ROI is yet to be realized but has already been substantial in my first year as I stand to make more money from my section being short this year (hoping to hire!) in addition to academic incentives that I would not have had easy access to as a general anesthesiologist. My research niche is in my fellowship, which was one of the reasons I chose it. I stand to easily make up an adequate ROI from my fellowship investment!
What do you think? Did you choose a fellowship to make more money or because you really enjoyed the subspecialty? Will you get your ROI on your fellowship? Was your opportunity cost high?
Great post. With regards to the editor’s note at the top and the upcoming post on dental residency, not all of them charge tuition. The school based ones do, but the hospital based ones work off the same medicare PGY system as medical residency. Oral surgery is mixed for some of the programs in the country. For me, having gone to a dual degree program, I paid tuition for the 2 and a half years it took to get the MD degree. But the rest of the years, I was paid as a PGY1 to PGY6. My colleagues who did not get the MD never paid tuition and earned a PGY1-PGY4 salary. I am looking forward to reading your post on this topic!
Thanks Beth!
And (I should have commented earlier to WCI’s points above, but didn’t).
My counter argument would be the following for each point:
1) including taxes in the number. I have no idea what taxes will be in twenty years and because my argument involves your last year’s income, that’s why I didn’t include it. Certainly could use today’s to get a rough estimate and the number would decrease.
2) I agree that making an adjustment for cash flow would work. While I did double count dollars earned that might also be invested, I also didn’t include any dollars you’d miss out on that are matched or contributed by an employer. So, I think the double counting (for a rough conservative estimate) is probably warranted.
3) Your last point, I could agree more with. This is not just a financial decision and given that a ton of my posts on my website have to do with wellness, this should surprise you.
I definitely think this is a decision best made determining work/life balance, career goals, where you will live, academic versus PP, etc.
The purpose of this post is to only speak towards the financial aspect. I completely agree this is not the only (and definitely not the most important) aspect.
Thanks for making that point.
TPP
Thanks for clarification.
I actually did a 1 year fellowship in interventional radiology (thought it would be a good compromise after I made a career switch after doing 2 years in a general surgery residency). I know a had a huge opportunity cost because 2 years after practicing in academics as an IR doc I joined my current practice where I purely practice general radiology (ie I am making the same salary as if I was not fellowship trained). Stings a little bit but not the end of the world as I wouldn’t trade this particular practice for anything due to significant lifestyle benefit (outpatient multispecialty clinic M-F, 830-5, no call).
What I really don’t get it some fellowship trained physicians actually have a normal average salary BELOW that of a non fellowship trained one. I can’t recall which ones but I believe several pediatric subspecialties are notorious for that. The opportunity cost there is tremendous.
Definitely true. I was interested in peds infectious disease for a small stent during third year of medical school (later found out I really just liked the faculty in that section).
They make a lot less than their gen peds counterparts.
Where you practice and how much you like your work/life balance is infinitely more important than a cash based return on investment point of view. It does sting if you get the ROI wrong from the money side, but the wellness you get from loving your job makes up for that, I am sure.
Finishing an ER residency and getting a Ped’s fellowship is famous for that sorta thing. Gotta really really hate dealing with adults/adult diseases for that sorta thing to make sense.
I have a close friend who fits that exact deal. He hates the adult ED. So, he did a peds ED fellowship and loves his job. He went EM –> peds EM. But it is academic. So, I assume he makes the same as his adult counterparts?
Not usually. The acuity is usually lower, the payor mix is worse (more Medicaid), and there are fewer procedures. It’s usually more training for less pay.
That’s very true. It is all about supply and demand of the market. Many young physicians think if they go ahead and subspecialize, this will automatically guarantee them a higher pay. But the problem is, they do not study the market.
For instance, under IM umbrella; nephrology/ID/rheumatology are all two-year fellowships but the market are full and it is hard to a get job. The only jobs available are underpaid minimum wage jobs (relatively speaking), and usually are very notorious working environment where they get cannibalized by their senior partners.
This is a very important post. Thank you for bringing this up.
Rheum and ID are full? I’m not going to argue they pay well, but they’re not easy to get in to see around here, especially Rheum.
Rheum job market is relatively robust outside of the biggest cities. Endocrine is also hiring just about everywhere. ID is awful, many recent graduates are doing primary care in addition to ID. Nephrology is worse, something like 2/3 of programs don’t completely fill because of how bad the job market is. Competitiveness typically falls along the same lines (Rheum is almost as competitive as cards/GI/heme-onc/pulm-crit, Endocrine is mildly competitive, nephrology just requires a pulse).
I went through calculations like this years ago. I decided I could learn the majority of the income-boosting techniques over time without a fellowship. I spent time with mentors and at cadaver courses. My skills and income have grown over time and I have no regrets. It actually keeps things fresh for me to learn a new technique each year or so. Also, the insecurity of not having done a fellowship makes me less cocky and more likely to be careful and stay educated.
Hey anything that keeps you away from the Duning-Kruger effect on thinking you know more than you do is important.
Many, many people are perfectly happy in their generalist positions. Learning skills from the subs is important, and I do the same from others in different subs than my own.
It’s all about balance. The ROI is only part of the equation… But the decision not to sounds like it worked in your favor.
TPP
This is an unnecessarily complicated and overly negative view of the cost of additional training. As WCI said above, you are counting the lost salary twice, and not accounting for a lifetime of larger earnings with compounded growth.
It’s actually just a simple discounted cash-flow problem. Plug in your cost (salary difference for the training years) as a negative flow, then your increase in expected salary after the training years. Set whatever return rate you would like. This accounts for the differences in salary before and after, as well as the time value of money. Factor in taxes if you want to take to the next level.
I suppose that subtracting out the invested dollars would make sense, but I also didn’t count any matched dollars that employers often provide (because that is different for everyone).
This is simply looking at the financial side of the equation. I am very proud work/life balance. If you choose not to do a fellowship because it would make you happier (and yet make less money), I think that’s the right decision.
You need to find your dream job… Regardless of whether it requires more training. But the financial aspect of the decision is there whether we like it or not.
TPP
I don’t disagree with the fact that there is a monetary cost, I just think you used the incorrect approach to calculate it.
For example, let’s say an internist makes 225,000 annually and is contemplating a 3 year fellowship that would increase their salary to 300,000 annually. She will make 60,000 per year in the fellowship.
Using a rate of return of 7%, we can find the NPV of her future cash flows to become equal sometime between 10-11 years (including training years). This is her “break-even point,” after which the fellowship is more profitable.
It’s a simple calculation that accounts for the time-value of money, and is generally the accepted way to approach this type of financial decision.
The real rub is that fellowships in no way uniformly increase salary, nor are they required to do so. Lots of ways to do that in just your standard field. There are obvious cases on both sides where it absolutely helps and definitely hurts, but for most in the middle its a decided meh.
This is definitely the right way to think about it. You can use change in net worth if you want to adjust for col, employer contributions, etc. In one step. Your description is also consistent with the orthopedic article above.
In pathology, it’s almost necessary to do at least one 1-yr fellowship (>90% do). The decision instead is whether to do a second fellowship for marketability reasons. You’d be surprised at how many even end up doing a 3rd fellowship, but that’s usually to bide time because you were unable to find a job. Since everyone has some sort of subspecialty training, the extra training doesn’t really help us from a salary point of view.
That’s kind of fascinating. I guess the only reason to do a fellowship in that situation is to get a job that you really want or because you love the sub-specialty and cannot imagine not doing it.
Agree. Vast majority do one fellowship. A good chunk do two. I’m doing GI and Derm due to my interests and marketability.
I know one guy doing a third, and sadly, it comes down to ability to get a job that will sponsor his visa
I’m a general adult psychiatrist. In 2001, I took a job as medical director of a geriatric psychiatry unit (no fellowship trained docs took the job).
I ran that unit for 11 years, with no fellowship. After a year of doing the work, I felt as if I was as competent as any fellowship trained geriatric psychiatrist. Zero opportunity cost. I guess they could have been paying me less than what I would have earned with a fellowship, but I earned a small pension there too.
In psychiatry, beyond child psychiatry, I’m not sure there is much of a financial bonus for fellowship training.
That’s really interesting (about psych fellowships outside of child not being very helpful).
Experience does count for a lot! And it sounds like you enjoy your job, which is the most important part.
There is something to be said about non-accredited fellowships (for as long as they remain a thing, anyways). I am also a regional anesthesia guy, and the money you can make in a non-accredited fellowship is great. You often start at an increased salary compared to ACGME (lots of the regional ones are at the 100k mark, some a little more) and have better moonlighting opportunities (you can make huge money here). I actually completely made up for the “lost” income during my fellowship year (granted I did pick up shifts 2-3 weekends per month, and took lots of mid week call from colleagues who were selling it). Though this comparison would be vs 1st year in practice, not the “final” income as partner as the author appropriately compares above. I never felt overly stressed, as regional anesthesia is a fun specialty, and I also really enjoyed getting some things paid off, loans consolidated, and putting some money in the bank. Obviously there are still known pros/cons that are always taken into account, but while they are still around (regional anesthesia is to be an ACGME fellowship with the corresponding PGY5 pay in the next few years) it’s not a bad option.
Completely agree. Having a non-accredited fellowship made this decision a little easier on the financial side.
I love regional, and hope to practice it exclusively maybe 8-10 years out. (We still do some general anesthetics for joints when we cover at our joint hospital).
Interesting post. Did a 2 year toxicology fellowship on active duty. Army pays its fellows as if they are practicing attendings in their base specialty (don’t get too excited, it’s still Army pay, for me in EM around half what I’ve seen reported others making) but then extend their service obligation. Changes the math a little. Even more so if doing the fellowship pushes your obligation far enough out that you change plans to doing 20 years and getting the pension (I’ll be at 11 which is hard to walk away from, but not close enough to call it a breeze).
That really would change things a lot. I am the first man in about five generations not to serve. There has always been a nagging sensation that I should someday.
For what it is worth, thank you for your service.
When I’ve run the numbers, 11 years is usually well past the break even point to go for the pension/Tricare for life. I’d be pretty hesitant to separate at that point, especially if being in the military didn’t REALLY bother you. Now EM pays pretty well these days in the civilian world, but I’m not sure it pays quite well enough to walk away from a pension in 9 years.
When we speak of the army… my husband getting to learn to fly helicopters and getting to do so now and then and a brief navy Aerospace medicine course on flying Jets, was something he probably would’ve paid a years salary to do for fun later on in life. Plus getting to live in Germany for three years in England for four… If you’re in the military, might stay, and would pay to fly aircraft consider residency aerospace medicine
That sounds amazing! I had a buddy that I went to residency with who was a flight surgeon before doing civilian residency. It seemed like he enjoyed his time, though the medical work was different than he wanted. All of the ancillary stuff he found really enjoyable.
Thank you for your service as well! When one person serves so does the entire family.
TPP
You’re welcome, on two counts. I have served as a soldier doctor as well as soldiers wife and appreciate the recognition for family members- as they say the hardest job in the army. I got to jump out of a perfectly good airplane for free, a lot more safely than my daughter who pays money to do it now. However the value of that, aside from the safety, is much lower than flying a jet.
Someone actually calculated this out for the various orthopedic subspecialties. I suspect that foot and ankle has pulled themselves into the black over the last ten years due to the high demand in the job market for that subspecialty. There’s a great break even point chart in the paper if you can access it.
https://www.ncbi.nlm.nih.gov/m/pubmed/19571105/
The financial impact of orthopaedic fellowship training.
Gaskill T, et al. J Bone Joint Surg Am. 2009.
“RESULTS: Investment in an orthopaedic fellowship yields variable returns. Adult spine, shoulder and elbow, sports medicine, hand, and adult arthroplasty may yield positive returns. Trauma yields a neutral return, while pediatrics and foot and ankle have negative net present values.”
That’s fascinating. I’ll look into it!
As an academic, I do a lot of research. Given my interests online (personal finance and wellness) I am thinking of taking this slant with some of my studies.
What speciality did you pursue? (Or did you stay in general Ortho?)
Thanks for mentioning the article. I’m going to print it out.
TPP
Ortho sports. I hit 4/5 of the “lifestyle” ROI factors above (especially #5 since the government is coming after certain Ortho subspecialties more so than others) which are more important to me than the money factors but I made sure to read that paper before chosing. I point it out to our pediatric aspiring Ortho residents just so they know what they are getting into.
I think that’s great that you are looking out for those coming behind you. I am all about that.
TPP
Super interesting paper. I’d love to see that done periodically in every specialty. Thanks for sharing.
https://journals.lww.com/jaaos/Abstract/2020/06150/The_Return_on_Investment_of_Orthopaedic_Fellowship.10.aspx
Here is the 10y update of the aforementioned article. The data has changed now that 90% of orthopods are opting for fellowship training.
That’s a great article that goes directly at the question. Of course, even if you’re going for a specialty that won’t break even, you may still have to do the fellowship to get the job at all.
I think there is an opportunity cost due to location, as well. The more specialized one becomes, the more one needs a large institution nearby, typically academic, in order to practice the specialized medicine. Large institutions are found in larger urban areas, which have higher costs of living and often lower salaries when compared to smaller areas. Even if you want to live in a large, urban area, a fellowship does not guarantee you a job, as that is where all of the specialized physicians have congregated.
You do not absolutely need a large institution to practice specialized medicine, but do you really want to be the only one in your specialty covering a one hundred mile diameter area?
That’s certainly a consideration. I fortunately practice medicine at an academic center in a very low cost of living area as well. It’s a smaller city, though.
If you are forced to live in a higher COLA, then the number will certainly go up.
I would make sure that living in such a place would really make you happy, though. By far the more important piece in that equation.
TPP
One additional factor not mentioned is that WHICH fellowship program you go to change the ROI calculation significantly. A given fellowship track might be 1 year or 2; allow (and have reasonable opportunities for) moonlighting or not, in addition to COL considerations. This can change the break-even point significantly.
Good points.
Interesting article. I did a more qualitative analysis in my decision not to do a fellowship: I felt like I needed to start paying off my debt and putting money in the bank, not just treading water! Besides, I was psychologically done with “school.”
Now 15 years later (at FI), the ROI of any extra training (or new degree) would be purely for amusement as opposed to dollars and cents. Yes, I could use it to “pivot” to a new path, but I can think of other luxury purchases I’d rather make first!
Well done TPP! Calculating opportunity cost is always hard, but you have given us a nice framework. I have never seen anything like tis before.
Thanks, Doc G!
This calculation was also performed for peds subspecialties and it was quite depressing. The only specialties that were worth the time were Cards, NICU , and PICU. Everything else was a loss (and a big loss). I’m a Peds Endo and so I’m really in the hole for a long time. Good thing I love what I do. Here is the article:
http://pediatrics.aappublications.org/content/127/2/254
Thanks for the article, Peds ENDO! I’ll check it out.
And, it is sad. But, if you are loving what you do, then that is infinitely more important! So long as your debt isn’t so crushing that you get burned out despite the good job. Make a plan and get out from underneath it.
TPP
While many peds fellowships have poor ROI. PICU and NICU actually allow you to double your salary for just doing 3 extra years. There’s some sacrifice since you’ve committed yourself to a lifestyle with nights and weekends in the hospital. Some places have a more EM type shift work mentality which makes it more palatable. Speaking of EM, Peds EM seems to be the hot fellowship now . While it pays less than adult EM its at the high end of pediatrics. Also the shift work is nice. Also, many Peds EM folks are in the dept of EM vs. the dept of Peds which helps to boost your salary. One other thing about peds subspeciality positions is the ranges of salaries vary wildly. I have friends in various hospitals who make a wide range of salaries that seem to have no correlation to the amount of work they do.
Thanks for sharing. Great article.
Great writeup although to play devil’s advocate, there are more things to consider beyond opportunity cost and ROI for a fellowship
I did a non-accredited fellowship that had the potential to double my income.
The fellowship ended up linking me with people I otherwise wouldn’t have met. I ended up taking a job far, far away from where I would have taken a job without the connections from fellowship training. My income has nearly tripled over the job I would have signed without fellowship.
Obviously a decision that worked out very well for me 🙂
Definitely agree that the monetary aspect isn’t the only one. I’d argue that it’s definitely not the most important aspect. Just one of the many to consider. I was only hoping to provide a framework in which to consider it.
Glad it worked out well for you! I did a non-accredited fellowship, too. So, my salary more than doubled from my last year in residency. Was still much less than my attending salary now, but I think has been worth it for several reasons.
TPP
I think it’s a lot easier to justify a fellowship where your pay is closer to that of an attending than one where it is closer to that of a resident.
Congrats on your success. Life can be complicated for sure and who you know really does often matter more than what you know.
I didn’t do a sub-specialty fellowship to gain a larger income, I did it to be in a position manage more complicated cases and be surrounded by people who wanted to do the same thing. Stimulation and satisfaction. I started at a much lower salary than I would have as private generalist and although this increased for various reasons over the subsequent years, I didn’t start to make really big money until I shifted to private practice and became somewhat less specialized.
That’s really interesting. What prompted the move from academics to PP?
Complicated… several factors. A young family, a lack of passion to do the kind of research that was going to get me to the top of academia, the realization that there were other paths to having a national/international impact, a private gig that let me do almost all of the things that I enjoyed about academic medicine and paid me in a manner that got me to FI much earlier and thus gave me many more options.
In my case, I chose to do a pediatric subspecialty for several reasons, but it is lucrative. The difference between a pediatrician salary and a Peds EM salary is substantial. I work in the midwest and the difference was 75k the first year out of fellowship (comparison between two large academic institutions in the midwest). The earning potential then went up from there to now the difference between the two is double that at 150k per year. The one benefit of doing the fellowship is that moonlighting is at a higher rate than a general pediatrician would be so this also helps with return on investment. That being said, there are several pediatric fellowships that actually pay lower than the starting salary of a general pediatrician.
Interesting thought experiment. I agree with the process (although not so much the numerical result). There’s too many inherent assumptions to come up with a single valid number. This would be more useful as a probable range of opportunity costs from least to most pessimistic assumptions along with presenting it as a percentage of total lifetime earnings. $591,644 is a big number, but maybe it’s only 1.5% of total lifetime earnings in the end.
Regardless, good job pulling in many factors that are usually left out. I’ve often thought the “go to college because it automatically pays XXX more overall” is based on several faulty assumptions. Those never include things like deferring income for six years (the typical graduation timeframe nowadays), dropping out early with a degree, investment opportunity costs, student loan interest, pensions, lack of immediate employment upon graduation, etc.. Vocational schools would probably come out on top with a more comprehensive analysis.
Why don’t more people go through this exercise for getting a basic college degree?
That’s a great question! It is definitely a worthwhile endeavor at any major fork in the road.
I am actually a big believer in vocational schools, too. One of my best friends from college is easily one of the smartest guys I’ve ever know. College just wasn’t his passion. He could have easily become a doc, lawyer, etc. He actually took the LSAT and destroyed it before deciding not to proceed.
I always thought my buddy would have been better off just going to trade school.
Either way, this thought experiment proves helpful.
This is an interesting article, but it leaves out the other side of the equation, which is opportunity gain. With a specialty, the income is higher than IM, as an example, and when you take the salary differences accumulated over time and invested at say 5%-8% ROI, the net effect of opportunity gain from a speciality is much higher than the opportunity cost.
So while this spreadsheet looks at one side of the equation correctly, ie, the opportunity cost, it doesn’t factor in the gain of higher salary with a speciality, more job stability (hopefully), and this difference of salary invested over a long period of time.
Thoughts?
I don’t disagree with your sentiment at all, but it is tough to capture in the calculator.
The worksheet is meant to evaluate the cost side, not the benefit. That said, the article itself goes into the benefits of pursuing fellowship. That is simply harder to measure and “put a number on” because it is very different for every specialty.
Personally, I will definitely end up benefiting from the fellowship. Obviously, from a work satisfaction most of all, but even from a financial standpoint, too. I’ll likely promote faster in academics because of it (which results in a pay raise) and earn more money each year, too.
TPP